International Tax Treaty Networks 2005
Germany Article 12 (Royalties) Page
Meaning of the symbols for Article 12 | Germany Page | Article 12 Page | Start Page
Australia 
This article differs from the Model in allowing the source country to tax royalties though at a
limited rate of 10%.
The definition of royalties is extended to include payments for the use of, or right of use, of films
or tapes in connection with television or radio broadcasting.
The counterpart of paragraph 3 of the Model does not extend to the performance of independent
personal services from a fixed base.
There is an additional paragraph based on paragraph 5 of the interest article of the 1963 Model
which describes when royalties shall be deemed to arise in a state.
Austria 
1954
Royalties may be taxed in the state of residence of the
recipient.
The wording largely reflects the wording of the Model; but it
specifically excludes rights pertaining to the working of natural
resources.
There is an early experiment at the wording of paragraph 4 of the
Model, stipulating that where royalty payments have been arranged
between the parties in an irregular manner, the right to tax of
the state in which they arise is not to be affected.
2000
The article follows the Model, with the addition of a source rule
on the lines of paragraph 5 of the interest Article 11.
An additional Article 27, headed "Refund of withholding taxes"
provides that the right of a contracting state to levy
withholding tax under its domestic law on payment of dividends
to a person residing in the other state is not to be affected by
the treaty. However at the request of the taxpayer, the tax
withheld is to be refunded if the treaty provides that it should
be reduced or eliminated. Reimbursement must be claimed before
the end of the fourth calendar year following the year in which
the tax deducted at source was assessed on the dividends,
interest, royalties or other items of income. The contracting
state where the dividend originates may ask the applicant for a
statement by the competent authority certifying his residence in
the other state. The competent authorities can mutually agree on
the implementation of the article, and on procedures for other
tax reductions or exemptions provided by the treaty.
The Protocol of Signature states that Article 27 is
clarificatory. It is not to be taken to mean, in the case of
Austria, as allowing the initiation of refund procedures which
could not be initiated under bilateral tax treaties with other
states of the European Union.
Belgium 
Royalties are to be taxed only in the state of residence of the
recipient.
The definition specifically excludes royalties on immovable
property.
There is a source rule based on the wording of the equivalent
Model paragraph 5 of the interest article.
An additional paragraph modifies the counterpart of paragraph 4
of the Model where one enterprise controls the other, or the two
enterprises are under common control, or are members of the same
group of companies; the normal amount of the royalty may be
obtained by adding a reasonable profit margin to the cost of
acquiring and maintaining the right from which it arises, if
there is no more appropriate way of determining an arm's length
price.
Brazil
The treaty follows the 1963 text. Thus there is no reference to
beneficial ownership.
The definition includes films or tapes for television or radio
broadcasting, and the Protocol of Signature brings in income
derived from the rendering of technical assistance and technical
services.
Instead of exemption (as in the Model) there is a paragraph
stating that royalties may be taxed in the state in which they
arise, in which case the tax shall not exceed 25% of royalties
arising from the use of trade marks and 15% in other cases.
A source rule parallels that for interest.
Canada
1981 The source country may tax but the tax so charged is
not to exceed 10% However, the source country exempts copyright
royalties and other payments relating to literary, dramatic,
musical or artistic work (but excluding motion picture films and
film or videotape work for use in connection with television).
The "royalties" definition is extended to cover payments of any
kind in respect of motion picture films and works on film or
videotape for use in connection with television.
There is an additional paragraph, analogous with the bilateral
source rule for interest, defining the source of royalties.
2001 The source country may tax but the tax so charged is
not to exceed 10% However, the source country exempts copyright
royalties and other payments relating to literary, dramatic,
musical or artistic work (but excluding motion picture films and
film or videotape work for use in connection with television).
The source country also exempts royalties for the use of or the
right to use computer software or any patent, or for information
concerning industrial, commercial or scientific experience (but not
including any such royalty provided in connection with a rental or
franchise agreement).
The "royalties" definition is extended to cover payments of any
kind in respect of motion picture films and works on film or
videotape for use in connection with television.
There is an additional paragraph, analogous with the bilateral
source rule for interest, defining the source of royalties.
The Protocol of Signature makes it clear that the "gross amount" of
royalty, on which the maximum rate of tax is calculable, does not
include turnover taxes
China
There is a 10% withholding tax, and a source rule parallels that
for interest.
Cyprus
Paragraph 1 omits the beneficial ownership condition.
A non-standard paragraph (2 of the present article) permits the
source state to charge a maximum tax of 5% of the gross amount of
royalties paid in respect of copyright (including films and
videotapes for television).
The counterpart of paragraph 2 (definition) adds, on UN lines,
films or tapes for radio or television broadcasting.
Czech Republic
The treaty provides for a 5% withholding tax; there is no
reference to beneficial ownership.
The equivalent of paragraph 3 uses the 1963 text.
Denmark
1962
Royalties are to be taxed in the state of residence of the
recipient.
The definition specifically excludes rights in respect of the
operation of natural resources.
Gains from the alienation of the rights referred to in the first
part of the definition (excluding those related to films and
industrial, commercial and scientific equipment and information)
are covered by the exemption given in the article.
There is no equivalent of paragraph 4 of the Model: that of
paragraph 2 makes no reference to Article 14 (professions).
1995
Royalties are defined to include payments for the use of or the
right to use films or video or audio tapes for television or
radio. The definition does not however include payments for the
use of or the right to use industrial, commercial or scientific
equipment.
Estonia
The source country may tax but at a rate limited, in general, to
10%, and to 5% in the case of royalties for the use of
industrial, commercial or scientific equipment.
Royalties are defined to include also payments for the use of or
the right to use tapes for radio or television.
The source of royalties is defined analogously with the source
of interest in the bilateral treaty.
The Protocol of Signature provides that payments for technical
services or for consultancy or managerial services are not to be
deemed to be payments for information concerning industrial,
commercial or scientific experience (and are to be dealt with
under the bilateral Business profits or Independent personal
services articles (Articles 7 or 14) as appropriate) except to
the extent that the amounts of such payments are based on
production, sales, performance, profits or any similar basis
related to the use of the information.
Finland
The definition of royalties is split into two, and there is a 5%
withholding tax on those arising from patents, trademarks,
designs or models, plans, secret formulae or processes or
industrial, commercial or scientific or economic equipment or
information relating to industrial commercial or scientific
expenses.
Other royalties arising from copyright of literary, artistic or
scientific work (including cinematograph films and films or tape
recordings for television or radio broadcasting are exempt in the
state of source.
A source rule parallels that for interest.
France
The "royalties" definition specifically excludes payments for
the working of mines, quarries or other natural resources and
includes income derived from the alienation of property and
rights referred to in the definition.
Paragraph 4 has no counterpart.
The bilateral treaty article does not require that the
resident recipient be the beneficial owner of the royalties
for the purposes of paragraph 1.
Greece
The article largely reflects the Model, but omits any reference
to cinematograph films.
Hungary
The article uses the 1963 Model text, with the addition of a
source rule reflecting the wording of the equivalent Model
paragraph 5 of the interest Article 11.
Iceland
The article uses the 1963 Model text, with the addition of a
source rule reflecting the wording of the equivalent Model
paragraph 5 of the interest Article 11.
India
1959
Royalties and fees for technical services may be taxed in the
state in which they arise, and according to national law, but the
tax on technical services fees is not to exceed 20%.
The standard definition of royalties is used. Technical services
fees are defined as payments, other than to an employee of the
payer, for managerial, technical or consultancy services,
including the provision of personnel.
A source rule parallels that for interest.
An exchange of notes in 1984 confirmed that the 20% rate was to
apply to lump sum consideration for the transfer outside India,
or the imparting of information outside India, of any data,
documentation and the like relating to any patent, invention,
model, design etc.
1995
The article applies to both royalties and fees for technical
services. Withholding tax is allowed at source at up to 10%.
Royalties are restrictively defined as payments received as
consideration for the use of or the right to use industrial,
commercial or scientific equipment or for information concerning
industrial, commercial or scientific experience [ie copyright of
literary work etc etc are not included].
Fees for technical services are defined as payments for
managerial, technical or consultancy services, but not payments
for services mentioned in the bilateral Dependent Personal
Services Article (Article 15).
A source rule parallels that for interest.
Indonesia
Paragraph 1 is non-OECD in that it gives source state secondary
taxing rights as follows:-
copyright, including patent royalties up to a maximum of 15%;
rental of equipment and payments for use of know-how, up to a
maximum of 10%; and
technical service fees 7.5%.
Paragraph 2 (definition) includes payments for the use of films
or tapes for radio or television broadcasting (on UN Model
lines). Rental payments for use of industrial etc equipment are
included.
An additional paragraph (3 of the present article) defines
technical service fees as payments to persons other than
employees of the payer for any services "of a managerial,
technical or consultancy nature" rendered in the state of which
the payer is a resident.
An additional paragraph (5 of the present article) provides a
source rule based on Model article 11(5).
Ireland
The definition excludes mention of cinematograph films.
The exemption extends to payments of consideration for the
alienation of any property or rights mentioned in the definition.
The counterpart of paragraph 3 of the Model makes no reference
to fixed bases. That of paragraph 4 simply states that the
article is only to apply to so much of a royalty as represents
fair and reasonable consideration.
Italy
There is a 5% withholding tax, but certain royalties are exempt,
being copyright etc payments in respect of literary, dramatic,
musical or artistic work, including cinematographic films and
films or tapes for radio or television broadcasting.
There is a source rule reflecting the wording of the equivalent
Model paragraph 5 of the interest Article 11.
Japan
The bilateral treaty article provides that royalties may be taxed
in the state where they arise but the tax so charged shall not
exceed 10% of the gross amount of royalties.
There is an additional paragraph which describes when royalties
are deemed to arise in a state.
The counterpart of paragraph 3 of the Model does not extend to
the performance of independent personal services from a fixed
base.
Korea
1976
Royalties may be taxed in the source state at a maximum rate of
15% (in general), but at a maximum rate of 10% in the case of
industrial investment: these latter royalties are defined more
precisely in the Protocol of Signature as royalties for the use
of, or the right to use, any patent, design, model, plan, secret
formula or process for industrial purposes, or for information
concerning industrial or scientific experience.
There is no beneficial ownership or subject to tax test to
qualify for these reliefs.
The term "royalties" includes payments for the use of, or the
right to use, films or tapes for radio or television
broadcasting: it also includes payments for the use of or the
right to use industrial, commercial or scientific equipment
(which is defined as including ships or aircraft leased under a
bareboat charter contract).
The article's rules about the taxability of royalties and the
maximum rates applicable apply also to gains from the alienation
of any right or property giving rise to such royalties, if such
rights or property are alienated by a resident of a contracting
state for exclusive use in the other contracting state and the
payment for that alienation is borne by an enterprise of that
other state or a permanent establishment situated therein.
The counterpart of paragraph 3 of the Model (effectively
connected royalties) omits any reference to independent personal
services or fixed bases.
A source rule is provided on the lines of the bilateral source
rule for interest (ie the Model's source rule less any mention
of fixed bases).
2000
Royalties may be taxed in the source state but, in general, at
a maximum rate of 10%. The maximum rate is 2% where the royalties
are paid for the use of or the right to use industrial,
commercial or scientific equipment. However, the Protocol of
Signature records an agreement that if Korea should, in a tax
treaty with any other OECD member state, give the sole right of
taxation of royalties to the residence state, then this shall be
the rule in the present treaty.
Royalties are defined also to include payments for the use of or
the right to use films or tapes for radio or television.
Moreover, the Protocol of Signature records an understanding that
payments for the use of or the right to use software are to be
treated as royalties if
- (a)
- the source code is transferred to the user in addition to
the software; or
- (b)
- the software is developed for, or adapted to the specific
needs of a particular end-user; or
- (c)
- the payments for the acquisition of the software are
measured by reference to its productivity or use.
A source rule is provided on the lines of the bilateral source
rule for interest.
Notwithstanding the provisions of this article, the income
covered by the bilateral Entertainers article (Article 17)
includes also remuneration for the use of, or the right to use,
the name, the picture or other personal rights of the artiste or
athlete.
Bilateral Article 27 provides that the limitations on the source
country rate of tax on Dividends, Interest and Royalties provided
by the treaty will not apply if it was the main purpose of any
person concerned, in creating or assigning the relevant shares
or other rights, to take advantage of the relevant articles of
the treaty (including bilateral Aricle 21 - Other income) by
means of that creation or assignment without economic reason
appropriate to the business operation concerned.
Latvia
Paragraph 1 is non-OECD in that it permits an option for source
state taxation.
A non-standard paragraph (2 of the present article) permits the
source state to charge a maximum tax of 5% of the gross amount of
royalties paid for the use of industrial etc equipment and 10% in
all other cases.
The counterpart of paragraph 2 (definition) adds, on UN lines,
films or tapes for television or radio broadcasting.
Paragraph 5 of the present article is a source rule which parallels
that for interest at Article 11(5).
Lithuania
Paragraph 1 is non-OECD in that it permits an option for source
state taxation.
A non-standard paragraph (2 of the present article) permits the
source state to charge a maximum tax of 5% of the gross amount of
royalties paid for the use of industrial etc equipment and 10% in
all other cases.
The counterpart of paragraph 2 (definition) adds, on UN lines,
films or tapes for television or radio broadcasting.
Paragraph 5 of the present article is a source rule which parallels
that for interest at Article 11(5).
Luxembourg
There is a 5% withholding tax on royalties.
In the counterpart of paragraph 3 there is no reference to fixed
bases. There is no counterpart of paragraph 4, but the Protocol
of Signature lays down that where a contract provides for a
payment of royalties which are in fact hidden distributions of
profit the dividend article is to apply.
Malaysia
Paragraph 1 does not follow the Model; it permits source state
taxation with a maximum of 10%.
A non-standard paragraph (2 of the present article) permits
Malaysia to exempt from tax royalties paid to German residents,
subject to competent authority approval.
Notwithstanding paragraphs 1 and 2, source state taxation at full
domestic rates is permitted (by paragraph 3 of the present
article) in the case of literary etc copyright royalties,
including cinema films and tapes for TV or broadcasting.
The counterpart of paragraph 2 (definition) adds a reference to
tapes for television or broadcasting (on UN model lines).
The counterpart of paragraph 3 omits the references to fixed base
and Article 14.
An additional paragraph (6 of the present article) provides a
source rule based on Model Article 11(5), but omitting the
references to a fixed base.
The Protocol of Signature (paragraph 5) records the understanding
that the term "royalties" includes periodical payments in respect
of the alienation of rights etc as well as lump sum payments for
the use or right to use the property mentioned in Article 12(4).
Malta
1974
The source country exempts royalties for the use of or the right to use any
copyrights of literary, artistic, or scientific work, including
cinematographic films or tapes for television or broadcasting.
The source country may tax, though at a rate limited to 10%, royalties for
the use or the right to use any patent, trademark, design, model, plan,
secret formula or process, equipment or information concerning industrial,
commercial or scientific experience.
There is no beneficial ownership or subject to tax test.
Royalties are not, directly, defined.
The equivalent of paragraph 3 (effectively connected royalties) makes no
mention of fixed bases.
There is a source rule analogous with the bilateral source rule for interest
(including a Land as well as a political subdivision etc as a source).
2001
The reference to payments for the use etc of industrial equipment is omitted
following the 1992 revision of the OECD Model.
Mexico
There is a 10% withholding tax on royalties, with a beneficial
ownership test.
The definition includes gains derived from the alienation of any
right or property giving rise to royalties if they are contingent
on their productivity or use.
There is a source definition based on Article 11(5) of the Model
(interest). The Protocol of Signature modifies the rule set out
in the second sentence of this source paragraph by providing that
where an obligation to pay royalties is incurred by the head
office of the enterprise and the right or property in respect of
which they are paid is effectively connected with several
permanent establishments or fixed bases in different countries,
only so much of the royalty payment as is borne by a permanent
establishment or fixed base in a contracting state is to be
deemed to arise in that state.
An additional paragraph provides that the article is not to apply
to a royalty for a right or property which was agreed upon or
assigned with the object of taking advantage of the article. The
competent authorities are to consult together before this
paragraph is used.
Netherlands
The effect of Article 20(1), coupled with the permission to tax
given to the residence state by Article 15, produces exemption
in the state of source.
The definition specifically excludes income from rights
pertaining to the working of natural resources and includes gains
derived from the alienation of the rights described under the
definition.
The counterpart of paragraph 3 of the Model does not extend to
the performance of independent personal services from a fixed
base.
Paragraph 4 has no exact counterpart. But the Protocol of
Signature contains provisions for royalties which are hidden
distributions of profits to be treated as dividends.
New Zealand
There is a 10% rate of withholding tax.
Paragraph 5 of the treaty contains a source rule for royalties
based on the wording of paragraph 5 of the interest article.
The Protocol of Signature provides that payments for the use of
industrial, commercial or scientific equipment are to be taxable
under Article 7 (business profits) unless they are dependent upon
production. Other payments for technical services, including
engineering contracts and consultant and supervisory services are
also to be outside Article 12.
Poland
The article uses the 1963 Model text.
Portugal
There is a 10% rate of withholding tax.
Paragraph 5 of the treaty contains a source rule for royalties
based on the wording of paragraph 5 of the interest article.
Russia
1981
The article is headed "income from copyrights and licences".
The definition extends to unprotected inventions, servicemarks,
and software for electronic data-processing equipment, as well
as to payments for the supply of technical services if they are
connected with matters spelled out in the definition.
The counterpart of paragraph 3 makes no mention of fixed bases
(there is no equivalent of Article 14 in the treaty); that of
paragraph 4 is briefly set out in the Protocol of Signature.
1996
Paragraph 2 (definition) contains additional wording, after
"films", it includes "tapes and other records used for radio and
television broadcasting or other means used to multiply and
distribute information and computer programs". Payments for the
use of industrial etc equipment are included.
A non-standard paragraph (3 of this Article) extends coverage to
payments for technical services if they are connected with
matters listed in paragraph 2.
A further addition is a source rule (paragraph 5 of this
Article), reflecting the wording of the equivalent Model
paragraph 5 of Article 11 (interest).
Singapore
1972
In general, royalties were exempted from source country tax.
There was no subject to tax or beneficial ownership test.
However, literary and artistic copyright royalties, including
royalties for the use of or the right to use cinematograph films
or tapes for television or broadcasting may be taxed in and
according to the law of the contracting state from which they are
derived.
Royalties are defined as in the Model but include also payments
for television and broadcasting tapes.
The counterpart of paragraph 4 (effectively connected royalties)
does not mention fixed bases.
Royalties are deemed to be derived from the other contracting
state when they are so derived according to the law of that
state.
2004
Royalties may be taxed in the state where they arise at a maximum
of 8%.
The definition extends to films or tapes for radio or television
broadcasting, and there is a source paragraph on the lines of
that for interest in Article 11.
For the terms of Article 28 of the treaty as they apply to the
payment of royalties, please see the note at the end of Article
10 above.
Slovak Republic
The treaty provides for a 5% withholding tax; there is no
reference to beneficial ownership.
The equivalent of paragraph 3 uses the 1963 text.
Slovenia
Royalties may be taxed in the source state at a rate not
exceeding 10%.
The definition includes films and tapes for television and radio
broadcasting.
Spain
The article follows the wording of the 1963 Model text, but
allows the source country to tax royalties at a rate not
exceeding 5%.
As in the interest article the treaty provides that paragraph 1
is not to apply where the royalty is effectively connected with
a permanent establishment in the other state, but leaves
paragraph 2 - the 5% rate - in force.
There is an extra paragraph in very similar terms to paragraph
5 of the interest article in the Model providing the same source
rules for royalties.
Sweden
1959
There is no reference to beneficial ownership.
There is a brief counterpart of paragraph 3, without a reference
to fixed bases; none of paragraph 4.
Switzerland
The counterpart of paragraph 3 of the Model does not extend to
the performance of independent personal services from a fixed
base.
The bilateral article does not contain the expression "if such
resident is the beneficial owner of the royalties" as found in
paragraph 1 of the Model's 1977 version.
It is worth mentioning that Article 23 of the bilateral treaty
includes a restrictive rule regarding companies which are not
subject to full cantonal taxes on royalties derived from Germany.
Turkey
There is a 10% rate of withholding tax.
The counterpart of paragraph 3 makes no reference to fixed bases.
The Protocol of Signature makes it clear that remuneration for
professional services is not a royalty.
Paragraph 5 of the treaty provides a source rule based on the
wording of that set out in paragraph 5 of the interest article.
Ukraine
1981
The article is headed "income from copyrights and licences".
The definition extends to unprotected inventions, servicemarks,
and software for electronic data-processing equipment, as well
as to payments for the supply of technical services if they are
connected with matters spelled out in the definition.
The counterpart of paragraph 3 makes no mention of fixed bases
(there is no equivalent of Article 14 in the treaty); that of
paragraph 4 is briefly set out in the Protocol of Signature.
1995
The article follows the OECD principle of exclusive residence
state taxation in respect of industrial and commercial royalties
including patents, trademarks and knowhow, as defined at
paragraph 4(b) of the present treaty.
It departs from OECD in permitting source state taxation at 5%
in respect of literary and artistic copyright royalties, defined
at paragraph 4(a) to include films and tapes for cinema, radio
and TV. An additional paragraph (6) provides a source rule.
United Kingdom
The royalties definition specifically excludes payments in
respect of the operation of a mine or quarry or of any other
extraction of natural resources or a rent or royalty paid in
respect of cinematograph films.
The counterpart of paragraph 3 of the Model does not extend to
the performance of independent personal services from a fixed
base.
The bilateral treaty provides that royalties paid by a company
to a resident of the other state do not have to be left out of
account as a deduction in computing the company's profits as
being a dividend or distribution. However this rule does not
apply if the right or property giving rise to the royalties was
created or assigned mainly for the purpose of taking advantage
of the article and not for bona fide commercial reasons.
The exemption for royalties extends also to payments received as
consideration for the alienation of any property or rights as
described by the "royalties" definition.
To qualify for exemption from source country tax, the recipient
must be subject to tax in the country of residence.
The counterpart of paragraph 6 (special relationship) provides
that the article shall apply only to so much of any royalty which
represents a fair and reasonable consideration in respect of the
indebtedness or rights for which it is paid.
United States
The reference to cinematographic films extends to works on film,
tape, or other means of reproduction for use in radio or
television broadcasting.
