Article 12 - Royalties and Fees for Technical Services - Netherlands

1 [ARTICLE 12 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 3 [ 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or the fees for technical services. ] 3. The competent authorities of the State shall by mutual agreement settle the mode of application of paragraph 2. 4 [ 4. the term royalties as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning or scientific experience. ] 5. For purposes of this Article, Fees for technical services means payments of any kind to any person in consideration for the rendering of any technical or Consultancy services (including through the provisions of services of technical or other personnel) if such services. a) are ancillary and subsidiary to the application or enjoyment of the right property or information for which a payment described in paragraph 4 of this Article is received; or b) make available technical knowledge, experience, skill, know how or processes, or consist of the development and transfer of a technical plan or technical design. 2 [ 6. Notwithstanding paragraph 5, fees for technical services dose not include amounts paid : a) for services that are ancillary and subsidiary, as well inextricably and essentially linked, to the sale of property; b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; c) for teaching in or by educational institutions; d) for services for the personal use of the individual or individuals, making the payment; or e) to an employee of the person making the payments or to any individual or partnership for professional services as defined in Article 14 (Independent Personal Services) of this Convention. ] 7. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of royalties or fees for technical services, being a resident of one of the states, carries on business in the other state in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other state independent personal services from a fixed base situated therein and the royalties or fees for technical services are effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 8. Royalties or fees for technical services shall be deemed to arise in one of the States when the payer is that State itself, a political sub-division, a local authority or a resident of that State Where, however, the person paying the royalties or fees for technical services, whether he is a resident of one of the States or not, has in one of the State a permanent establishment or a fixed base in connection with which the contract under which the royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 9. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services, having regard to the royalties or fees for technical services for which they are paid exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payment shall remain taxable according to the laws of each State, due regard being had to other provisions of this Convention. ] ***************** NOTES:- 1 . Substituted Vide Notification No. SO 693(E), dated 30-8-1999 , w.e.f. 1-4-1991 2 . Substituted Vide Notification No. SO 693(E), dated 30-8-1999 , w.e.f. 1-4-1995 before it was read as, 6. Notwithstanding paragraph 5, fees for technical services does not include amounts paid: a) for services that are ancillary and subsidiary as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 4(a); b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; c) for teaching in or by educational institutions; d) for services for the personal use of the individual or individuals making the payments ; or e) to an employee of the person making the payments or to any individuals or partnership or professional service as defined in Article 14 (Independent personal services) of this Convention. 3 . Substituted Vide Notification No. SO 693(E), dated 30-8-1999 , w.e.f. 1-4-1997 before it was read as, 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contacting State, the tax so charged shall not exceed:- (a) in the case of royalties referred to in sub-paragraph (a) of paragraph 4 and fees for technical services as defined in this Article (other than services described in sub-paragraph): (i) during the first five taxable years for which this Convention has effect, (A) 15 per cent of the gross amount of the royalties or fees for technical services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company; and (B) 20 per cent of the gross amount of the royalties or fees for technical services in all other cases; and (ii) during the subsequent years 15 per cent of the gross amount of royalties or technical services; and (b) in the case of royalties referred to in sub-paragraph (b) of paragraph 4 and fees for technical services as defined in this Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 4(b) of this Article, 10 per cent of the gross amount of the royalties or fees for technical services. 4 . Substituted Vide Notification No. SO 693(E), dated 30-8-1999 , w.e.f. 1-4-1998 before it was read as, 4. The term royalties as used in this Article means: a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including motion picture films and works on film or videotape for use in connection with television, any patent, trade mark, design or model plan secret formula or process, or for information concerning industrial, commercial or scientific experience; and b) payments of any kind received as consideration for the use of or the right to use industrial, commercial or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 and 8A (Shipping and Air Transport) from activities described in paragraph 2(a) of Article 8 or paragraph 4(b) of Article 8A.