Article 12 - Royalties and Fees for Included Services - Swiss Confederation

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. 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 Contracting State, 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 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 a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. 4. For purposes of this Article the term fees for technical services means payments of any kind to any person in consideration for the rendering of any managerial, technical or consultancy services, including the provision of services by technical or other personnel. 5. Notwithstanding paragraph 4, fees for technical services does not include amounts paid : ( a ) for teaching in or by educational institutions ; ( b ) for services covered by Article 14 or Article 15, as the case may be. 6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting 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 contract in respect of which the royalties or fees for technical services are paid is 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. 7. Royalties and fees for technical services shall be deemed to arise in a Contracting State 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 a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such 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. ] 8. 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 the royalties or fees for 2 [ technical services ] paid exceeds the amount which would have been paid 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 payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. ************** NOTES:- 1 . Substituted vide Notification No. 35 dated 07-02-2001 before it was read as, ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for included 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 included services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) In the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services referred to in sub-paragraph (b) of paragraph 4 of this Article: (i) During the first five taxable years for which this Agreement has effect: (A) 15 percent of the gross amount of the royalties or fees for included 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 percent of the gross amount of the royalties or fees for included services in all other cases; and (ii) During the subsequent years, 15 percent of the gross amount of royalties or fees for included services; and (b) In the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services referred to in sub-paragraph (a) of paragraph 4 of this Article. 3. 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 a literary, artistic, or scientific work, including cinematograph films or work on film, tape, or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, 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, any industrial, commercial, or scientific equipment. 4. For purposes of this Article, the term fees for included services means: (a) Payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services are ancillary and subsidiary to the application or enjoyment of the right, for which a payment described in sub-paragraph (b) of paragraph 3 is received; (b) Payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (i) Are ancillary and subsidiary to the application or enjoyment of the right, property, or information for which a payment described in sub-paragraph (a) of paragraph 3 is received; or (ii) Make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. 5. Notwithstanding paragraph 4, fees for included 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. (b) For teaching in or by educational institutions; (c) For services for the personal use of the individual or individuals making the payment; or (d) To an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services falling under Article 14. 6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for included services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for included services arise, through a permanent establishment situated therein, and the contract in respect of which the royalties or fees for included services are paid is effectively connected with such permanent establishment. In such case, the provisions of Article 7 shall apply. 7. Royalties and fees for included services shall be deemed to arise in a Contracting State 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 included services, whether they are a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the liability to pay the royalties or fees for included services was incurred, and such royalties or fees for included services are borne by such permanent establishment, then such royalties or fees for included services shall be deemed to arise in the State in which the permanent establishment is situated. 2 . Substituted vide Notification No. 35 dated 07-02-2001 before it was read as, included services