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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Kazakhstan: double taxation agreement: Article 12: Royalties

  1. Royalties 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 may 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, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

3. Notwithstanding paragraph (2) of this Article the beneficial owner of royalties in respect of leasing, as defined in subparagraph (b) of paragraph (4) of this Article, may elect to be taxed, in the Contracting State in which the royalties arise, as if the right or property in respect of which such royalties are paid is effectively connected with a permanent establishment or fixed base in that Contracting State. In such case the provisions of Article 7 or Article 14 of this Convention as the case may be shall apply to the income and deductions (other than capital allowances) attributable to such right or property.

  1. 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:

(a) any copyright of literary, artistic or scientific work (including cinematograph films, and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience; and

(b) industrial, commercial or scientific equipment.

  1. The provisions of paragraph (1), (2) or (3) of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14 of this Convention, as the case may be, shall apply.

  2. Royalties shall be deemed to arise in a Contracting State when paid for the use of, or the right to use, the right or property in that State.

  3. 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 paid exceeds, for whatever reason, 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 payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

  4. The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.