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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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DT: Barbados: double taxation agreement, Article 11: Royalties

(1) Any royalty derived from sources within a Contracting State by a resident of the other Contracting State who is subject to tax in that other State in respect thereof, shall be exempt from tax in that first-mentioned Contracting State. Provided that, where any such royalty is in respect of cinematograph or television films, tax may be imposed thereon in the Contracting State from which the royalty is derived, but the tax so imposed shall not exceed tax at the rate applicable to companies on 15 per cent of the gross amount of the royalty.

(2) In this Article, the term `royalty` means any royalty or other amount paid as consideration for the use of, or for the privilege of using, any copyright, patent design, secret process or formula, trade-mark, or other like property, and includes any rental or like payment in respect of cinematograph or television films, but does not include any royalty or other amount paid in respect of the operation of a mine or quarry or of any other extraction of natural resources.

(3) The provisions of paragraph (1) of this Article shall not apply where a resident of a Contracting State has a permanent establishment in the other Contracting State and the royalty is attributable to that permanent establishment, in such event the royalty shall be treated as if it were industrial or commercial profits to which the provisions of Article 6 are applicable.

(4) Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalty, having regard to the use, right or property for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of the preceding paragraphs of this Article shall apply only to the last-mentioned amount. In that 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.

(5) Royalties paid by a company which is a resident of a Contracting State to a resident of the other Contracting State shall not be treated as a distribution of that company. The preceding sentence shall not apply to royalties paid to a company where:

(a) the same persons participate directly or indirectly in the management or control of the company paying the royalties and the company deriving the royalties; and

(b) more than 50 per cent of the voting power in the company deriving the royalties is controlled, directly or indirectly, by a person or persons resident in the first-mentioned Contracting State.