DEPARTMENT OF THE TREASURY TECHNICAL EXPLANATION OF THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS（五） Paragraph 4 　　Paragraph 4 provides rules that modify the maximum rates of tax at source provided in paragraph 2 in particular cases. The first sentence of paragraph 4 denies the lower direct investment withholding rate of paragraph 2(a) for dividends paid by a U.S. Regulated Investment Company (RIC) or a U.S. Real Estate Investment Trust (REIT). The second sentence denies the benefits of both subparagraphs (a) and (b) of paragraph 2 to dividends paid by REITs in certain circumstances, allowing them to be taxed at the U.S. statutory rate (30 percent). The United States limits the source tax on dividends paid by a REIT to the 15 percent rate when the beneficial owner of the dividend is an individual resident of the other State that owns a less than 10 percent interest in the REIT. These exceptions to the general rules of paragraph 2 have been part of U.S. tax treaty policy since 1988. 　　The denial of the 5 percent withholding rate at source to all RIC and REIT shareholders, and the denial of the 15 percent rate to all but small individual shareholders of REITs is intended to prevent the use of these entities to gain unjustifiable source taxation benefits for certain shareholders resident in the other Contracting State. For example, a corporation resident in Ireland that wishes to hold a diversified portfolio of U.S. corporate shares may hold the portfolio directly and pay a U.S. withholding tax of 15 percent on all of the dividends that it receives. 　　Alternatively, it may acquire a diversified portfolio by purchasing shares in a RIC. Since the RIC may be a pure conduit, there may be no U.S. tax costs to interposing the RIC in the chain of ownership. Absent the special rule in paragraph 2, use of the RIC could transform portfolio dividends, taxable in the United States under the Convention at 15 percent, into direct investment dividends taxable at only 5 percent. 　　Similarly, a resident of Ireland directly holding U.S. real property would pay U.S. tax either at a 30 percent rate on the gross income or at graduated rates on the net income (up to 39.6 percent in the case of individuals and up to 35 percent in the case of corporations). As in the preceding example, by placing the real property in a REIT, the investor could transform real estate income into dividend income, taxable at the rates provided in Article 10, significantly reducing the U.S. tax burden that otherwise would be imposed. To prevent this circumvention of U.S. rules applicable to real property, most REIT shareholders are subject to 30 percent tax at source. However, since a relatively small individual investor might be subject to a U.S. tax of 15 percent of the net income even if he earned the real estate income directly, individuals who hold less than a 10 percent interest in the REIT remain taxable at source at a 15 percent rate. Paragraph 5 　　Paragraph 5 defines the term dividends broadly and flexibly. The definition is intended to cover all arrangements that yield a return on an equity investment in a corporation as determined under the tax law of the state of source, as well as arrangements that might be developed in the future. 　　The term dividends includes income from shares, or other rights that are not treated as debt under the law of the source State. The term also includes income that is subjected to the same tax treatment as income from shares by the law of the State of source. Thus, a constructive dividend that results from a non-arm's length transaction between a corporation and a related party is a dividend. In the case of the United States the term dividend includes amounts treated as a dividend under U.S. law upon the sale or redemption of shares or upon a transfer of shares in a reorganization. See, e.g., Rev. Rul. 92-85, 1992-2 C.B. 69 (sale of foreign subsidiary's stock to U.S. sister company is a deemed dividend to extent of subsidiary's and sister's earnings and profits). Further, a distribution from a U.S. publicly traded limited partnership, which is taxed as a corporation under U.S. law, is a dividend for purposes of Article 10. However, a distribution by a limited liability company is not taxable by the United States under Article 10, provided the limited liability company is not characterized as an association taxable as a corporation under U.S. law. 　　Under U.S. law, a payment denominated as interest that is made by a thinly capitalized corporation may be treated as a dividend to the extent that the debt is recharacterized as equity under the laws of the source State. Paragraph 5 of the Protocol provides that the term "dividends" does not include interest that is recharacterized as dividends because it is paid to a non-resident company, except to the extent that it exceeds an arm's length amount. This rule is not intended to limit the ability of the United States to apply its thin capitalization rules, which apply without regard to the identity of the beneficial owner of the income. Rather, it is to deal with the situation where all interest paid to non-resident companies is treated as dividends without regard to whether the payor is thinly capitalized or the amount of the payment is other than an arm's length amount. Paragraph 6 　　Paragraph 6 excludes from the general source country limitations under paragraph 2 dividends paid with respect to holdings that form part of the business property of a permanent establishment or a fixed base. Such dividends will be taxed on a net basis using the rates and rules of taxation generally applicable to residents of the State in which the permanent establishment or fixed base is located, as modified by the Convention. An example of dividends paid with respect to the business property of a permanent establishment would be dividends derived by a dealer in stock or securities from stock or securities that the dealer held for sale to customers. Paragraph 7 　　Paragraph 7 permits a State to impose a branch profits tax on a company resident in the other State. The tax is in addition to other taxes permitted by the Convention. A State may impose a branch profits tax on a company if the company has income attributable to a permanent establishment in that State, derives income from real property in that State that is taxed on a net basis under Article 6, or realizes gains taxable in that State under paragraph 1 of Article 13. The tax is limited, however, to the aforementioned items of income that are included in the "dividend equivalent amount" in the case of the United States, and the amount that would be distributed as a dividend if earned by a subsidiary rather than a branch, in the case of Ireland. 　　Paragraph 7 permits the United States generally to impose its branch profits tax on a corporation resident in Ireland to the extent of the corporation's 　　(i) business profits that are attributable to a permanent establishment in the United States 　　(ii) income that is subject to taxation on a net basis because the corporation has elected under section 882(d) of the Code to treat income from real property not otherwise taxed on a net basis as effectively connected income and 　　(iii) gain from the disposition of a United States Real Property Interest, other than an interest in a United States Real Property Holding Corporation. The United States may not impose its branch profits tax on the business profits of a corporation resident in the other State that are effectively connected with a U.S. trade or business but that are not attributable to a permanent establishment and are not otherwise subject to U.S. taxation under Article 6 or paragraph 1 of Article 13. 　　The term "dividend equivalent amount" used in paragraph 7 has the same meaning that it has under section 884 of the Code, as amended from time to time, provided the amendments are consistent with the purpose of the branch profits tax. Generally, the dividend equivalent amount for a particular year is the income described above that is included in the corporation's effectively connected earnings and profits for that year, after payment of the corporate tax under Articles 6, 7 or 13, reduced for any increase in the branch's U.S. net equity during the year and increased for any reduction in its U.S. net equity during the year. U.S. net equity is U.S. assets less U.S. liabilities. See, Treas. Reg. section 1.884-1. The dividend equivalent amount for any year approximates the dividend that a U.S. branch office would have paid during the year if the branch had been operated as a separate U.S. subsidiary company. This is analogous to the amount that Ireland may tax under subparagraph (b). Paragraph 8 　　Paragraph 8 provides that the branch profits tax permitted by paragraph 7 shall not be imposed at a rate exceeding the direct investment dividend withholding rate of five percent. Relation to Other Articles 　　Notwithstanding the foregoing limitations on source country taxation of dividends, the saving clause of paragraph 3 of Article 1 permits the United States to tax dividends received by its residents and citizens, subject to the special foreign tax credit rules of paragraph 3 of Article 24 (Relief from Double Taxation), as if the Convention had not come into effect. The benefits of this Article are also subject to the provisions of Article 23 (Limitation on Benefits). Thus, if a resident of Ireland is the beneficial owner of dividends paid by a U.S. corporation, the shareholder must qualify for treaty benefits under at least one of the tests of Article 23 in order to receive the benefits of this Article. ARTICLE 11 Interest 　　Article 11 specifies the taxing jurisdictions over interest income of the States of source and residence and defines the terms necessary to apply the article. Paragraph 1 　　This paragraph grants to the State of residence the exclusive right, subject to exceptions provided in paragraph 3 of Article 11 and paragraph 6 of the Protocol, to tax interest beneficially owned by its residents and arising in the other Contracting State. 　　The term "beneficial owner" is not defined in the Convention, and is, therefore, defined as under the internal law of the country imposing tax (i.e., the source country). The beneficial owner of interest for purposes of Article 11 is the person to which the interest income is attributable for tax purposes under the laws of the source State. Thus, if interest arising in one of the States is received by a nominee or agent that is a resident of the other State on behalf of a person that is not a resident of that other State, the interest is not entitled to the benefits of this Article. However, interest received by a nominee on behalf of a resident of that other State would be entitled to benefits. These limitations are confirmed by paragraph 8 of the OECD Commentaries to Article 11. See also, paragraph 24 of the OECD Commentaries to Article 1 (General Scope). 　　Paragraph 6 of the Protocol provides anti-abuse exceptions to the source-country exemption in paragraph 1 for two classes of interest payments. 　　The first exception deals with so-called "contingent interest." Under this provision interest arising in the United States that is determined by reference to the profits of the issuer or to the profits of one of its associated enterprises, and paid to a resident of the other State may be taxed by the United States according to its domestic laws, but if the beneficial owner is a resident of the other Contracting State, the gross amount of the interest may be taxed at a rate not exceeding the rate prescribed in subparagraph b) of paragraph 2 of Article 10 (Dividends). 　　The second exception is consistent with the policy of Code sections 860E(e) and 860G(b) that excess inclusions with respect to a real estate mortgage investment conduit (REMIC) should bear full U.S. tax in all cases. Without a full tax at source foreign purchasers of residual interests would have a competitive advantage over U.S. purchasers at the time these interests are initially offered. Also, absent this rule the U.S.FISC would suffer a revenue loss with respect to mortgages held in a REMIC because of opportunities for tax avoidance created by differences in the timing of taxable and economic income produced by these interests. Paragraph 2 　　The term "interest" as used in Article 11 is defined in paragraph 2 to include, inter alia, income from debt claims of every kind, whether or not secured by a mortgage. Penalty charges for late payment of taxes are excluded from the definition of interest. Interest that is paid or accrued subject to a contingency is within the ambit of Article 11. This includes income from a debt obligation carrying the right to participate in profits. The term does not, however, include amounts that are treated as dividends under Article 10 (Dividends). 　　The term interest also includes amounts subject to the same tax treatment as income from money lent under the law of the State in which the income arises. Thus, for purposes of the Article, amounts that the United States will treat as interest include 　　(i) the difference between the issue price and the stated redemption price at maturity of a debt instrument, i.e., original issue discount (OID), which may be wholly or partially realized on the disposition of a debt instrument (section 1273), 　　(ii) amounts that are imputed interest on a deferred sales contract (section 483), 　　(iii) amounts treated as OID under the stripped bond rules (section 1286), 　　(iv) amounts treated as original issue discount under the below-market interest rate rules (section 7872), 　　(v) a partner's distributive share of a partnership's interest income (section 702), 　　(vi) the interest portion of periodic payments made under a "finance lease" or similar contractual arrangement that in substance is a borrowing by the nominal lessee to finance the acquisition of property, 　　(vii) amounts included in the income of a holder of a residual interest in a REMIC (section 860E), because these amounts generally are subject to the same taxation treatment as interest under U.S. tax law, and 　　　(viii) embedded interest with respect to notional principal contracts. Paragraph 3 　　Paragraph 3 provides an exception to the exclusive residence taxation rule of paragraph 1 in cases where the beneficial owner of the interest carries on business through a permanent establishment in the State of source or performs independent personal services from a fixed base situated in that State and the interest is attributable to that permanent establishment or fixed base. In such cases the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services) will apply and the State of source will retain the right to impose tax on such interest income. 　　In the case of a permanent establishment or fixed base that once existed in the State but that no longer exists, the provisions of paragraph 3 also apply, by virtue of paragraph 4 of the Protocol, to interest that would be attributable to such a permanent establishment or fixed base if it did exist in the year of payment or accrual. See the Technical Explanation of paragraph 1 of Article 7. Paragraph 4 　　Paragraph 4 provides a source rule for interest. Under this paragraph, interest is deemed to arise in a Contracting State when the payor is a resident of that State, or the payor, whether a resident of a Contracting State or not, has in that Contracting State a permanent establishment or fixed base in connection with which the indebtedness on which the interest paid was incurred and such interest is borne by such permanent establishment or fixed base. This source rule corresponds to paragraph 5 of Article 11 of the OECD Model. Paragraph 5 　　Paragraph 5 provides that in cases involving special relationships between persons, Article 11 applies only to that portion of the total interest payments that would have been made absent such special relationships (i.e., an arm's length interest payment). Any excess amount of interest paid remains taxable according to the laws of the United States and the other Contracting State, respectively, with due regard to the other provisions of the Convention. Thus, if the excess amount would be treated under the source country's law as a distribution of profits by a corporation, such amount could be taxed as a dividend rather than as interest, but the tax would be subject, if appropriate, to the rate limitations of paragraph 2 of Article 10 (Dividends). 　　The term "special relationship" is not defined in the Convention. In applying this paragraph the United States considers the term to include the relationships described in Article 9, which in turn corresponds to the definition of "control" for purposes of section 482 of the Code. 　　This paragraph does not address cases where, owing to a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest is less than an arm's length amount. In those cases a transaction may be characterized to reflect its substance and interest may be imputed consistent with the definition of interest in paragraph 2. The United States would apply section 482 or 7872 of the Code to determine the amount of imputed interest in those cases. Paragraph 6 　　Paragraph 6 provides that the excess of the amount deductible by a permanent establishment in the United States of a company which is a resident of Ireland over the interest actually paid by such permanent establishment, as those amounts are determined pursuant to the laws of the United States, shall be treated as interest beneficially owned by a resident of Ireland. Thus, the Article 11 exemption from source country taxation will generally prevent the United States from collecting the excess interest tax imposed by section 884(f) of the Code on a resident of Ireland. This provision generally is not included in U.S. tax treaties because it is the result provided by U.S. law when interest is exempt from tax at source and therefore does not need to be stated in the treaty. Relation to Other Articles 　　Notwithstanding the foregoing limitations on source country taxation of interest, the saving clause of paragraph 4 of Article 1 permits the United States to tax its residents and citizens, subject to the special foreign tax credit rules of paragraph 3 of Article 24 (Relief from Double Taxation), as if the Convention had not come into force. 　　As with other benefits of the Convention, the benefits of exclusive residence State taxation of interest under paragraph 1 of Article 11, or limited source taxation under paragraph 6 of the Protocol, are available to a resident of the other State only if that resident is entitled to those benefits under the provisions of Article 23 (Limitation on Benefits). ARTICLE 12 Royalties 　　Article 12 specifies the taxing jurisdiction over royalties of the States of residence and source and defines the terms necessary to apply the article. Paragraph 1 　　Paragraph 1 grants to the state of residence of the beneficial owner of royalties the exclusive right to tax royalties arising in the other Contracting State, subject to exceptions provided in paragraph 3 (for royalties taxable as business profits and independent personal services). 　　The term "beneficial owner" is not defined in the Convention, and is, therefore, defined as under the internal law of the country imposing tax (i.e., the source country). The beneficial owner of royalties for purposes of Article 12 is the person to which the royalty income is attributable for tax purposes under the laws of the source State. Thus, if royalties arising in one of the States is received by a nominee or agent that is a resident of the other State on behalf of a person that is not a resident of that other State, the royalties are not entitled to the benefits of this Article. However, royalties received by a nominee on behalf of a resident of that other State would be entitled to benefits. These limitations are confirmed by paragraph 4 of the OECD Commentaries to Article 12. See also, paragraph 24 of the OECD Commentaries to Article 1 (General Scope). Paragraph 2 　　The term "royalties" as used in Article 12 is defined in paragraph 2 to include payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, scientific or other work; for the use of, or the right to use, any patent, trademark, design or model, plan, secret formula or process, or other like right or property; or for information concerning industrial, commercial, or scientific experience. It does not include income from leasing personal property. Like the U.S., but unlike the OECD, Model, paragraph 1 does not refer to an amount "paid" to a resident of the other Contracting State. The deletion of this term is intended to eliminate any inference that an amount must actually be paid to the resident before it is subject to the provisions of Article 12. Under paragraph 1, an amount that is accrued but not paid also would fall within Article 12. 　　The term royalties is defined in the Convention and therefore is generally independent of domestic law. Certain terms used in the definition are not defined in the Convention, but these may be defined under domestic tax law. For example, the term "secret process or formulas" is found in the Code, and its meaning has been elaborated in the context of sections 351 and 367.See Rev. Rul. 55-17, 1955-1 C.B. 388; Rev. Rul. 64-56, 1964-1 C.B. 133; Rev. Proc. 69-19, 1969-2 C.B. 301. Consideration for the use or right to use cinematographic films, or works on film, tape, or disks in radio or television broadcasting is specifically included in the definition of royalties. It is intended that subsequent technological advances in the field of radio and television broadcasting will not affect the inclusion of payments relating to the use of such means of reproduction in the definition of royalties. 　　If an artist who is resident in one Contracting State records a performance in the other Contracting State, retains a copyrighted interest in a recording, and receives payments for the right to use the recording based on the sale or public playing of the recording, then the right of such other Contracting State to tax those payments is governed by Article 12. See Boulez v. Commissioner, 83 T.C. 584 (1984), aff'd, 810 F.2d 209 (D.C. Cir. 1986.) 　　Computer software generally is protected by copyright laws around the world. While not explicitly stated, it is mutually understood that, under the Convention, consideration received for the use or the right to use computer software is treated either as royalties or as business profits, depending on the facts and circumstances of the transaction giving rise to the payment. It is also understood that payments received in connection with the transfer of so-called "shrink-wrap" computer software are treated as business profits. 　　The term "royalties" also includes gain derived from the alienation of any right or property that would give rise to royalties, to the extent the gain is contingent on the productivity, use, or further alienation thereof. Gains that are not so contingent are dealt with under Article 13 (Capital Gains). 　　The term "industrial, commercial, or scientific experience" (sometimes referred to as "know-how") has the meaning ascribed to it in paragraph 11 of the Commentary to Article 12 of the OECD Model Convention. Consistent with that meaning, the term may include information that is ancillary to a right otherwise giving rise to royalties, such as a patent or secret process. Know-how also may include, in limited cases, technical information that is conveyed through technical or consultancy services. It does not include general educational training of the user's employees, nor does it include information developed especially for the user, for example, a technical plan or design developed according to the user's specifications. Thus, as provided in paragraph 11 of the Commentaries to Article 12 of the OECD Model, the term "royalties" does not include payments received as consideration for after-sales service, for services rendered by a seller to a purchaser under a guarantee, or for pure technical assistance. 　　The term "royalties" also does not include payments for professional services (such as architectural, engineering, legal, managerial, medical, or software development services). For example, income from the design of a refinery by an engineer (even if the engineer employed know-how in the process of rendering the design) or the production of a legal brief by a lawyer is not income from the transfer of know-how taxable under Article 12, but is income from services taxable under either Article 14 (Independent Personal Services) or Article 15 (Dependent Personal Services). Professional services may be embodied in property that gives rise to royalties, however. Thus, if a professional contracts to develop patentable property and retains rights in the resulting property under the development contract, subsequent license payments made for those rights would be royalties. Paragraph 3 　　This paragraph provides an exception to the rule of paragraph 1 that gives the state of residence exclusive taxing jurisdiction in cases where the beneficial owner of the royalties carries on business through a permanent establishment in the state of source or performs independent personal services from a fixed base situated in that state and the royalties are attributable to that permanent establishment or fixed base. In such cases the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services) will apply. 　　The provisions of paragraph 4 of the Protocol apply to this paragraph. For example, royalty income that is attributable to a permanent establishment or a fixed base and that accrues during the existence of the permanent establishment or fixed base, but is received after the permanent establishment or fixed base no longer exists, remains taxable under the provisions of Articles 7 (Business Profits) or 14 (Independent Personal Services), respectively, and not under this Article. Paragraph 4 　　Paragraph 4 provides that in cases involving special relationships between the payor and beneficial owner of royalties, Article 12 applies only to the extent the royalties would have been paid absent such special relationships (i.e., an arm's length royalty). Any excess amount of royalties paid remains taxable according to the laws of the two Contracting States with due regard to the other provisions of the Convention. If, for example, the excess amount is treated as a distribution of corporate profits under domestic law, such excess amount will be taxed as a dividend rather than as royalties, but the tax imposed on the dividend payment will be subject to the rate limitations of paragraph 2 of Article 10 (Dividends). Paragraph 5 　　Paragraph 5 is not found in the U.S. or OECD Models. It limits the extent to which one State may tax royalties paid by a resident of the other State. Subparagraphs (a) and (b) of paragraph 5 permit taxation of such royalties when they are paid to a resident of the firstmentioned State (subparagraph (a)), or when they are attributable to a permanent establishment or fixed base situated in that first-mentioned State (subparagraph (b)). Even without these two subparagraphs, these taxing rights could be exercised under the Convention by the State of residence of the State in which the permanent establishment or fixed base is located, under the saving clause of paragraph 4 of Article 1 (General Scope), Article 7 (Business Profits) or Article 15 (Independent Personal Services). 　　Subparagraphs (c) and (d) deal with taxation by one State of a royalty paid by a resident of the other State to a resident of a third State for the use of an intangible in the first-mentioned State. Subparagraph (c) provides that if a royalty is borne by a permanent establishment or fixed base located in one of the States, and the contract in connection with which the royalty was paid was concluded in connection with that permanent establishment or fixed base, the State where the permanent establishment or fixed base is located may tax the royalty if it is not paid to a resident of the other State. The rate of the tax imposed on the royalty may be limited by reference to the tax treaty, if any, in force between the taxing State and the third State. Thus, for example, if a new process is developed by a Canadian company and licensed for use in the United States by a U.S. permanent establishment of an Irish company, assuming that the royalties are paid by the branch, and deducted by it for U.S. tax purposes, then under U.S. law the Irish resident (i.e. the U.S. permanent establishment) is required to withhold U.S. tax on the royalty at a 10 percent rate, the rate applicable to royalties under the U.S.-Canada treaty. This result would also obtain absent the explicit statement in subparagraph 5(c) because the royalty is U.S. source under U.S. law, and it is not covered by the exemption in paragraph 1 of Article 12 since it would not be beneficially owned by a Irish resident. 　　Subparagraph (d) provides an additional case in which a State may tax royalties paid by a resident of the other state to a third-country resident. Under Code section 861(a)(4), and implicitly under the U.S. Model, any royalty paid for the use of an intangible in the United States, regardless of the residence of the payor, is U.S. source, which, subject to any limitations in the tax treaty, if any, between the United States and the country of residence of the beneficial owner, may be taxed by the United States. Under the Convention, however, in addition to the circumstances described in subparagraph (c), one State may tax a royalty paid by a resident of the other State only if 　　(1) it is for the use of a property in the first-mentioned State, 　　(2) it is not paid to a resident of that other State, 　　(3) the payor of the royalty has also received a royalty in respect of the use of a property in the first-mentioned State, and that royalty is either paid by a resident of that first-mentioned State or borne by a permanent establishment or fixed base situated in that State, and 　　(4) the use of the intangible is not a component part of or directly related to the active conduct of a trade or business in which the payor (i.e. the resident of the other State) is engaged. The last requirement is to be interpreted in accordance with paragraph 3 of Article 23 (Limitation on Benefits). For example, a Canadian resident licenses a patent for a process used in the automotive industry to a resident of Ireland, who in turn sub-licenses the patent to an automobile producer in the United States. The U.S. producer pays a royalty to the resident of Ireland for the use of the patent in the United States, and the Irish resident, in turn, pays a royalty to the Canadian resident for that same U.S. use of the patent. The royalty paid by the Irish resident to the resident of Canada would be exempt from U.S. tax under the provisions of paragraph 1 of Article 12. The royalty paid by the Irish resident to the resident of Canada, however, would be subject to U.S. tax under subparagraph (d). The rate would be set at 10 percent, under the provisions of the U.S.-Canada treaty. If, on the other hand, the Irish resident was also engaged in automobile production, the royalty paid by the Irish resident to the Canadian resident would not be subject to U.S. taxation. Relation to Other Articles 　　Notwithstanding the foregoing limitations on source country taxation of royalties, the saving clause of paragraph 4 of Article 1 (General Scope) permits the United States to tax its residents and citizens, subject to the special foreign tax credit rules of paragraph 3 of Article 24 (Relief from Double Taxation), as if the Convention had not come into force. As with other benefits of the Convention, the benefits of exclusive residence State taxation of royalties under paragraph 1 of Article 12 are available to a resident of the other State only if that resident is entitled to those benefits under Article 23 (Limitation on Benefits).