The Double Taxation Relief (Taxes on Income) (Iceland) Order 1991

ARTICLE 12 Royalties

(1) Royalties derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

(2) 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, and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.

(3) The provisions of paragraphs (1) 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 through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed based 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.

(4) 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 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.

(5) The provisions of this Article shall not apply if the right or property giving rise to the royalties was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

(6) The provisions of paragraph (1) of this Article shall not apply where the beneficial owner of the royalties is a company other than a quoted company, unless the company shows that it is not controlled by a person, or two or more associated or connected persons together, who or any of whom would not have been entitled to relief under paragraph (1) of this Article if he had been the beneficial owner of the royalties.

(7) For the purposes of paragraph (6) of this Article:

(a) a quoted company is any company the shares in which are officially quoted on a stock exchange in the Contracting State of which it is a resident;

(b) subject to paragraph (8) of this Article, a person or two or more associated or connected persons together shall be treated as having control of a company if, under the laws of the Contracting State in which the royalties arise relating to the taxes covered by this Convention, they could be treated as having control of it for any purpose and persons shall be treated as associated or connected if, under those laws, they could be so treated for any purpose.

(8) Where an individual is treated under paragraph (7)(b) of this Article as having control of a company by reason only of the fact that he holds ordinary shares in the company carrying full voting and dividend rights, and that individual holds not more than 10 per cent of the total number of such shares in the company, the shares held by him shall be left out of account in determining whether the company is controlled by a person or two or more associated or connected persons together, provided that not more than 25 per cent of the total of such shares in the company may be left out of account in this manner.