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Regardless of whether they would regard technical services or technical assistance as the provision of knowhow, a few countries specifically include, in the definition of “royalties” or within the scope of the royalties article, payments for technical assistance in connection with the granting of rights, property or information covered by the definition.

Australia and New Zealand extend the definition of “royalties” to include subsidiary and auxiliary services necessary for the application or enjoyment of rights, property or information otherwise covered in the definition. As the services must be “subsidiary” as well as “auxiliary”, this extension may be seen as similar to (though broader than) the de minimis exception noted in the OECD Commentary with respect to contracts that cover both knowhow and the provision of technical assistance. In that case the Commentary states that if

“one part of what is being provided constitutes by far the principal purpose of the contract and the other parts stipulated therein are only of an ancillary and largely unimportant character, then the treatment applicable to the principal part should generally be applied to the whole amount of the consideration.”

India includes within the scope of the royalties article “fees for included services”, which covers, in addition to ancillary and subsidiary services similar to those included in the royalties definition by Australia and New Zealand, services that make available technical knowledge, experience, skill, knowhow, or processes, or consist of the development and transfer of a technical plan or technical design. Other countries, such as Portugal and Russia, also extend the definition to cover services connected with a transfer of knowhow or other technology, irrespective of whether the services are subsidiary' and auxiliary to the main contract.

Others do not seek to define “technical services” in detail in the treaty but would consider that the term only applies to services which are linked to royalty contracts. It would appear that Brazil, for example, which includes technical services in the “royalties” definition, would only apply royalty treatment to income from services that are connected with the transfer of technology.

 

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