The Ministry of Finance has issued a circular (pol. 1024/2011) providing guidance on the interpretation and application of Article 12 of the Double Tax Convention between Greece and Finland, on the tax treatment of royalties.
In particular: Article 12 para. 3 of the Greece-Finland DTC provides for three categories of royalties:
(a) payments 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 television or radio broadcasting;
(b) payments for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or any industrial, commercial, or scientific equipment;
(c) payments for information concerning industrial, commercial or scientific experience.
According to Article 12 para.2 the source state has a limited right to tax royalties up to 10% that applies only to cases (b) and (c) above. It is therefore obvious that for the tax treatment of royalty payments falling into the case (a) above Article 12 para. 1 applies. Article 12 para.1 in its turn provides for a non-exclusive right to tax for the state of residence of the recipient of royalties.
It follows that according to Article 12 para.1 both states (the state of residence and the source state) have the right to tax the royalties falling in category (a) above (literary, artistic, scientific works, including cinema, TV and other broadcasting materials) according to the relevant provisions of their domestic legislation.
The circular notes that where the contracting states wished to provide for an exclusive right to tax, they use the words «are taxed only».
In view of the above, the circular concludes, any different interpretation on the same subject ceases to be valid (such as the interpretation provided at p. 25 of the Circular Number 22/1983/ Ε 15695/364 of the Ministry of Finance).
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