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Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

ARTICLE 11

Interest

(1) Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

(2) However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged may not exceed 5 percent of the gross amount of the interest.

(3) Notwithstanding the provisions of paragraph (2), interest referred to in paragraph (1) shall be taxable only in the Contracting State of which the person receiving the interest is a resident, if this person is their beneficial owner and if one of following conditions is met:

  • (a) such person is a Contracting State, a local authority thereof, or any of its legal entities of public law, including the central bank of that State; or the interest is paid by one of these States, local authorities or legal entities of public law; or
  • (b) this interest is paid in respect of debt claims or loans guaranteed or insured or aided by a Contracting State or by any other person acting on behalf of a Contracting State;
  • (c) such interest is paid on account of the sale on credit of any industrial, commercial or scientific equipment, or for the credit sale of goods or provision of services by an enterprise to another enterprise;
  • (d) this interest is paid by a financial institution of a Contracting State to a financial institution of the other Contracting State.

(4) The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a clause establishing the right to participate in the debtor's profits including income from government securities and income from bonds or debentures as well as premiums and prizes attaching to such securities, bonds or debentures. Late-payment penalties shall not be considered interest as defined in this Article.

(5) The provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on a business activity in the other Contracting State in which the interest arises, through a permanent establishment situated therein, and the debt-claim in respect of which the interest is paid is effectively connected therewith. In such case the provisions of Article 7 shall apply.

(6) Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he or she is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

(7) Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some third parties, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of a similar 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 in accordance with the laws of each Contracting State, due regard being had to the other provisions of this Convention.

(8) The provisions of this Article shall not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt claim, for which the interest is paid, is to take advantage of this Article by means of such creation or assignment.