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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 Contracting State.

(2) However, such interest may also be taxed in the Contracting State in which it arises and according to the national laws of that Contracting State, but if the recipient is the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

(3) 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 right to participate in the debtor's profits, and in particular, income from government/state securities and income from bonds or debentures, including the premium and prizes attaching to such securities, bonds or debentures. Penalty charges for late payments shall not be regarded as interest for the purpose of this Article.

(4) The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 and Article 14, as the case may be, shall apply.

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

(6) 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 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 such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of payments shall remain taxable according to the national laws of each Contracting State, due regard being had to the other provisions of this Convention.

(7) The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

(8) Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a Contracting State shall be exempt from tax in that State if it is received and really hold by:

  • (a) In the case of Kazakhstan:
    • (i) the Government of the Republic of Kazakhstan, a political subdivision or local authorities;
    • (ii) the National Bank of the Republic of Kazakhstan;
    • (iii) JSC Fund of the National Prosperity "Samruk-Kazyna"; and
    • (iv) any other such government financial institutions as may be agreed from time to time between the Contracting States;
  • (b) in the case of the U.A.E.:
    • (i) the Government of the IMF or its political subdivision, or local authorities, local Government of their financial institutions:
    • (ii) U.A.E. Central Bank;
    • (iii) Abu Dhabi Investment Authority;
    • (iv) Abu Dhabi Investment Council;
    • (v) Abu Dhabi Fund for Economic Development;
    • (vi) Mubadala;
    • (vii) Dubai Holding;
    • (viii) Dubai World;
    • (ix) Abu Dhabi International petroleum Company; and
    • (x) any other such government financial institution as may be agreed from time to time between the Contracting States.