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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 laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:

  • (a) 4.9% in the case of interests paid to banks;
  • (b) 10% in other cases.

(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 securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as all other income that is treated as income from money lent by the laws of the Contracting State in which the income arises. The term "interest" shall not include any item of income which is considered as a dividend under the provisions of paragraph 2 of Article 10.

(4) Notwithstanding the provisions of the preceding paragraphs, interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if:

  • (a) the beneficial owner of the interest is the Government, a political subdivision or a local authority, or the Central Bank of the other Contracting State;
  • (b) the interest is paid by any of the entities mentioned in sub-paragraph a);
  • (c) in the case of the United Arab Emirates, the following entities as long as they are wholly owned by United Arab Emirates:
    • (i) The Abu Dhabi Investment Authority;
    • (ii) The Abu Dhabi Investment Council;
    • (iii) Mubadala Development Company (Mubadala);
    • (iv) Dubai World;
    • (v) Dubai Investment Company (DIC);
    • (vi) Emirates Investment Authority;
    • (vii) International Petroleum Investment Company (IPIC);
  • (d) in the case of Mexico, the following entities as long as they are wholly owned by Mexico:
    • (i) Banco Nacional de Comercio Exterior, S.N.C.;
    • (ii) Nacional Financiera, S.N.C.;
    • (iii) Banco Nacional de Obras y Servicios Publicos, S.N.C.;
  • (e) any other institution that the governments of each Contracting State certifies that are wholly owned by them.

(5) The provisions of paragraphs 1 and 2 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 or 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 or Article 14, as the case may be, shall apply.

(6) Interest shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting 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 Contracting State in which the permanent establishment or fixed base is situated.

(7) Where, by reason of a special relationship between the payer and the beneficial owner of the interest 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 of the interest 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 Agreement.