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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, interest arising in a Contracting State may also be taxed in that State 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 3% (three percent) of the gross amount of the interest.

(3) Notwithstanding the provisions of paragraphs 1 and 2 of this Article, interest arising:

  • (a) in the United Arab Emirates, and paid to the Government of Romania or to any of its financial institutions shall be exempt from U.A.E. tax;
  • (b) in Romania and paid to the Government of the United Arab Emirates or its financial institutions shall be exempted from Romanian taxes;
  • (c) from institutions the capital of which is wholly or partially owned by the Government of Romania or the Government of the United Arab Emirates shall be exempt from taxation related to interest in either Contracting State.

(4) For the purpose of paragraph 3, the term "Government" includes particularly but not exclusively:

  • (a) in the case of Romania:
    • (i) Romania, any administrative-territorial unit or any local authority thereof and the Government of Romania;
    • (ii) the National Bank of Romania;
    • (iii) any institution or any person or any entity owned or controlled directly or indirectly by Romania, by an administrative-territorial unit or by a local authority thereof or by the Government of Romania.
  • (b) in the case of United Arab Emirates:
    • (i) Central Bank of the United Arab Emirates;
    • (ii) Abu Dhabi Investment Authority;
    • (iii) Abu Dhabi Investment Council;
    • (iv) Emirates Investment Authority;
    • (v) Mubadala Development Company;
    • (vi) International Petroleum Investment Company;
    • (vii) Dubai World;
    • (viii) Investment Corporation of Dubai;
    • (ix) Abu Dhabi National Energy Company PJSC (TAQA); or
    • (x) any other institution created by the Federal Government, the local governments, or the local authorities, which is recognized as an integral part of that Government, those governments or those authorities as shall be agreed by notification of the competent authorities of the Contracting States.

(5) 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. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

(6) 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 situated therein and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

(7) 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 is resident of a Contacting 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, an such interest is borne by such permanent establishment, than such interest shall be deemed to arise in the State in which the permanent establishment is situated.

(8) 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 the payments shall remain taxable according to the laws of each Contracting State, due regard being given to the other provisions of this Agreement.

(9) 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.