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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 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 5 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) Notwithstanding the provisions of paragraphs (1) and (2) of this Article, interest paid by a company which is a resident of a Contracting State shall be taxable only in the other Contracting State if the beneficial owner of the interest is that other State itself, political subdivision, local Government, local authority, Central Bank thereof, recognized pension fund, Abu Dhabi Investment Authority, Abu Dhabi Investment Council, Emirates Investment Authority, Mubadala Development Company, International Petroleum Investment Company, Dubai World, Investment Corporation of Dubai, or any other institution created by the Government, a political subdivision, local authority or local Government of that other State which is recognized as an integral part of that Government as shall be agreed through exchange of letters by the competent authorities of the Contracting States. In the case of Slovenia, interest arising in United Arab Emirates and paid in consideration of a loan guaranteed or insured by SID Bank (SID-Slovenska izvozna in razvojna banka) Inc., Ljubljana on account of the Republic of Slovenia as authorized in accordance with the domestic law shall be exempt from tax in United Arab Emirates.

(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 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.

(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 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.

(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 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 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 had to the other provisions of this Agreement.