(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 in accordance with the laws of that State, but if the beneficial owner of the interest is a resident of the Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of interest.
(3) Notwithstanding the provisions of paragraph (2) of this Article, the following provisions shall apply:
- (a) interest arising from the People's Democratic Republic of Algeria paid in respect of a loan benefiting from a guarantee from the Federal Republic of Germany for exports or direct investment abroad or paid to the Government of the Federal Republic of Germany, the Deutsche Bundesbank, the Kreditanstalt für Wiederaufbau or the Deutsche Investitions-und Entwicklungsgesellschaft shall be exempt from tax in Algeria;
- (b) interest arising from the Federal Republic of Germany and paid to the Government of the People's Democratic Republic of Algeria, to the Bank of Algeria or to an institution or agency (including financial institutions) wholly owned by the People's Democratic Republic of Algeria as well as interest paid in respect of a loan guaranteed by the People's Democratic Republic of Algeria for exports or direct investment abroad shall be exempt from German tax.
(4) The provisions of paragraph (2) of this Article notwithstanding, the interest mentioned in paragraph (1) shall only be taxable in the Contracting State of which the person receiving the interest is a resident, if such a person is the beneficial owner of this interest and the latter is paid in connection with the sale on deferred terms of industrial, commercial, or scientific equipment.
(5) The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Late-payment penalties shall not be considered interest as defined in this Article.
(6) The provisions of paragraphs (1) to (4) of this Article 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, 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 therewith. In such case the provisions of Article 7 or Article 14 of this Convention, as the case may be, 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 or she 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.
(8) Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some third party, 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.