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 be taxed in the Contracting State in which it arises, and according to the law of that State, but the tax so charged shall not exceed 25 per cent of the gross amount of the interest.

(3) Notwithstanding the provisions of paragraph 2, the tax of a Contracting State on interest received by any financial institution (including an insurance company) which is a company of the other Contracting State shall not exceed 10 per cent of the gross amount of the interest, if the enterprise paying the interest engages in an industrial undertaking within the meaning of paragraph 4, sub-paragraph (b), of Article 10.

(4) Notwithstanding the provisions of paragraphs 2 and 3, interest arising in a Contracting State shall be exempt from tax in that State if the interest is received by:

• (a) the other Contracting State, a "Land", a political subdivision, a local authority or a local administration thereof, or
• (b) any financial institution wholly owned by the other Contracting State, a "Land", a political subdivision, a local authority or a local administration thereof, and in particular, in the case of the Federal Republic, by the "Deutsche Bundesbank" or the "Kreditanstalt fur Wiederaufbau", and in the case of Thailand, by the "Bank of Thailand", or
• (c) by a resident of the other Contracting State on bonds issued by the Government of the first-mentioned State.

(5) The term "interest" as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises.

(6) The provisions of paragraphs 1 to 4 shall not apply if the recipient of the interest, being a resident of a Contracting State, has in the other Contracting State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is effectively connected, provided that under the law of the State the interest is taxed as part of the profits of the permanent establishment.

(7) Interest shall be deemed to arise in a Contracting State when the payer is that State, a "Land", a political subdivision, a local authority 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 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 Contracting State in which the permanent establishment is situated.

(8) Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, 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 recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.