(1) Interest, which comes from one Contracting State and is paid to a person resident in the other Contracting State can be taxed in the other State.
(2) This interest can, however, also be taxed in the Contracting State, from which it originates under the laws of this State; the tax may, however, if the beneficial user of interest is resident in the other Contracting State, exceed 10 percent of the gross amount of interest.
(3) Irrespective of paragraph (2) the following applies:
- (a) Interest, which originates from the Federal Republic of Germany and which is paid to the government of Turkmenistan, the Central Bank of Turkmenistan, or to the National Foreign Trade bank of Turkmenistan are exempt from German taxes;
- (b) Interest, which originates from Turkmenistan and is paid for a load guaranteed by the Federal Republic of Germany for carrying out direct investment abroad or to the government of the Federal Republic of Germany, the German Federal Bank, the Reconstruction Loan Company or the DEG-German Investment and Development Company mbH, are exempt from Turkmen taxes.
(4) Irrespective of paragraph (2) interest in the sense of paragraph (1) can only be taxed in the Contracting State in which the recipient is resident, if the recipient of the interest is the beneficial recipient and the interest payment
- (a) is connected with the sale of commercial, business or scientific equipment on credit, or
- (b) is connected with the sale of merchandise by a business to another business on credit.
(5) The term, "interest" used in this Article means earnings from claims of any kind even if the claims are secured by mortgage rights to real estate, and especially earnings from public loans from obligations including the therewith associated surcharges and the profits from lottery bonds. Charges for delayed payment are not counted as interest in the sense of this Article.
(6) Paragraphs (1) to (4) do not apply, if the beneficial recipient is resident in one Contracting State carries out a commercial activity through a permanent establishment domiciled there in the other Contracting State, from which the interest originates, or carries freelance work through a fixed establishment located there and the claims for which the interest is paid, actually belongs to this permanent establishment or fixed establishment. In this case Article 7 and/or Article 14 is to be applied.
(7) Interest is then deemed to originate from the Contracting State if the debtor is the State itself, one of its provinces or one of its geographical sub-divisions or a person resident in this State. If, however the debtor maintains a permanent establishment or a fixed place of business regardless of whether the debtor is resident in a Contracting State or not, and the debt for which the interest is paid was assumed for the purposes of the permanent establishment or the fixed place of business and the permanent establishment or fixed place of business bears the interest, then the interest is deemed to originate from the State in which the permanent establishment or fixed place of business is located.
(8) If there are special relationships between the debtor and the beneficial user or between each of them and a third party and for that reason the interest, measured against the basic claims, the amount that debtor and the beneficial user would have agreed on without these relationships, then this Article will only be applied to the latter amount. In which case the excess amount can be taxed according to the law of each of the Contracting States and taking into account the other provision of this Convention.