ARTICLE 11

Interest or Income from Debt-Claims

(1) Interest or income from debt-claims 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, such interest or income from debt-claims may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is a resident of the other Contracting State and the beneficial owner of the interest or income from debt-claims the tax so charged shall not exceed 5 percent of the gross amount of the interest or income from debt-claims.

(3) 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 or income from debt-claims for the purpose of this Article.

(4) Notwithstanding the provisions of paragraph (2), interest or income from debt-claims arising in a Contracting State and derived by the other Contracting State, ministries, other Governmental institutions, municipalities, Central Bank and other banks wholly owned by the other Contracting State, shall be exempted from tax in the first-mentioned State.

(5) The provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of the interest or income from debt-claims, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest or income from debt-claims arises, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated there in, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

(6) Interest or income from debt-claims shall be deemed to arise in a Contracting State when the payer is that State itself, a local authority or a resident of that State. Where, however, the person paying the interest or income from debt-claims, whether he 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 or income from debt-claims is paid and such interest or income from debt-claims is borne by such a permanent establishment or fixed base then such interest or income from debt-claims shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base 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.