background image
Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

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 person receiving the interest is the beneficial owner of the interest, the tax so charged shall not exceed 15 percent of the gross amount of  the interest.

The competent authorities of the Contracting States shall determine by mutual agreement the methods of application of such limitations.

(3) Notwithstanding the provisions of paragraph (2), interest arising in a Contracting State is exempt from tax in such State in case:

  • (a) if the person owing such interest is the Government of such Contracting State or one of its local entities; or
  • (b) if such interest is paid to the Government of the other Contracting State or to one of its local entities or its institutions or organizations (including financial institutions) entirely owned by the Contracting State or one of its local entities; or
  • (c) if such interest is paid to other institutions or organizations (including financial institutions) on the basis of funding granted by them within the scope of the agreements entered into by the Governments of the Contracting States.

(4) The term "interest" as used in this Article refers to the income from government securities, debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in debtors' profits, and includes other income which is treated in a similar manner as the amounts loaned under the tax laws of the State in which the interest arises.

(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 an industrial or commercial activity in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or provides in that other State independent personal services through a fixed place of business situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed place of business. In this case, the interest is taxable in the other Contracting State in accordance to its domestic laws.

(6) Interest shall be deemed to arise in a Contracting State when the payer is that State itself, any one of its political or administrative subdivisions, any one of its local entities or a resident of that State. However, where the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State, a permanent establishment or a fixed place of business in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or such fixed place of business, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or the fixed place of business is situated.

(7) Where, by reason of a special relationship, either between the payer and the beneficial owner or between both of them and some other person, the amount of 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 special 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 Convention.