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 one of the States and paid to a resident of the other State may be taxed in that other State.

(2) However, such interest may be taxed in the State in which it arises, and according to the law of that State, but the tax so charged shall not exceed:

  • (a) 5 per cent of the gross amount of the interest, if such interest is received through a bank or equivalent financial institution;
  • (b) 10 per cent of the gross amount of the interest in all other cases.

(3) Notwithstanding the provisions of paragraph 2, the State in which the interest arises shall not tax interest paid to the other State or to a political subdivision or local authority thereof, or to an agency or body (including a financial institution) which is wholly owned by that State or by such a political subdivision or local authority.

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

(5) The provisions of paragraphs 1, 2 and 3 shall not apply if the recipient of the interest, being a resident of one of the States, has in the other State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is effectively connected. In such a case the provisions of Article 7 shall apply.

(6) Interest shall be deemed to arise in one of the States when the payer is that State itself, 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 one of the States or not, has in one of the States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such a permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

(7) 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 payment shall remain taxable according to the law of each State, due regard being had to the other provisions of this Convention.