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Cape Verde - Sao Tome Tax Treaty (2019, not yet in force) — Orbitax Tax Hub

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 10 percent of the gross amount of the interest.

(3) Notwithstanding the provisions of paragraph (2), interest arising in a Contracting State and whose beneficial owner is a resident of the other Contracting State shall be exempt from tax in the first-mentioned State:

  • (a) if the debtor of such interest is the Government of that Contracting State or a political or administrative subdivision or local authority thereof; or
  • (b) if interest is paid to the Government of the other Contracting State, a political or administrative subdivision or local authority, institution or body (including a financial institution) in connection with any financing granted by them under an agreement between the Governments of the Contracting States; or
  • (c) in the case of interest on long-term loans (five or more years) granted by a banking or other financial institution resident in the other Contracting State.

The competent authorities of the Contracting States shall, by mutual agreement, settle the mode of application of paragraph (2) and (3).

(4) 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 other credits of any nature, as well as income assimilated to income from money lent by the taxation law of that State in which the income arises. Penalty charges for late payment of contract remuneration shall not be regarded as interest for the purpose of this Article.

(5) The provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial owner of the interest, being resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding 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 14, as the case may be, shall apply.

(6) Interest shall be deemed to arise in a Contracting State when the debtor is 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 or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest 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 of the interest 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 that 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 Convention.