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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 recipient of the interest is a resident of the other Contracting State, then the tax so charged shall not exceed 10 percent of the gross amount of the interest.

(3) Notwithstanding the provisions of paragraph (2) of this Article, any interest arising in a Contracting State and paid to a resident of the other Contracting State, shall only be subject to tax in that other State, if the recipient is the beneficial owner of the interest and:

  • (a) the recipient is that, one of its political subdivisions, local entities or the Central Bank of that State;
  • (b) the interest is paid by the State or one of its political subdivisions, or local authorities;
  • (c) the interest is paid on loans or credit due, conceded, granted, guaranteed or insured by one of the Contracting States, or by one of its political subdivisions, territorial-administrative units, or local entities or by an export credit agency dependent on the State or on its political subdivisions;
  • (d) the recipient is a financial institution totally controlled by that State or one of its political subdivisions;
  • (e) it is a pension fund approved for tax purposes by that other State and the income of the aforesaid fund is, in general terms, tax exempt in that State.

(4) The term "interest" as used in this Article means income from debt-claims of any 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 attached to such titles. Likewise, any other income which is liable to the same taxation treatment as income from the proceeds of loans, in accordance with the tax laws of the State from which the income arises. Penalty charges for late payments shall not be regarded as interest for the purposes of this Article.

(5) The provisions of paragraphs (1) and (2) of this Article shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, and the debt-claim in respect of which the interest is paid is effectively connected to such permanent establishment. In such cases, the provisions of Article 7 of this Convention 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

(7) Where, by reason of a special relationship, either between the payer and the beneficial owner of the interest 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 cases, 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.