DT3875 Botswana: double taxation agreement, Article 11: Interest

This agreement applies for periods before the new comprehensive agreement has effect (see DT3850).

1. Interest arising in a Contracting State which is derived and beneficially owned by 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 law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the interest.
   
   
3. The term `interest` as used in this Article means income from money lent and shall include income deemed by the law of the Contracting State in which such income arises to be income from money lent, but shall not include income deemed by the law of the Contracting State in which it arises to be a dividend or distribution.
   
   
4. The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner 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. or performs in that other State professional services from a fixed base situated therein, and the indebtedness on which the interest arises is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 13, as the case may be, shall apply.
   
   
5. Interest shall be deemed to arise in a Contracting State 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 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 that permanent establishment, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
   
   
6. The relief from tax provided for in paragraph (2) of this Article shall not apply to interest on any form of debt claim dealt in on a stock exchange where the beneficial owner of the interest:
   
   

7. Where, owing to a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of interest 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 that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.
   
   
8. Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a Contracting State shall be exempt from tax in that State if it is derived and beneficially owned by the Government of the other Contracting State, a political subdivision or local authority thereof, or any agency or instrumentality wholly owned by that Government, political subdivision or local authority.