DT4630.11 - Canada: double taxation agreement: 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 be taxed in the Contracting
State in which it arises, and according to the law of that State;
but if the recipient is the beneficial owner of the interest, the
tax so charged shall not exceed 10 per cent of the gross amount of
the interest.
(3) Notwithstanding the provisions of paragraph 2 of this
Article,
- interest arising in the United Kingdom and paid to a resident
of Canada shall be taxable only in Canada if it is paid in respect
of a loan made, guaranteed or insured, or a credit extended,
guaranteed or insured by Export Development Canada;
- interest arising in Canada and paid to a resident of the United
Kingdom shall be taxable only in the United Kingdom if it is paid
in respect of a loan made, guaranteed or insured, or a credit
extended, guaranteed or insured by the United Kingdom Export
Credits Guarantee Department; and
- interest arising in a Contracting State and paid with respect to indebtedness in connection with the sale on credit by a resident of the other State of any equipment, merchandise or services, except where the sale or indebtedness was between related persons, shall be taxable only in the other State.
(4)
- Notwithstanding the provisions of paragraph 2 of this Article,
interest arising in Canada and paid in respect of a bond, debenture
or other similar obligation of the Government of Canada or of a
political subdivision or local authority thereof shall, provided
that the interest is beneficially owned by a resident of the United
Kingdom, be taxable only in the United Kingdom;
- Notwithstanding the provisions of Article 29 Canada may, on or before the thirtieth day of June in any calendar year give to the United Kingdom notice of termination of this paragraph and in such event this paragraph shall cease to have effect in respect of interest paid on obligations issued after 31 December of the calendar year in which the notice is given.
(5) 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 in particular, income from government securities and
income from bonds or debentures, including premiums and prizes
attaching to bonds or debentures, as well as income assimilated to
income from money lent by the taxation law of the State in which
the income arises. However, the term `interest` does not include
income dealt with in Article 10.
(6) The provisions of paragraphs 1, 2, 3 and 4 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 debt-claim in respect of which the interest is paid is
effectively connected with such permanent establishment or fixed
base. In such a case, the provisions of Article 7 or Article 14, as
the case may be, shall apply.
(7) 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 that 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.
