(1) Interest derived from one of the Contracting States by a
resident of the other Contracting State who is the beneficial owner
thereof may be taxed in the first mentioned Contracting State at a
rate not exceeding 10 per cent of the gross amount thereof.
(2) The term `interest` as used in this Article means income
from Government securities, bonds or debentures, whether or not
secured by mortgage and whether or not carrying a right to
participate in profits, and other debt-claims of every kind as well
as all other income assimilated to income from money lent by the
taxation law of the State in which the income arises.
(3) Interest shall be deemed to be derived from a
Contracting State when the payer is that State itself, a political
subdivision or a local authority thereof 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 such permanent establishment, then such
interest shall be deemed to be derived from the Contracting State
in which the permanent establishment is situated.
(4) The provisions of paragraph (1) of this Article shall
not apply if the beneficial owner of the interest, being a resident
of one of the Contracting States, has in the other Contracting
State from which the interest is derived a permanent establishment
with which the indebtedness from which the interest arises is
effectively connected. In such a case the provisions of Article 8
shall apply.
(5) 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 the interest paid having regard to the
indebtedness 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 a case, the excess
part of the payment shall remain taxable according to the law of
each Contracting State, due regard being had to the other
provisions of this Convention.
(6) The provisions of this Article shall not apply if the
loan or other indebtedness in respect of which the interest is paid
was created or assigned mainly for the purpose of taking advantage
of this Article and not for bona fide commercial reasons.
