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Double Taxation: OECD Model Convention
- 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
beneficial owner of the interest is a resident of the other Contracting
State, the tax so charged shall not exceed 10 per cent of the gross amount
of the interest. The competent authorities of the Contracting States shall
by mutual agreement settle the mode of application of this limitation.
- 3.
- 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 such securities,
bonds or debentures. Penalty charges for late payment shall not be regarded
as interest for the purpose of this Article.
- 4.
- The provisions of paragraphs 1 and 2 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 and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment. In such case the provisions of Article 7 shall
apply.
- 5.
- Interest shall be deemed to arise in a Contracting State when the payer
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.
- 6.
- Where, by reason of a special relationship between the payer and the
beneficial owner 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 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.
© OECD: Last modified: 2003-04-09
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