Article 11 Interest

Interest arising in one of the States and paid to a resident of the other State shall be taxable only in that other State.

The term ‘interest’ as used in this Article means income from government securities, bonds or debentures, whether or not secured by mortgage, but not carrying a right to participate in profits, and 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.

The provisions of paragraph 1 of this Article shall not apply if the recipient of the interest, being a resident of one of the States, carries on business in the other State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal 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 case, the provisions of Article 7 or Article 14 of this Convention, as the case may be, shall apply.

Interest shall be deemed to arise in one of the States when the payer is that State itself, a political subdivision, a local authority or a resident of that State.

Notwithstanding the provisions of paragraph 4 of this Article the interest shall be deemed to arise in the State in which the payer of the interest has a permanent establishment or a fixed base with which the indebtedness on which the interest is paid is effectively connected and which bears the interest, whether or not the payer of the interest is a resident of one of the States.

Where, by reason of a special relationship between the payer and the recipient 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 recipient 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 State, due regard being had to the other provisions of this Convention.