- 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 5 per cent of the gross amount of the interest.
- 3
- Notwithstanding the provisions of paragraph 2, interest referred to in paragraph 1 shall be taxable only in the Contracting State of which the recipient is a resident if the beneficial owner of the interest is a resident of that State, and:
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- a)the recipient of the interest is a Contracting State or a political subdivision or local authority thereof, a public body or the Central Bank of a Contracting State;
- b)the interest is paid in connection with a loan granted, approved, guaranteed or insured by a Contracting State, the Central Bank of a Contracting State, or any agency or entity (including a financial institution) controlled by a Contracting State;
- c)the recipient of the interest is Atradius Dutch State Business NV (or its legal successor) in respect of loans granted, approved, guaranteed or insured by the Netherlands or the recipient of the interest is the Netherlands’ Finance Company for Developing Countries (de Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV) (or its legal successor);
- d)the recipient of the interest is a pension fund;
- e)the interest is paid in connection with a loan granted by a bank or an insurance company;
- f)the interest is paid in connection with the sale on credit of any industrial, commercial or scientific equipment;
- g)the interest is paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise.
- 4
- 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.
- 5
- The provisions of paragraphs 1, 2 and 3 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.
- 6
- 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.
- 7
- 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.
