- 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
- Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to, or on loans guaranteed or insured by, the Government or a local authority, the Central Bank, or any financial institution wholly owned by the other Contracting State, shall be exempt from tax in the first-mentioned State.
- 4
- For the purposes of paragraph 3, the term “any financial institution wholly owned by the other Contracting State” means:
-
- a)in the case of China:
- (i)China Development Bank Corporation;
- (ii)Agricultural Development Bank of China;
- (iii)Export-Import Bank of China;
- (iv)National Council for Social Security Fund;
- (v)China Export & Credit Insurance Corporation;
- (vi)China Investment Corporation; and
- (vii)any other institution as may be agreed from time to time between the competent authorities of the Contracting States;
- b)in the case of the Netherlands:
- (i)Netherlands Finance Company for Developing Countries;
- (ii)Netherlands Investment Bank for Developing Countries; and
- (iii)any other institution as may be agreed from time to time between the competent authorities of the Contracting States.
- 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 such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
- 6
- 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, 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, as the case may be, shall apply.
- 7
- 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 or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
- 8
- 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 Agreement.
- 9
- The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.
