Interest taxation under DTAA: source-state withholding limited; government-backed debt may be exempt from source tax.

Interest arising in one Contracting State and paid to a resident of the other may be taxed in the recipient's State, while the source State may also tax such interest subject to specified maximum withholding rates for loans and other debt. Exemptions apply for interest derived by governments, political subdivisions, central banks or debt financed, guaranteed or insured by those public entities. Interest is broadly defined as income from debt-claims; interest effectively connected with a permanent establishment or fixed base is taxed under business profits or personal services rules, and amounts exceeding arm's length interest remain taxable under domestic law.

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