Article 11 - Interest

Interest taxation: source state withholding allowed, with reduced treaty tax where the beneficial owner is resident elsewhere.

Article 11 provides that interest arising in a Contracting State may be taxed in the recipient's residence State while the source State may also tax it subject to a reduced rate when the beneficial owner is resident of the other State. Exemptions apply for interest beneficially owned by governments, specified central banks and public financial institutions, or other agreed institutions. Interest connected to a permanent establishment or fixed base is taxed under the rules for business profits or independent personal services. Deemed source rules locate interest where the payer or the bearing permanent establishment is resident, and special relationship adjustments limit treaty application to arm's length amounts.