Interest withholding tax cap limits source state taxation on cross border interest, subject to exemptions and PE connection. Article 11 permits residence state taxation of interest paid by a Contracting State but allows the source State to tax such interest subject to a capped rate where the beneficial owner is resident in the other Contracting State. Exemptions apply to central banks, governments and agreed institutions. Interest is broadly defined; interest is deemed to arise where the payer is resident or where a permanent establishment or fixed base bears the indebtedness. If the beneficial owner's interest is effectively connected to a permanent establishment or fixed base, Articles 7 or 14 govern. Related party excess interest is limited to arm's length amounts for treaty purposes.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Interest withholding tax cap limits source state taxation on cross border interest, subject to exemptions and PE connection.
Article 11 permits residence state taxation of interest paid by a Contracting State but allows the source State to tax such interest subject to a capped rate where the beneficial owner is resident in the other Contracting State. Exemptions apply to central banks, governments and agreed institutions. Interest is broadly defined; interest is deemed to arise where the payer is resident or where a permanent establishment or fixed base bears the indebtedness. If the beneficial owner's interest is effectively connected to a permanent establishment or fixed base, Articles 7 or 14 govern. Related party excess interest is limited to arm's length amounts for treaty purposes.
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