Interest withholding tax cap limits source state taxation of cross border interest where beneficial owner is resident, with specific exemptions. Interest paid across Contracting States may be taxed in the recipient's State, while the source State may tax such interest subject to a withholding tax cap when the beneficial owner is resident of the other State; exemptions apply for governments and specified financial institutions. The Article defines interest broadly, excludes penalty charges, treats interest as arising where the payer is resident (with a deemed source rule tied to permanent establishments or fixed bases), disapplies withholding rules for interest effectively connected to a permanent establishment or fixed base, and restricts treaty treatment to arm's length interest where special relationships exist.
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 of cross border interest where beneficial owner is resident, with specific exemptions.
Interest paid across Contracting States may be taxed in the recipient's State, while the source State may tax such interest subject to a withholding tax cap when the beneficial owner is resident of the other State; exemptions apply for governments and specified financial institutions. The Article defines interest broadly, excludes penalty charges, treats interest as arising where the payer is resident (with a deemed source rule tied to permanent establishments or fixed bases), disapplies withholding rules for interest effectively connected to a permanent establishment or fixed base, and restricts treaty treatment to arm's length interest where special relationships exist.
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