Interest withholding tax cap limits source-state taxation on cross-border interest when the beneficial owner is resident. Interest arising in a Contracting State may be taxed in the recipient's State of residence, while the source State may also tax such interest but, if the beneficial owner is a resident of the other Contracting State, source taxation is capped. Exemptions from source tax apply where the interest is derived and beneficially owned by specified government or public financial institutions or other mutually agreed institutions. Interest is defined broadly as income from debt claims, excluding penalty charges. Interest connected to a permanent establishment or fixed base is attributed to the State of that establishment, and related party excess interest is limited to an arm's length amount.