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of <h1>Article 11 of DTAA Limits Source State Interest Tax to 10% for Beneficial Owners; Exemptions for Government Loans</h1> Article 11 of the Double Tax Avoidance Agreement (DTAA) between two Contracting States addresses the taxation of interest. Interest arising in one Contracting State and paid to a resident of the other may be taxed in the recipient's state, but also in the state where it arises, with a maximum tax rate of 10% if the recipient is the beneficial owner. Interest paid to governmental entities or on government-backed loans is exempt from tax in the source state. The term 'interest' includes income from debt-claims but excludes penalty charges. Special rules apply if the interest is connected to a permanent establishment or involves a special relationship affecting the agreed interest amount.
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