Interest taxation: treaty limits source withholding, exempts government creditors, and ties taxation to PE connections. Article 12 permits both the recipient's State and the source State to tax interest, but limits source withholding when the recipient is the beneficial owner; exemptions apply for interest beneficially owned by governments and the central bank, and additional exemptions may be granted with governmental approval. Interest is defined broadly, penalty charges are excluded, and nexus rules direct taxation to business profits or independent services when interest is effectively connected with a permanent establishment or fixed base. Special-relationship adjustments restrict treaty treatment to arm's-length interest amounts.
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 taxation: treaty limits source withholding, exempts government creditors, and ties taxation to PE connections.
Article 12 permits both the recipient's State and the source State to tax interest, but limits source withholding when the recipient is the beneficial owner; exemptions apply for interest beneficially owned by governments and the central bank, and additional exemptions may be granted with governmental approval. Interest is defined broadly, penalty charges are excluded, and nexus rules direct taxation to business profits or independent services when interest is effectively connected with a permanent establishment or fixed base. Special-relationship adjustments restrict treaty treatment to arm's-length interest amounts.
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