Interest withholding limits under tax treaty cap source taxation and provide government exemptions for cross-border debt income. Interest paid cross-border may be taxed by the recipient State; the source State may also tax but, if the recipient is the beneficial owner, source tax is limited to 10 per cent of the gross interest. Exemptions apply for interest paid to the other State's government or central bank; competent authorities may designate other institutions for exemption. The Article defines interest broadly and excludes late-payment penalties. Where the beneficial owner's interest is effectively connected to a permanent establishment or fixed base in the source State, Articles 7 or 15 apply. Interest attributable to a payer's permanent establishment is deemed to arise in the State of that establishment. Special-relationship adjustments limit treaty relief to arm's-length 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 withholding limits under tax treaty cap source taxation and provide government exemptions for cross-border debt income.
Interest paid cross-border may be taxed by the recipient State; the source State may also tax but, if the recipient is the beneficial owner, source tax is limited to 10 per cent of the gross interest. Exemptions apply for interest paid to the other State's government or central bank; competent authorities may designate other institutions for exemption. The Article defines interest broadly and excludes late-payment penalties. Where the beneficial owner's interest is effectively connected to a permanent establishment or fixed base in the source State, Articles 7 or 15 apply. Interest attributable to a payer's permanent establishment is deemed to arise in the State of that establishment. Special-relationship adjustments limit treaty relief to arm's-length amounts.
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