Interest withholding cap for cross-border payments to nonresidents; residence taxation and exemptions for government securities and specified government-backed loans Interest paid to a resident of the other Contracting State may be taxed in the recipient's State, but may also be taxed in the source State with a withholding tax cap when the recipient is the beneficial owner. Interest is taxable only in the recipient's State if paid on government obligations or loans and credits made, refinanced, guaranteed or insured by specified central banks or agreed governmental lending institutions. Exceptions apply where interest is effectively connected with a permanent establishment or fixed base, and special-relationship adjustments limit treaty application to arm's-length amounts.