Interest withholding tax limit permits source-state taxation with a ceiling and exempts government receipts and PE-connected interest. Article 12 permits the State where interest arises to tax that interest subject to a capped source tax; interest paid to the other State's government entities is exempt. Interest is defined to include government securities, bonds, debentures and other debt-claims. Interest is sourced to the payer's State or to the State where a permanent establishment/fixed base bearing the indebtedness is situated. If the recipient's interest is effectively connected to a permanent establishment or fixed base in the source State, taxation follows the rules for business or professional income. Amounts inflated by special relationships are limited to an arm's-length amount for treaty application; excess remains taxable under domestic law.