Taxation of interest: source and residence rights balanced with a negotiated withholding limit and arm's length rule.

Interest may be taxed by the residence of the beneficial owner, while the source State may also tax interest but must limit that tax to a negotiated percentage of gross interest when paid to a beneficial owner resident in the other Contracting State; competent authorities determine application. The Article broadly defines interest as income from debt claims, excludes penalty charges, treats interest as arising where the payer or connected permanent establishment/fixed base is resident, and requires arm's-length adjustment where related-party relationships inflate interest.

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