Interest taxation: source state may tax interest with treaty limits, residence state also taxes and exemptions apply. Interest may be taxed by the recipient's State of residence and also by the source State subject to treaty limits and exemptions; beneficial ownership constrains source taxation and certain interest is exempt when owned by the other State, political subdivisions or central bank, or approved residents. Interest effectively connected with a permanent establishment or fixed base is governed by business profit or independent services rules. The Article defines interest as income from debt-claims and applies an arm's-length adjustment where special relationships inflate interest amounts.