Cross-border interest withholding limited under treaty; source taxation constrained and exemptions apply for government and central bank recipients.

Interest arising in one Contracting State and paid to a resident of the other may be taxed in the recipient's State, while the State of source may also tax that interest subject to a reduced withholding rate when the recipient is the beneficial owner. The Article defines interest broadly, sets specific exemptions for governments and central banks, provides for government-approved exemptions for other residents, disapplies treaty relief where interest is effectively connected with a permanent establishment or fixed base, and adjusts amounts in cases of non-arm's-length special relationships.

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