Taxation of cross-border interest: source-state withholding limited for beneficial owners, with government and PE exceptions.

Interest paid to a resident beneficial owner of the other Contracting State may be taxed in that other State, while the source State may also tax such interest subject to a capped rate when the recipient is the beneficial owner. Exemptions apply for interest paid to specified government bodies and agreed financial institutions. Interest is defined broadly as income from debt claims but excludes late payment penalties. Exceptions apply where interest is effectively connected with a permanent establishment or fixed base, and special-relationship adjustments limit treaty application to the arm's length portion.

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