Cross-border interest taxation permits taxing rights while preserving treaty exemptions for public entities, qualifying banks, and approved debt claims.

Article 11 permits both the recipient's State and the source State to tax cross-border interest, while capping source-State tax on gross interest at 7.5 per cent where the beneficial owner is resident in the other Contracting State. Source-State exemptions apply to interest beneficially owned by the other State's Government, local authorities, governmental agencies or entities, qualifying resident banks for specified pre-existing debt-claims, and other residents where the debt transaction receives governmental approval. The interest rules are displaced where an effectively connected debt-claim belongs to a permanent establishment or fixed base.

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