Source-state taxation of interest limited by treaty, with exceptions for permanent establishments and related-party excess adjustments. The Article allocates taxing rights over cross-border interest: resident States may tax received interest while source States may tax subject to a treaty limitation negotiated by competent authorities. Exceptions apply where the beneficial owner's interest is effectively connected with a permanent establishment or fixed base in the source State, in which case business profits or independent personal services rules govern. Interest is deemed to arise where the payer resides unless the indebtedness is linked to a permanent establishment or fixed base, and related-party excess interest is limited to arm's-length amounts for treaty relief.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Source-state taxation of interest limited by treaty, with exceptions for permanent establishments and related-party excess adjustments.
The Article allocates taxing rights over cross-border interest: resident States may tax received interest while source States may tax subject to a treaty limitation negotiated by competent authorities. Exceptions apply where the beneficial owner's interest is effectively connected with a permanent establishment or fixed base in the source State, in which case business profits or independent personal services rules govern. Interest is deemed to arise where the payer resides unless the indebtedness is linked to a permanent establishment or fixed base, and related-party excess interest is limited to arm's-length amounts for treaty relief.
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