ARTICLE 11 — U.S. Income Tax Treaty

Interest

(1) Interest from sources in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

(2) Such interest may be taxed in the Contracting State in which it has its source, and according to the law of that State, but the tax so charged shall not exceed 10 percent of the gross amount of the interest.

(3) Paragraph (2) shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State or performs independent personal services in that other State from a fixed base situated therein and the indebtedness giving rise to the interest is effectively connected with such permanent establishment of fixed base. In such a case the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.

(4) Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the

provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law of each Contracting State, but subject to the other provisions of this Convention. (5) The term "interest" as used in this Convention includes income which, under the taxation law of the Contracting State in which the income has its source, is assimilated to income from money lent.

(6) A Contracting State may not impose any tax on interest paid by a resident of the other Contracting State, except insofar as:

(a) such interest has its source in the first-mentioned State, or is interest to which a resident of that State is beneficially entitled; or

(b) the indebtedness in respect of which the interest is paid is effectively connected with a permanent establishment or a fixed base of the beneficial owner of the interest situated in the first-mentioned State.

(7) Interest shall be treated as income from sources in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether he is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to have its source in the State in which the permanent establishment or fixed base is situated.