ARTICLE 11

Interest

(1) Interest derived from sources within one of the Contracting States by a resident of the other Contracting State may be taxed by both Contracting States.

(2) The rate of tax imposed by one of the Contracting States on interest derived from sources within that Contracting State by a resident of the other Contracting State shall not exceed 15 percent.

(3) Notwithstanding paragraphs (1) and (2), interest derived by a resident of one of the Contracting States from sources in the other Contracting State shall be exempt from tax by the other Contracting State if it is:

(a) Interest arising out of commercial credit-including credit which is represented by commercial paper-resulting from deferred payments for goods or merchandise or services supplied by a resident of one of the Contracting States to a resident of the other Contracting State,

(b) Interest paid between banks, except on loans represented by bearer instruments, or (c) Interest arising from deposits, not represented by bearer instruments, made in banks or other financial institutions.

(4) Notwithstanding paragraphs (1) and (2), interest beneficially derived by one of the Contracting States, or by an instrumentality of that Contracting State, not subject to tax by that Contracting State on its income, shall be exempt from tax by the other Contracting State.

(5) The term “interest” as used in this Convention means income from bonds, Government securities, notes or other evidences of indebtedness, whether or not secured and whether or not carrying a right to participate in profits, and debt-claims of every kind, as well as all other income assimilated to income from money lent by the taxation law of the Contracting State in which the income has its source, but not interest which is considered as dividends in accordance with the second sentence of paragraph (2) of Article 10 (Dividends); it includes, in the case of Belgium, prizes on lottery bonds.

(6) Interest shall be treated as income from sources within a Contracting State only if paid by such Contracting State, a political subdivision or a local authority thereof, or by a resident of that Contracting State. Notwithstanding the preceding sentence:

(a) If the person paying the interest (whether or not such person is a resident of one of the Contracting States) has a permanent establishment in one of the Contracting States in connection with which the indebtedness on which the interest is paid was incurred and such interest is borne by such permanent establishment, or

(b) If the person paying the interest is a resident of one of the Contracting States and has a permanent establishment in a State other than a Contracting State in connection with which the indebtedness on which the interest is paid was incurred and such interest is paid to a resident of the other Contracting State, and such interest is borne by such permanent establishment, such interest shall be deemed to be from sources within the State in which the permanent establishment is situated.

(7) Paragraphs (2), (3), and (4) shall not apply if the recipient of the interest, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State and the indebtedness giving rise to the interest is effectively connected with such permanent establishment. In such a case, the provisions of Article 7 (Business Profits) shall apply.

(8) Where any interest paid by a person to any related person exceeds an amount which would have been paid to an unrelated person, the provisions of this article shall apply only to so much of the interest as would have been paid to an unrelated person. In such a case the excess payment may be taxed according to its own law by the Contracting State from which the interest is derived.

(9) Interest paid by a resident of one of the Contracting States to a person other than a resident of the other Contracting State shall be exempt from tax by that other Contracting State. This paragraph shall not apply if:

(a) Such interest is treated as income from sources within that other Contracting State under paragraph (6),

(b) The recipient of the interest has a permanent establishment in that other Contracting State and the indebtedness giving rise to the interest is effectively connected with such permanent establishment, or

(c) Such interest is from sources within the United States and is received within Belgium by a person who is not a citizen or resident of the United States.