ARTICLE 7

Source of Income

For purposes of this Convention: (1) Dividends paid by a resident of a Contracting State shall be treated as income from sources within that State.

(2) 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, 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 and such interest is borne by such permanent establishment, such interest shall be deemed to be from sources within the Contracting State in which the permanent establishment is situated.

(3) Royalties described in paragraph (3) of Article 13 (Royalties) for the use of, or the right to use, property or rights described in such paragraph within a Contracting State shall be treated as income from sources within such Contracting State.

(4) Income from immovable property including income in respect to the operation of mines, oil wells, quarries, or other natural resources (including gains derived from the sale of such property or the right giving rise to such income) shall be treated as income from sources within a Contracting State only if such property is situated in that Contracting State.

(5) Income from the rental of tangible personal (movable) property, other than ships or aircraft or containers used in international traffic, shall be treated as income from sources within a Contracting State only if such property is situated in that Contracting State.

(6) Income received by an individual for his performance of labor or personal services, whether as an employee or in an independent capacity, shall be treated as income from sources within a Contracting State only to the extent that such services are performed in that Contracting State. Income from personal services performed aboard ships or aircraft operated by a resident of one of the Contracting States in international traffic shall be treated as income from sources within that Contracting State if rendered by a member of the regular complement of the ship or aircraft. For purposes of this paragraph, income from labor or personal services includes pensions (as defined in paragraph (4) of Article 21 (Private Pensions and Annuities)) paid in respect of such services. Notwithstanding the preceding provisions of this paragraph, remuneration described in Article 22 (Social Security Payments) shall be treated as income from sources within a Contracting State only if paid by or from the public funds of that Contracting State or a political subdivision or local authority thereof.

(7) Income from the sale, exchange or other disposition of property described in paragraph (1) (a) and (b) of Article 14 (Capital Gains) shall be treated as income from sources within Indonesia or the United States, as the case may be.

(8) Notwithstanding paragraphs (1) through (6), business profits which are attributable to a permanent establishment which the recipient, a resident of one of the Contracting States, has in the other Contracting State, including income derived from immovable property and natural resources and dividends, interest, royalties (as defined in paragraph (3) of Article 13 (Royalties)) and capital gains shall be treated as income from sources within that other Contracting State, but only if the property or rights giving rise to such income, dividends, interest, royalties, or capital gains are effectively connected with such permanent establishment.

(9) The source of any item of income to which paragraphs (1) through (8) are not applicable shall be determined by each of the Contracting States in accordance with its own law. Notwithstanding the preceding sentence, if the source of any item of income under the laws of one Contracting State is different from the source of such item of income under the laws of the other Contracting State or if the source of such income is not readily determinable under the laws of one of the Contracting States, the competent authorities of the Contracting States may, in order to prevent double taxation or further any other purpose of this Convention, establish a common source of the item of income for purposes of this Convention.