ARTICLE 11 — U.S. Income Tax Treaty

Interest

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
Such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State. However, if the beneficial owner of the interest is a resident of the other Contracting State, except as provided in paragraph 3 the tax so charged shall not exceed:

a) 4.9 percent of the gross amount of interest derived from:

(i) loans granted by banks, including investment banks and savings banks, and insurance companies;

(ii) bonds or securities that are regularly and substantially traded on a recognized securities market; b) 10 percent of the gross amount of interest if the beneficial owner is not a person described in subparagraph (a) and the interest is:

(i) paid by banks, including in vestment banks and savings banks; (ii) paid by the purchaser of machinery and equipment to a beneficial owner that is the seller of the machinery and equipment in connection with a sale on credit; and

c) 15 percent of the gross amount of the interest in all other cases.

For purposes of this paragraph, interest paid on back-to-back loans will be taxed in accordance with the domestic law of the State in which the interest arises.

For a period of five years from the date on which the provisions of this Article take effect:

a) the rate of 10 percent shall apply in place of the rate provided in subparagraph (a) of paragraph 2; and

b) the rate of 15 percent shall apply in place of the rate provided in subparagraph (b) of paragraph 2.

Notwithstanding the provisions of paragraphs 2 and 3, interest referred to in paragraph 1 may only be taxed in the Contracting State in which the beneficial owner is a resident if:

a) the beneficial owner is a Contracting State, a political subdivision or local authority; b) the interest is paid by any of the persons mentioned in subparagraph (a); c) the beneficial owner is a trust, company, or other organization constituted and operated exclusively to administer or provide benefits under one or more plans established to provide pension, retirement or other employee benefits and its income is generally exempt from tax in that Contracting State;

d) the interest arises in the United States and is paid in respect of a loan for a period of not less than three years made, guaranteed, or insured, or a credit for such period extended, guaranteed, or insured, by the Banco Nacional de Comercio Exterior, S.N.C. or Nacional Financiera, S.N.C.; or

e) the interest arises in Mexico and is paid in respect of the loan for a period of not less than three years made, guaranteed, or insured, or a credit for such period extended, guaranteed, or insured, by the Export-Import Bank or the Overseas Private Investment Corporation.

The term "interest" as used in this Convention means income from debt-claims of every kind, whether or not secured by a mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities, and income from bonds or debentures, including premiums or prizes attaching to such securities, bonds, or debentures, as well as all other income that is treated as income from money lent by the taxation law of the Contracting State in which the income arises.
The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on or has carried on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs or has performed in that other State independent personal services from a fixed base situated therein, and the interest is attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.
Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision, local authority, or resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State permanent establishment or a fixed base and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
Where there is a special relationship between the payer and the beneficial owner or between both of them and some other person and the amount of the interest, for whatever reason, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.