Article 9. INTEREST

The proposed Convention retains the basic provision of the existing Convention that interest derived from sources within one of the Contracting States by a resident of the other Con­ tracting State shall be exempt from tax by the first-mentioned Contracting State.

Interest is defined generally as in­ come from any kind of debt-claim or

any income treated as interest under the tax law of the State of source. In cases in which excessive interest is paid by reason of a special relation­ ship between the payor and the recipi­ ent, the provisions of the interest arti­ cle do not apply to the excess part of the payments. Excess interest pay­ ments may be taxed according to the law of the State from which the inter­ est is derived. Thus, in the case of excess interest derived from the United States, the excess interest may be taxed as a dividend.

The exemption from taxation pro­ vided by paragraph (1) does not apply if the recipient of the interest, being a resident of one of the Con­ tracting States, has a permanent es­ tablishment in the State of source and the indebtedness giving rise to the in­ terest is effectively connected with such permanent establishment. In such a case, the provisions of Article 5

(Business Profits) apply.

Interest paid by a resident of one of the Contracting States to a person other than a resident of the other Contracting State (and in the case of interest paid by a Norwegian corpora­ tion, to a person other than a citizen of the United States) is exempt from tax by the other Contracting State un­ less the interest is effectively con­ nected with a permanent establish­ ment of the recipient maintained in the other Contracting State, or the in­ terest is treated as income from sources within the other Contracting State under paragraph (2) of Article 24 (Source of Income).