Article 12. INTEREST — U.S. Income Tax Treaty

Paragraph (1) provides that interest derived by a resident of one Contracting State may be taxed by both Contracting States. However, the rate of tax in the Contracting State of source is limited by paragraph (2) to a rate not in excess of 15 percent of the gross amount of the interest and. if the interest is derived with respect to public issues of bonded indebtedness, by paragraph (3) to a rate not in excess of 10 percent of the gross amount of the interest.

Paragraph (4) provides that interest beneficially derived by one

this rule. interest income derived by the Central Bank of the Philippines, the Federal Reserve Banks of the United States, the Export-Import Bank of the United States. the Overseas Private Investment Corporation (OPIC). State. will be exempt from tax by the other Contracting State. Under

of the Contracting States. or by an instrumentality of that Contracting

and such other institutions of either Contracting State as the r:ompetent authorities may determine by mutual agreement on loans made tc .::-esi dents of the other Contracting State will be exempt from tax in that other State. The exemption also applies where a resident of a Contract ing State receives interest income with respect to debt obligations guaran teed or insured by that Contracting State or an instrumentality thereof.