. .

Paragraph (5) provides that the reduced rate of tax under paragraphs (2) and (3) and the exemption under paragraph (4) will not apply if the recipient of interest from sources within one Contracting State, being a resident of the other Contracting State carries on business through a permanent establishment situated therein or performs in that other State

independent personal services from a fixed base situated therein and the debt claim in respect of whic.h the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the interest will be treated as business profits subject to the provisions of Article 8 (Business Profits) or income from the performance of independ­

ent personal services subject to the provisions of Article 15 (Independent Personal Services), as the case may be.

If excessive interest is paid to a related person, paragraph (6) pro• vides that this Article does not apply to the excessive portion of the pay­ ment. The excessive portion may be taxed by each Contracting State according to its own laws, including the Convention where applicable. In the case of the United States, the excessive portion may be taxed as a dividend, in which case the provisions of Article 11 (Dividends) will apply.

Paragraph (7) defines interest for purposes of the Convention as in­ come from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrr,ing a ri¹ht to participate in the debtor's profits.

In particular, the term 'interest ' includes income from government securities and income from bonds or debentures, including premiums and prizes attached to such bonds, debentures or government securities and other income (such as original issue discount) which under the taxation laws of the Contracting State in which the income arises is assimilated to income from money lent.

This Article is subject to the saving clause of paragraph (3) of Article 6 (General Rules of Taxation), Therefore, interest derived by a citizen or resident of the source Contracting State may be taxed by that Contracting State without regard to this Article,