Document ID: chunk:federal_register_of_legislation:C2008A00111:schedule:42a:p7
Version: federal_register_of_legislation:C2008A00111
Segment Type: schedule
Provision Reference: sch 42A (pt 7/16)
Character Range: 16856–19585

in respect of which the dividend is paid, to take advantage of this Article by means of that creation or assignment."

ARTICLE 6

Article 11 of the Agreement is omitted and the following Article is substituted:

"Article 11

Interest

    1. Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State.

    2. However, such interest may also be taxed in the Contracting State in which it arises and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

    3. Notwithstanding paragraph 2, interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may not be taxed in the firstmentioned State if:

         (a) the interest is derived by a Contracting State or by a political or administrative subdivision or a local authority thereof, or by any other body exercising governmental functions in a Contracting State, or by a bank performing central banking functions in a Contracting State; or

         (b) the interest is derived by a financial institution which is unrelated to and dealing wholly independently with the payer. For the purposes of this Article, the term "financial institution" means a bank or other enterprise substantially deriving its profits by raising debt finance in the financial markets or by taking deposits at interest and using those funds in carrying on a business of providing finance.

    4. Notwithstanding paragraph 3, interest referred to in subparagraph (b) of that paragraph may be taxed in the State in which it arises at a rate not exceeding 10 per cent of the gross amount of the interest if the interest is paid as part of an arrangement involving back‑to‑back loans or other arrangement that is economically equivalent and intended to have a similar effect to back‑to‑back loans.

    5. The term "interest" in this Article includes interest from government securities or from bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, interest from any other form of indebtedness, as well as income which is subjected to the same taxation treatment as income from money lent by the law of the Contracting State in which the income arises.

    6. The provisions of paragraphs 1 and 2, subparagraph (b) of paragraph 3 and paragraph 4 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated in that other State, or performs in that other State