Document ID: chunk:federal_register_of_legislation:C2008A00111:schedule:42a:p8
Version: federal_register_of_legislation:C2008A00111
Segment Type: schedule
Provision Reference: sch 42A (pt 8/16)
Character Range: 19335–21982

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 independent personal services from a fixed base situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

    7. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of a Contracting State or not, has in a Contracting State or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and that interest is borne by that permanent establishment or fixed base, then the interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

    8. Where, by reason of a special relationship between the payer and the beneficial owner of the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might reasonably have been expected to have been agreed upon by the payer and the person so entitled in the absence of that relationship, the provisions of this Article shall apply only to the lastmentioned amount. In such case, the excess part of the amount of interest paid shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

    9. No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with assignment of the interest, or the creation or assignment of the indebtedness in respect of which the interest is paid, to take advantage of this Article by means of that creation or assignment."

ARTICLE 7

Article 12 of the Agreement is omitted and the following Article is substituted:

"Article 12

Royalties

    1. Royalties 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, those royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed