Document ID: chunk:federal_register_of_legislation:C2004A00987:schedule:2a:p6
Version: federal_register_of_legislation:C2004A00987
Segment Type: schedule
Provision Reference: sch 2A (pt 6/14)
Character Range: 66455–69225

taxed in the first‑mentioned State if:
    (a) the interest is derived by one of the Contracting States or by a political or administrative sub‑division 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;
    (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) (a) Notwithstanding paragraph (3), interest referred to in sub‑paragraph (b) of that paragraph may be taxed in the State in which it arises at a rate not exceeding 10 percent 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.
    (b) Nothing in this Article shall be construed as restricting, in any manner, the right of a Contracting State to apply any anti‑avoidance provisions of its taxation law.
(5) The term "interest" in this Article means interest from government securities or from bonds or debentures (including premiums attaching to such securities, 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. Income dealt with in Article 10 (Dividends) and penalty charges for late payment shall not be regarded as interest for the purposes of this Article.
(6) The provisions of paragraphs (1), (2), (3) and (4) shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, 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 that case the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.
(7) Interest shall be deemed to arise in a Contracting State when the payer is a resident