Document ID: chunk:federal_register_of_legislation:C2007A00136:schedule:23:p13
Version: federal_register_of_legislation:C2007A00136
Segment Type: schedule
Provision Reference: sch 23 (pt 13/27)
Character Range: 104926–107611

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, 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 therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment.  In such case the provisions of Article 7 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment 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 have been expected to have been agreed upon by the payer and the beneficial owner in the absence of that relationship, the provisions of this Article shall apply only to the last‑mentioned amount.  In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.

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 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 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