34-(14)

II SÉRIE-A — NÚMERO 4

of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises,.then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits where that other State considers the adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

Article 10 Dividends

1 — Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2 — However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of the State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 15 % of the gross amount of the dividends.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

This paragraph shall not affect taxation of the company in respect of the profits out of which the dividends are paid.

3 — The term «dividends» as used in this article means income from shares or other rights, not being debt-claims, participating in profits, as well as income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. The term also includes profits attributed under an arrangement for participation in profits (associação em participação).

4 — The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment of fixed base. In such case, the provisions of article 7 or article 14, as the case may be, shall apply.

5 — Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11 Interest

1 — Interest arising in a Contracting State and paid to 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 laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15 % of the gross amount of such interest.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3 — Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempted from tax in this State if:

a) the debtor of such interest is the Government of that State or a local authority thereof; or

b) Interest is paid to the Government of the other Contracting State or a local authority thereof or an institution or body (including a financial institution) in connection with any financing granted by them under an agreement between the Governments of the Contracting States.

4 — The term «interest», as used in this article, means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises but does not include any income which is treated as a dividend under article 10.

5 — The provisions of paragraphs 1 and 2 shall not apply if the beneficial onwer 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, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions or article 7 or article 14, as the case may be, shall apply.

6 — Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a politica\ or administrative subdivision, a focal authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on. which the interés is paid was incurred, and the interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

7 — Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest paid, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this article shall apply only the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to tile laws of each Contracting State, due regard being had to the other provisions of this Convention.