1636-(22)

II SÉRIE-A — NÚMERO 56

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

that State, but if the recipient is the beneficial owner

of the dividends the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the 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 from other corporate rights 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.

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 or 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 Contracting 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 Contracting 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 Contracting 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 Contracting 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 Contracting State.

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

3 — Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that Contracting State, where the interest is paid to:

a) In China:

/) The Government of the People's Republic of China, an administrative subdivision or a local authority thereof; ii) The People's Bank of China; Hi) The State Development Bank;

iv) The Import and Export Bank of China;

v) The Agriculture Development Bank of China;

w) Any other institution wholly owned by the Government of China or an administrative subdivision or a local authority

thereof as may be agreed from time to

time between the competent authorities of the Contracting States;

b) In Portugal:

/)■ The Government of the Portuguese Republic, an administrative subdivision or a local authority thereof;

h) The General Deposits Bank (Caúca Geral de Depósitos — CGD);

Hi) The National Overseas Bank (Banco Nacional Ultramarino — BNU);

iv) Investment, Trade and Tourism of Portugal (ICEP — Investimentos, Comercio e Turismo de Portugal);

v) Any other institution wholly owned by the Government of Portugal or an administrative subdivision or a local authority hereof as may be agreed from time to time between the competent authorities 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 £rom government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this article.

5 — The provisions of paragraphs 1, 2 and 3 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, or performs in that other Contracting 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 of 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, an administrative subdivision or a local authority thereof or a resident of that Contracting 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 interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the 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, 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 to the \ast-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.