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 Con-

tracting 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 beneficial owner of the interest

is a resident of the other Contracting State, the tax so charged shall not exceed 10 per

cent of the gross amount of the 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 and paid to a resident of the other Contracting State shall be taxable only in that

other State, if such interest is paid to and beneficially owned by that other State, a po-

litical or administrative subdivision or a local authority thereof, or its Central Bank.

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. Penalty charges for late payment shall not be regarded

as interest for the purpose of this Article.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of

the interest, being a resident of a Contracting State, carries on business in the other Con-

tracting 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

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 a resi-

dent of that State. Where, however, the person paying the interest, whether he is a resi-

dent 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 estab-

lishment 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, hav-

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