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 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 who is the  beneficial owner thereof shall be taxable only in that other State to the extent that  such interest is paid 

a) in connection with the sale on credit of any industrial, commercial or  scientific equipment, 

b) in connection with the sale on credit of any merchandise by one  enterprise to another enterprise, or 

c) on any loan of whatever kind granted by a 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, 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 State independent personal  services from a fixed base situated therein, and the debt-claims 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 itself, a political subdivision, a local 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 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  last-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.