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 Contract-
ing 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 ex-
ceed 5 percent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2,
a) interest arising in the Federal Republic of Germany and paid
to the Government of Armenia and to the Central Bank of
Armenia shall be exempt from German tax;
b) interest arising in Armenia and paid in consideration of a loan
guaranteed by the Federal Republic of Germany in respect of
export or foreign direct investment or paid to the Government
of the Federal Republic of Germany, the Deutsche Bundes-
bank, the Kreditanstalt für Wiederaufbau or the DEG –
Deutsche Investitions- und Entwicklungsgesellschaft mbH
shall be exempt from Armenian tax.
4. The term “interest” as used in this Article means income
from debt-claims of every kind, whether or not secured by mort-
gage 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 pre-
miums and prizes attaching to such securities, bonds or deben-
tures. 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 Con-
tracting State, carries on business in the other Contracting State
in which the interest arises, through a permanent establishment
situated therein and the debt-claim in respect of which the inter-
est is paid is effectively connected with such permanent estab-
lishment. In such case the provisions of Article 7 shall apply.
6. Interest shall be deemed to arise in a Contracting State
when the payer is a resident of that State. Where, however, the
person paying the interest, whether he is a resident of a Con-
tracting State or not, has in a Contracting State a permanent es-
tablishment 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 establish-
ment 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 ac-
cording to the laws of each Contracting State, due regard being
had to the other provisions of this Agreement.