(1) Interest arising in a Contracting State and paid to a re-
sident of the other Contracting State may be taxed in that other
State.
(2) However, such interest may also be taxed in the Con-
tracting State in which it arises and according to the laws of
that State, but if the recipient is the beneficial owner of the in-
terest 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,
a) interest arising in the Federal Republic of Germany and
paid to the New Zealand Government shall be exempt from
German tax;
b) interest arising in New Zealand and paid to the German
Government, the Deutsche Bundesbank, the Kreditanstalt
für Wiederaufbau or the Deutsche Gesellschaft für wirt-
schaftliche Zusammenarbeit (Entwicklungsgesellschaft)
shall be exempt from New Zealand tax.
(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 attaching to such securities, bonds or debentures.
Penalty charges for late payment shall not be regarded as in-
terest for the purpose of this Article. However, the term “inter-
est” does not include income dealt with in Article 10.
(5) The provisions of paragraphs 1 to 3 shall not apply if the
beneficial owner of the interest, being a resident of a Contract-
ing 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 of Article 7 or Articie 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 “Land’’, a political sub-
division, a local authority or a resident 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 in-
curred, and such interest is borne by such permanent estab-
lishment 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 pro-
visions of this Article shall apply only to the last-mentioned
amount. In such case, the excess part of the payments shall re-
main taxable according to the laws of each Contracting State,
due regard being had to the other provisions of this Agreement.