(1) Interest arising in the sovereign territory of a Contracting
Party and paid to a resident of the sovereign territory of the
other Contracting Party may be taxed in the sovereign territory
of that other Contracting Party if such resident is the beneficial
owner of the interest.
(2) However, such interest may also be taxed in the
sovereign territory of the Contracting Party in which it arises
and according to the laws of the state of that Contracting Party,
but if the beneficial owner of the interest is a resident of the
sovereign territory of the other Contracting Party, the tax so
charged shall not exceed 5 per cent of the gross amount of the
interest.
(3) Notwithstanding the provisions of paragraph 2,
a) interest arising in the German sovereign territory and paid to
the Macedonian government shall be exempt from German
tax;
b) interest arising in the Macedonian sovereign territory 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 Bundesbank, the
Kreditanstalt für Wiederaufbau or the Deutsche Investitions-
und Entwicklungsgesellschaft shall be exempt from Mace-
donian tax.
(4) Notwithstanding the provisions of paragraph 2, interest
as referred to in paragraph 1 may be taxed only in the sovereign
territory of the Contracting Party of which the recipient is a
resident if the recipient is the beneficial owner of the interest
and the interest is paid
a) in connection with the sale of commercial or scientific
equipment on credit, or
b) in connection with the sale of goods by an enterprise to
another enterprise on credit.
(5) The term “interest” as used in this Article means income
from debt-claims of every kind, whether or not secured by
mortgage, 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.
(6) The provision of paragraph 1 shall not apply if the
beneficial owner of the interest, being a resident of the
sovereign territory of a Contracting Party, carries on business in
the sovereign territory of the other Contracting Party in which
the interest arises, through a permanent establishment situated
therein, or performs in that other sovereign territory 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.
(7) Interest shall be deemed to arise in the sovereign territory
of a Contracting Party if the debtor is the state of this Contracting
Party or, in the case of the German Contracting Party, also one
of its Länder or one of its political subdivisions, or local
authority thereof, or a resident of the sovereign territory of that
Contracting Party. Where, however, the person paying the
interest, whether he is a resident of the sovereign territory of a
Contracting Party or not, has in the sovereign territory of a
Contracting Party 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 sovereign territory of the Contracting
Party in which the permanent establishment or fixed base is
situated.
(8) 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 Party, due regard
being had to the other provisions of this Agreement.