(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 be taxed in the Con
tracting State in which it arises, and according to the
law of that State, but the tax so charged shall not ex-
ceed 25 per cent of the gross amount of the interest
(3) Notwithstanding the provisions of paragraph 2, the
tax of a Contracting State on interest received by any
financial institution (including an insurance company)
which is a company of the other Contracting State shall
not exceed 10 per cent of the gross amount of the in-
terest, if the enterprise paying the interest engages in
an industrial undertaking within the meaning of para-
graph 4, subparagraph b, of Article 10.
(4) Notwithstanding the provisions of paragraphs 2
and 3, interest arising in a Contracting State shall be
exempt from tax in that State if the interest is received
by
a) the other Contracting State, a ‘Land*, a political
subdivision, a local authority or a local administra-
tion thereof, or
b) any financial institution wholly owned by the other
Contracting State, a "Land", a political subdivision,
@ local authority or a local administration thereof,
and in particular, in the case of the Federal Repub-
lic, by the "Deutsche Bundesbank” or the “Kredi
anstalt für Wiederaufbau”, and in the case of Thai-
land, by the “Bank of Thailand“, or
©) by a resident of the other Contracting State on bonds
issued by the Government of the first-mentioned
State.
(6) The term "interest" as used in this Article means
income from Government securities, bonds or debentures,
whether or not secured by mortgage and whether or not
carrying a right to participate in profits, and debt-claims
of every kind as well as all other income assimilated to
income from money lent by the taxation law of the
State in which the income arises.
(6) The provisions of paragraphs 1 10 4 shall not ap-
ply if the recipient of the interest, being a resident of
a Contracting State, has in the other Contracting State
in which the interest arises a permanent establishment
with which the debt-claim from which the interest arises
is effectively connected, provided that under the law
of that other State the interest is taxed as part of the
profits of the permanent establishment.
(9) Interest shall be deemed to arise in a Contracting
State when the payer is that State, a “Land”, 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’ in con-
nection with which the indebtedness on which the in-
terest is paid was incurred, and such interest is borne
by such permanent establishment, then such interest shall
be deemed to arise in the Contracting State in which
the permanent establishment is situated.
(8) Where, owing to a special relationship between the
payer and the recipient or between both of them and
some other person, the amount of the interest paid,
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 recipient in the absence of
such relationship, the provisions of this Article shall
apply only to the last-mentioned amount. In that case,
the excess part of the payments shall remain taxable
according to the law of each Contracting State, due
regard being had to the other provisions of this Agree-
ment.