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(1) Interest arising in a Contracting State and paid to a resi- dent of the other Contracting State may be taxed in that other State.
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(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 exceed 10 per cent of the gross amount of the interest.
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(3) Notwithstanding the provisions of paragraph 2, interest arising in: a) the Federal Republic of Germany and paid to the Government of the Republic of Turkey or to the Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) shall be exempt from German tax; b) Turkey and paid to the Government of Germany or to the Deutsche Bundesbank shall be exempt from Turkish tax; c) Turkey 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 Kreditanstalt für Wiederauf- bau or the DEG – Deutsche Investitions- und Entwicklungs- gesellschaft mbH shall be exempt from Turkish tax; d) Germany and paid to the Turkish Eximbank (Türkiye İhracat Kredi Bankası A.Ş) shall be exempt from German tax.
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(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 in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penal- ty charges for late payment shall not be regarded as interest for the purpose of this Article.
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(5) The provisions of paragraphs 1 to 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-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.
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(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 establishment or a fixed base in connection with which the in- debtedness 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.
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(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 be- ing had to the other provisions of this Agreement.