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- (1) Interest arising in a Contracting State and paid to a resident 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 Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 5 per cent of the gross amount of interest.
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- (3) Notwithstanding the provisions of paragraph 2 of this Article, interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if the recipient is the beneficial owner of that interest and:
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- (a) is the Government of the other Contracting State
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- (b) is a bank or similar financial institution; or
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- (c) the interest is paid by a bank or similar financial institution
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- (4) For the purposes of paragraph 3 of this Article, the term Government:
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- (a) in the case of Singapore, means the Government of Singapore and shall include:
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- (i) the Monetary Authority of Singapore;
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- (ii) the Government of Singapore Investment Corporation Pte Ltd;
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- (iii) a statutory body; and
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- (iv) any institution wholly or mainly owned by the Government of Singapore as may be agreed from time to time between the competent authorities of the Contracting States;
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- (b) in the case of United Kingdom, means the Government of the United Kingdom and shall include:
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- (i) the Bank of England;
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- (ii) the United Kingdom Export Credits Guarantee Department;
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- (iii) CDC Group plc;
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- (iv) a statutory body; and
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- (v) any institution wholly or mainly owned by the Government of the United Kingdom as may be agreed from time to time between the competent authorities of the Contracting States
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- (5) 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. The term interest shall not include any item which is treated as a distribution under the provisions of Article 10 of this Agreement.
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- (6) The provisions of paragraphs (1), (2) and (3) of this Article 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 of this Agreement, as the case may be, shall apply.
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- (7) 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 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 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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- (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 paid exceeds, for whatever reason, 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 of interest. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
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- (9) [REPLACED by paragraph 1 and paragraph 4 of Article 7 of the MLI] (Refer to the box following Article 28 of the Agreement) [The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment].
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- (10) [REPLACED by paragraph 1 and paragraph 4 of Article 7 of the MLI] (Refer to the box following Article 28 of the Agreement) [In the event that a resident of a Contracting State is denied relief from taxation in the other Contracting State by reason of the provisions of paragraph (9) of this Article, the competent authority of that other Contracting State shall notify the competent authority of the first-mentioned Contracting State].