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ARTICLE 12.—(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) Such interest may also be taxed in the Contracting State in which it arises, and according to the law of that State, but where the interest is paid to a resident of the other Contracting State who is subject to tax in that other State in respect of it, the tax so charged in the State in which the interest arises shall not exceed: (a)10 per cent of the gross amount of the interest, if the interest is derived by a bank or any other financial institution (including an insurance company) which is a resident of the other State; (b)25 per cent of the gross amount of the interest, in all other cases. (3) Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a Contracting State and paid to the Government of the other Contracting State, a political subdivision or a local authority thereof, the Central Bank of that other Contracting State, or any agency (other than an agency with share capital) wholly owned by that Government, political subdivision or local authority shall be exempt from tax in the first-mentioned Contracting State. The competent authorities of the Contracting States may determine by mutual agreement any other governmental institution to which this paragraph shall apply. (4) 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 other debt-claims of every kind as well as other income assimilated to income from money lent by the taxation law of the State in which the income arises. (5) The provisions of paragraphs (1) and (2) of this Article shall not apply 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. In such case, the provisions of Article 8 shall apply. (6) Interest shall be deemed to arise in a Contracting State when the payer is that State itself, 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 connection with which the indebtedness on which the interest is paid was incurred, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated. (7) Where, owing to a special relationship between the payer and the recipient of the interest 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 paid in the absence of such relationship, the provisions of this Article shall apply 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 Convention.