Australian Tax Treaties
Interest arising in a Contracting State, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.
2
However, that interest may also be taxed in the Contracting State in which it arises and according to the law of that State, but the tax so charged shall not exceed:
(a) 10 per cent of the gross amount of the interest:
(i) if the person beneficially entitled is a bank or an insurance company; or
(ii) if derived from bonds and securities that are regularly and substantially traded on a recognized securities market; or
(iii) paid by banks except where subparagraphs (i) or (ii) apply; or
(iv) paid by the purchaser to the seller of machinery and equipment in connection with a sale on credit; and
(b) 15 per cent of the gross amount of the interest in all other cases.
3
Notwithstanding the provisions of paragraph 2, interest derived from the investment of official foreign exchange reserve assets by the Government of one of the Contracting States, its monetary institutions or a bank performing central banking functions in that State shall be exempt from tax in the other Contracting State.
4
The term " interest " in this Article includes interest from Government securities or from bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, interest from any other form of indebtedness and all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises.
5
The provisions of paragraphs 1 and 2 shall not apply if the person beneficially entitled to 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 in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or Article 14, as the case may be, shall apply.
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 the person is a resident of a Contracting State or not, has in a Contracting State or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and that interest is borne by that permanent establishment or fixed base, then the interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
7
Where, by reason of a special relationship between the payer and the person beneficially entitled to 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 or might have been expected to have been agreed upon by the payer and the person so entitled in the absence of that relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
8
The provisions of this Article shall not apply if the indebtedness in respect of which the interest is paid was created or assigned with the main purpose of taking advantage of this Article and not for bona fide commercial reasons. In that case the provisions of the domestic law of the Contracting State in which the interest arises shall apply.
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