China (tax/treaty)

Income from Debt-claims 1. Income from debt-claims 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 income 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 income from debt-claims, the tax so charged shall not exceed10 percent of the gross amount of the income from debt-claims. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation. 3. Notwithstanding the provisions of paragraph 2, income from debt-claims arising in a Contracting State and derived by the Government of the other Contracting State, a local authority and the Central Bank thereof or any financial institution wholly owned by the Government of that other State, or by any other resident of that other State with respect to debt-claims indirectly financed by the Government of that other State, a local authority, and the Central Bank thereof or any financial institution wholly owned by the Government of that State, shall be exempt from tax in the first- mentioned Contracting State. 4. The term "income from debt-claims" 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, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as income from debt-claims for the purpose of this Article. 5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the income from debt-claims, being a resident of a Contracting State, carries on business in the other Contracting State in which the income from debt-claims 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- claims in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such cases the provisions of Article 7 or