Pakistan (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 from debt-claims may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the income from debt-claims is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the income from debt- claims. 3. Notwithstanding the provisions of paragraph 2, income from debt-claims arising in a Contracting State and paid to the Government, or any entity wholly owned by the Government or the Central Bank of the other Contracting State or under a loan agreement approved by the Government 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 and 2 shall not apply if the beneficial owner of the income from the debt-claims, being a resident of a Contracting State, carries on business in the other Contracting State in which the income from the 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- claim in respect of which the income from debt-claims is paid is effectively connected with such permanent establishment or a fixed base. In such cases the provisions of