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 or prizes attaching to such securities, bonds or debentures,
and all other income that is subjected to the same taxation treatment as income from money lent
by the taxation law of the Contracting State in which the income arises. Income dealt with in
Article 10 (Dividends) and penalty charges for late payment shall not be regarded as interest for
the purposes of this Convention.
3. The provisions of paragraph 1 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 interest is attributable to
such permanent establishment or fixed base. In such case, the provisions of Article 7 (Business
Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.
4. Where, by reason of a special relationship between the payor and the beneficial owner or
between both of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds 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. 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 Convention.
5. Notwithstanding the provisions of paragraph 1:
a) interest that is contingent interest of a type that does not qualify as portfolio
interest under United States law may be taxed at a rate not exceeding the rate prescribed
in subparagraph (b) of paragraph 2 of Article 10 (Dividends); and
b) interest that is an excess inclusion with respect to a residual interest in a real
estate mortgage investment conduit may be taxed by the United States in accordance with
its domestic law.
ARTICLE 12
Royalties
1. Royalties derived and beneficially owned by a resident of a Contracting State shall be
taxable only in that State.
2. The term "royalties" as used in this Convention means:
a) any consideration for the use of, or the right to use, any copyright of literary,
artistic, scientific or other work (including computer software, cinematographic films,
audio or video tapes or disks, and other means of image or sound reproduction), any
patent, trademark, design or model, plan, secret formula or process, or other like right or
property, or for information concerning industrial, commercial, or scientific experience;
and
b) gain derived from the alienation of any property described in subparagraph (a),