Article 12 - Interest - Kenya (Old - Effective upto 29-08-2017)

Article 12 : Interest 1. Interest arising in a Contracting State and paid to a resident of the other ContractingState may be taxed in that other State. 2. However, such interest may be taxed in the ContractingState in which it arises, and according to the law of that State, but the tax so charged in the Contracting State in which the interest arises shall not exceed 15 per cent. of the gross amount of the interest. 3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to the Government of the other Contracting State or local authority thereof, the Central Bank of the other Contracting State, or any agency wholly owned by that Government or local authority, shall be exempt from tax of the first-mentioned Contracting State. The competent authorities of the Contracting State 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 all other incomes assimilated to income from money lent by the taxation law of the Contracting State in which the income arises. 5. The provisions of paragraph 2 shall not apply if the recipient 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 professional services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of article 7 or article 16, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, 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 or a 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 such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 7. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, 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 recipient in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount, in that case, the excess part of the payment shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.