Article 11 - Interest - Swiss Confederation

ARTICLE 11 INTEREST 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may taxed in that other State. 1 [ 2. However, such interest 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 interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest. ] 2 [****] 4 [ 3. Notwithstanding the provisions of paragraph 2 : ( a ) interest arising in Switzerland and paid to a resident of India shall be taxable only in India if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Government, a political subdivision, a statutory body or a local authority of India or the Export-Import Bank of India, the Reserve Bank of India, the Industrial Finance Corporation of India, the Industrial Development Bank of India, the National Housing Bank, the Small Industries Development Bank of India or by any institution specified and agreed in letters exchanged between the competent authorities of the Contracting States. ] (b) interest arising in India and paid to a resident of Switzerland shall be taxable only in Switzerland if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured under the Swiss provisions regulating the Exploit or Investment Risk. Guarantee or by any institution specified and agreed in letters exchanged between the competent authorities of the Contracting States; 7 [ ( c ) interest arising in a Contracting State and paid to a resident of the other Contracting State engaged in the operation of ships or aircraft in international traffic shall be taxable only in that other State to the extent that such interest is paid on funds connected with such activity; ] (d) interest arising in Contracting State and paid to a resident of Switzerland shall be element exempt from Indian tax if the loan or other indebtedness in respect of which the interest is paid is an approved loan. The term approved loan means any loan or other indebtedness approved by Government of India in this behalf. 5 [4.] the term interest 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 of debentures, including premiums and prizes attaching to such securities, bonds or debentures, penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 6 [ 5. The provisions of paragraphs 1 and 2 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 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 14, 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 such interest is borne by such 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. ] 5 [7.] Where, owing to a special relationship between the payer and the beneficial owner 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 beneficial owner 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 payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. ************** NOTES:- 1. Substituted vide Notification No. 35 dated 07-02-2001 before it was read as, 2. However, such interest may also tax in the Contracting State it arises, and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the gross amount interest. 2. Omitted vide Notification No. 35 dated 07-02-2001 before it was read as, 3. Notwithstanding the provisions of paragraph 2, where the interest is paid to a bank carrying on a bona fide banking business or to an enterprise which holds directly or indirectly at least 20 per cent of the capital of the company paying the interest which are a resident of the other Contracting State and are the beneficial owner of the interest the tax so charged in the Contracting State in which the interest arises shall not exceed 10 per cent of the gross amount of the interest. 3. Re-Numbered vide Notification No. 35 dated 07-02-2001 before it was read as, 4. 4. Substituted vide Notification No. 35 dated 07-02-2001 before it was read as, 3 [ 3. ] Notwithstanding the previsions paragraph 2 and 3. (a) interest arising in Switzerland and paid to a resident of India shall be taxable only in India if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export-Import Bank of India or by any institution specified and agreed in letters exchanged between the competent authorities of the Contracting State. 5. Re-Numbered vide Notification No. 35 dated 07-02-2001 before it was read as, 5. , 6. , 7. 8. 6. Substituted vide Notification No. 35 dated 07-02-2001 before it was read as, 5 [5.] The provisions of paragraphs 1 and 2 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, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such a case the provisions of Article 7 shall apply. 5 [6.] Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated. 7. Substituted vide Notification No. 62/2011 dated 27-12-2011 before it was read as, (c) interest arising in a Contracting State paid to a resident of the other Contracting State engaged in the operation of aircraft international traffic shall be taxable only in that other State to the extent that such interest is paid on funds connected with such activity