(1) Interest 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 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 7.5 per cent of the gross amount of the interest.
(3) Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a Contracting State shall be exempt from tax in that State if it is paid:
- (a) in the case of Turkey:
- (i) to the Government of Turkey or any political subdivision or local authority thereof;
- (ii) to the Central Bank of Turkey (Türkiye Cumhuriyet Merkez Bankası);
- (iii) to the Turkish Eximbank (Türkiye İhracat Kredi Bankası A.Ş.); or
- (iv) to any financial institution wholly or mainly owned by the Government of the Republic of Turkey or any political subdivision or local authority thereof as may be agreed from time to time between the competent authorities of the Contracting States.
- (b) in the case of Nigeria:
- (i) to the Federal Government of Nigeria or any political subdivision or local authority thereof;
- (ii) to the Central Bank of Nigeria;
- (iii) to the Nigerian Export and Import Bank;
- (iv) to the Nigerian Bank of Industry;
- (v) to the Nigerian Bank of Agriculture;
- (vi) to Nigerian Industrial and Development Bank;
- (vii) to any financial institution wholly or mainly owned by the Federal Government of Nigeria or any political subdivision or local authority thereof as may be agreed from time to time between the competent authorities of the Contracting States;
(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 or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as all other income assimilated to income from money lent by the taxation laws of the State in which the income arises. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
(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 (a) such permanent establishment or fixed base, or with (b) business activities referred to in (c) of paragraph (1) of Article 7. In such cases the provisions of Article 7 or 15, 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 subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is 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 that permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
(7) Where, by reason of a special relationship between the payer 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 Agreement.