Israel - Interest

Article 12. Interest

1. Interest arising in one of the States and paid to a resident of the other State may be taxed in that other State.

2. However, such interest may be taxed in the State in which it arises, and according to the law of that State, but the tax so charged
shall not exceed 15 per cent of the amount of the interest, provided that where such interest is paid to a bank or a financial institution
the tax so charged shall not exceed 10 per cent of the amount of the interest.

3. The competent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2.

4. The term “interest” as used in this Article means income from Government securities, bonds or debentures, whether or not
secured by mortgage but not carrying a right to participate in profits, and debt-claims of every kind not secured by mortgage as well
as all other income assimilated to income from money lent by the taxation law of the State in which the income arises.

5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the interest, being a resident of one of the States, has in the
other State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is
effectively connected. In such a case, the provisions of Article 8 shall apply.

6. Interest shall be deemed to arise in one of the States 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 one of the States or not, has in
one of the States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred,
and such interest is borne by such a permanent establishment, then such interest shall be deemed to arise in the State in which the
permanent establishment 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 lastmentioned
amount. In that case, the excess part of the payments shall remain taxable according to the law of each State, due regard
being had to the other provisions of this Convention.

Protocol:

III Ad Articles 11, 12 and 13

Applications for the restitution of tax levied contrary to the provisions of Articles 11, 12 and 13 to be lodged with the competent
authority of the State having levied the tax within a period of 5 years after the expiration of the calendar year in which the tax has
been levied.

V Ad Articles 12 and 26

The term “financial institution” as used in paragraph 2 of Article 12 and in paragraph 4 of Article 26, part A, of the Convention
includes a company which in the normal course of its business receives money on deposits or makes loans.