Italy - Interest

Article 11. 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 also be taxed in the State in which 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 10% of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in one of the States shall be
exempt from tax in that State if:

(a) the payer of the interest is the Government of that State, a political or administrative
subdivision or local authority thereof; or
(b) the interest is paid to the Government of the other State, a political or administrative
subdivision or local authority thereof or entities or bodies (including financial institutions)
wholly owned by that State, a political or administrative subdivision or a local authority thereof;
or
(c) the interest is paid to other entities or bodies (including financial institutions) by reason of
financing contracted by them under agreements concluded between the Governments of the
States.

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

5. The term "interest" as used in this Article means income from Government securities, bonds or
debentures, whether or 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; but it does not include
income as referred to in Article 10.

6. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest,
being a resident of one of the States, carries on business in the other 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 interest may be taxed in that other State in accordance with its domestic laws.

7. Interest shall be deemed to arise in one of the States when the payer is that State itself, a political
or administrative 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 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 State in which the permanent
establishment or fixed base is situated.

8. 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 a case, the excess part of the payments shall remain taxable
according to the laws of each State, due regard being had to the other provisions of this Convention.

Protocol:

5. With reference to Articles 10, 11 and 12

International organizations, their bodies and officials present in the territory of one of the States
shall not be entitled in the other State to any reduction of or exemption from tax referred to in
Articles 10, 11 and 12 concerning dividends, interest and royalties arising in that other State, if
such items of income are not subjected to a tax on income in the first-mentioned State.

6. With reference to Articles 10, 11, 12 and 22

As regards paragraph 6 of Article 10, paragraph 6 of Article 11, paragraph 4 of Article 12, and
paragraph 2 of Article 22, the last sentence included therein cannot be interpreted so that the
principles contained in Articles 7 and 14 of this Convention are not taken into consideration.

7. With reference to Articles 11 and 12

In determining the withholding tax rates as provided for in paragraph 2 of Article 11 and
paragraph 2 of Article 12, it has been taken into account that the Netherlands does not levy a
special withholding tax on interest and royalties paid to non-residents.