New Zealand - 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 per cent of the gross amount of the interest. 

3.  Notwithstanding the provisions of paragraph 2, the State in which the interest arises shall not levy a tax on interest paid to the other State or to any agency or any instrumentality (including a financial institution) wholly owned by that other State, or to the Central Bank of the Netherlands or to the Reserve Bank of New Zealand. 

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

5.  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. However, this term does not include income dealt with in Article 10. Penalty charges for late payment shall not be regarded as interest for the purposes of this Article. 

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 case the provisions of Article 7 or Article 14, as the case may be, shall apply. 

7.  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 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 lastmentioned amount. In such 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: 

V. With reference to Articles 10, 11 and 12

If in any future double taxation convention with any other country, being a member of the Organisation for Economic Co-operation and Development, New Zealand should limit its taxation at source on dividends, interest and royalties to a rate lower than the one provided for in any of such articles, New Zealand shall without undue delay enter into negotiations with the Netherlands to review the appropriate article with a view to providing the same treatment.

VI.  With reference to Articles 10, 11 and 12

In determining whether dividends, interest or royalties are beneficially owned by a resident of New Zealand, dividends, interest or royalties in respect of which a trustee is subject to tax in New Zealand shall be treated as being beneficially owned by that trustee.

VII. With reference to Articles 10, 11 and 12

Applications for the refund of tax levied not in accordance with the provisions of Articles 10, 11 and 12 shall be lodged with the competent authority of the State having levied the tax wit p in a period of five years after the expiration of the fiscal year in which the tax has been levied.

VIII. With reference to Article 11

The expression "any agency or any instrumentality (including a financial institution) wholly owned by that other State" as used in paragraph 3 shall not include the Bank of New Zealand.