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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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DT: Barbados: double taxation agreement, Article 10: Interest

(1) Where interest is derived from sources within a Contracting State by a resident of the other Contracting State who is subject to tax in that other State in respect thereof, the rate of tax imposed thereon in the first-mentioned Contracting State shall not exceed 15 per cent.

(2) The provisions of paragraph (1) of this Article shall not apply where a resident of a Contracting State has a permanent establishment in the other Contracting State and such interest is attributable to that permanent establishment in such event such interest as is attributable to that permanent establishment shall be treated as if it were industrial or commercial profits to which the provisions of Article 6 are applicable.

(3) In this Article, the term `interest` means income from Government securities, from bonds or debentures, whether or not secured by mortgage, or from any other form of indebtedness, as well as all other income assimilated to income from money lent by the taxation law of the Contracting State in which the income arises.

(4) 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 indebtedness in respect of 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 last mentioned amount. In that 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.

(5) Any provision of the law of a Contracting State which relates only to interest paid to a non-resident company shall not operate so as to require such interest paid to a company which is a resident of the other Contracting State to be left out of account as a deduction in computing the taxable profits of the company paying the interest as being a dividend or distribution.

(6) The provisions of this Article shall not apply if the form of indebtedness in respect of which the interest is payable was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.