Australian Tax Treaties

German Agreement  

AGREEMENT BETWEEN AUSTRALIA AND THE FEDERAL REPUBLIC OF GERMANY FOR THE ELIMINATION OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL AND THE PREVENTION OF FISCAL EVASION AND AVOIDANCE  

ARTICLE 22   Methods of Elimination of Double Taxation  

1    
Subject to the provisions of the laws of Australia which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article), German tax paid under the laws of the Federal Republic of Germany and in accordance with this Agreement, in respect of income derived by a resident of Australia shall be allowed as a credit against Australian tax payable in respect of that income.

2    
Where a resident of the Federal Republic of Germany derives income, profits or gains which, in accordance with the provisions of this Agreement, may be taxed in Australia or is exempt from Australian tax under paragraph 3 of Article 10 , German tax shall be determined as follows:

(a) Except as provided in subparagraph (c), the income, profits or gains shall be excluded from the basis upon which German tax is imposed. In the case of dividends, this applies only to such dividends as are paid to a company (not including a partnership) resident in the Federal Republic of Germany by a company resident in Australia at least 10 percent of the voting power of which is owned directly by the company resident in the Federal Republic of Germany. The exemption from the basis provided by the first sentence of this subparagraph shall not apply to dividends paid by a tax exempt company or to dividends that the distributing company may deduct for Australian tax purposes or for dividends that are attributed under the law of the Federal Republic of Germany to a person that is not a company resident in the Federal Republic of Germany.

(b) The Federal Republic of Germany retains the right to take into account in the determination of its rate of tax the items of income, profits or gains which under the provisions of this Agreement are exempted from German tax.

(c) With respect to the following items of income, there shall be allowed as a credit against German tax on income, subject to the provisions of German tax law regarding credit for foreign tax, the Australian tax paid in accordance with Australian law and with the provisions of this Agreement on the following items of income:

(i) dividends within the meaning of Article 10 to which subparagraph (a) does not apply;

(ii) interest;

(iii) royalties;

(iv) income, profits or gains to which paragraph 4 of Article 13 applies;

(v) income to which Articles 15 and 16 apply;

(vi) income to which paragraphs 2 and 3 of Article 17 apply;

(vii) income to which paragraph 3 of Article 20 applies.

For the purposes of application of this subparagraph (c), items of income of a resident of the Federal Republic of Germany that, under this Agreement, may be taxed in Australia shall be deemed to be income from sources within Australia.

(d) The provisions of subparagraph (a) are to be applied to profits within the meaning of Article   7 , dividends within the meaning of Article 10 and to income, profits or gains from the alienation of property within the meaning of paragraph 2 of Article 13 only to the extent that the items of income, profits or gains were derived from the production, processing, working or assembling of goods and merchandise, the exploration and extraction of natural resources, banking and insurance, trade or the rendering of services or if the items of income, profits or gains are economically attributable to these activities. This applies only if a business undertaking that is adequately equipped for its business purpose exists, except where profits may be taxed in Australia pursuant to paragraph 6 of Article 7 . If subparagraph (a) is not to be applied, double taxation shall be eliminated by means of a tax credit as provided for in subparagraph (c).

(e) Notwithstanding subparagraph (a), double taxation shall be eliminated by a tax credit as provided for in subparagraph (c), if

(i) Australia may, under the provisions of the Agreement, tax items of income, profits or gains, or elements thereof, but does not actually do so;

(ii) after consultation, the Federal Republic of Germany notifies Australia through diplomatic channels of items of income, profits or gains, or elements thereof, to which it intends to apply the provisions on tax credit under subparagraph (c). Double taxation is then eliminated for the notified items of income, profits or gains, or elements thereof, by allowing a tax credit from the first day of the calendar year following that in which the notification was made.

3    
If in the Contracting States items of income, profits or gains, or elements thereof,

(a) are placed, due to differences in their domestic laws, under different provisions of this Agreement and if, as a consequence of this different placement such income, profits or gains would be subject to double taxation and this conflict cannot be resolved by a procedure pursuant to paragraphs 2 or 3 of Article 25 , the State of which the person is a resident shall avoid such double taxation by allowing a tax credit following the procedures laid down in this Article;

(b) are placed under different provisions of this Agreement and if, as a consequence of this different placement such income, profits or gains would be subject to non-taxation or lower taxation than without this conflict, the State of which the person is a resident shall not be obliged to exempt such income, profits or gains, or, in the case of lower taxation only, that State shall allow a tax credit, following the procedures laid down in this Article in respect of such income, profits or gains.