Convention between the Federal Republic of Germanyand the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to taxes on income and capital and to certain other taxes
The Federal Republic of Germany and the United States of America,
Desiring to conclude a new Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital and to certain other taxes,
Have agreed as follows:
Article 1: General Scope
1. This Convention shall apply to persons who are residents of one or both of the Contracting States, except as otherwise provided in this Convention.
2. This Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded: a) by the laws of either Contracting State; or b) by any other agreement to which the Contracting States are party.
3. a) Notwithstanding the provisions of subparagraph b) of paragraph 2: aa) the Contracting States agree that any question arising as to the interpretation or application of the Convention and, in particular, whether a taxation measure is within the scope of the Convention, shall be determined exclusively in accordance with the provisions of Article 25 (Mutual Agreement Procedure) of the Convention; and bb) the provisions of any other agreement shall not apply to a taxation measure unless the competent authorities agree that the measure is not within the scope of Article 24 (Non-discrimination) of this Convention. b) For the purposes of this paragraph, a “measure” is a law, regulation, rule, procedure, decision, administrative action, or any similar provision or action.
4. a) Except to the extent provided in paragraph 5, this Convention shall not affect the taxation by the United States of its residents (as determined under Article 4 (Residence)) and its citizens. b) Notwithstanding the other provisions of this Convention, a former citizen or long-term resident of the United States may, for the period of ten years following the loss of such status, be taxed in accordance with the laws of the United States.
5. The provisions of paragraph 4 shall not affect the benefits conferred by the United States: a) under paragraph 2 of Article 9 (Associated Enterprises), paragraph 6 of Article 13 (Gains), paragraphs 3, 4 and 5 of Article 18 (Pensions, Annuities, Alimony, Child Support, and Social Security), paragraph 1 and 5 of Article 18A (Pension Plans), paragraph 3 of Article 19 (Government Service), and under Articles 23 (Relief from Double Taxation), 24 (Non-discrimination), and 25 (Mutual Agreement Procedure); and b) under paragraph 2 of Article18A (Pension Plans), subparagraph b) of paragraph 1 of Article 19 (Government Service), and under Articles 20 (Visiting Professors and Teachers; Students and Trainees) and 30 (Members of Diplomatic Missions and Consular Posts), upon individuals who are neither citizens of, nor have immigrant status in, the United States.
6. Nothing in the Convention shall be construed to prevent the Federal Republic of Germany from imposing its taxes on amounts included in the income of a resident of the Federal Republic of Germany according to part 4, 5, and 7 of the German “Außensteuergesetz”. Where such imposition of tax gives rise to double taxation, the competent authorities shall consult for the elimination of such double taxation according to paragraph 3 of Article 25 (Mutual Agreement Procedure).
7. In the case of an item of income, profit or gain derived by or through a person that is fiscally transparent under the laws of either Contracting State, such item shall be considered to be derived by a resident of a State to the extent that the item is treated for the purposes of the taxation law of such State as the income, profit or gain of a resident.
Protocol Article 1
1. With reference to subparagraph b) of paragraph 4 of Article 1 (General Scope): The term “long-term resident” shall mean any individual who is a lawful permanent resident of the United States in eight or more taxable years during the preceding 15 taxable years. In determining whether the threshold in the preceding sentence is met, an individual shall not be treated as a lawful permanent resident of the United States for any taxable year in which such individual is treated as a resident of a country other than the United States under the provisions of a tax treaty of the United States and the individual does not waive the benefits of such treaty provided by the United States to a resident of the other country. Consequently, if during each of the 15 taxable years preceding the loss of his status as a lawful permanent resident an individual was a resident of the Federal Republic of Germany (as determined under Article 4 (Residence)) and claimed the benefits provided by the United States to a resident of the Federal Republic of Germany, the individual shall not be considered a long-term resident.
Article 2: Taxes Covered
1. The existing taxes to which this Convention shall apply are: a) In the United States: aa) the federal income taxes imposed by the Internal Revenue Code (but excluding the accumulated earnings tax, the personal holding company tax, and social security taxes); and bb) the excise tax imposed on insurance premiums paid to foreign insurers (hereinafter referred to as “United States tax”).
This Convention shall, however, apply to the excise tax imposed on insurance premiums paid to foreign insurers only to the extent that the risks covered by such premiums are not reinsured with a person not entitled to the benefits of this or any other convention that provides exemption from such tax. b) In the Federal Republic of Germany: aa) the income tax (Einkommensteuer); bb) the corporation tax (Körperschaftsteuer); cc) the trade tax (Gewerbesteuer); and dd) the capital tax (Vermögensteuer) (hereinafter referred to as “German tax”).
2. This Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws.
Article 3: General Definitions
1. For the purposes of this Convention, unless the context otherwise requires: a) the terms “a Contracting State” and “the other Contracting State” mean the United States or the Federal Republic of Germany as the context requires; b) the term “United States”, when used in a geographical sense, means the United States of America, but does not include Puerto Rico, the Virgin Islands, Guam, or any other possession or territory of the United States of America; c) the term “Federal Republic of Germany”, when used in a geographical sense, means the area in which the tax law of the Federal Republic of Germany is in force; d) the term “person” includes but is not limited to an individual and a company; e) the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes; f) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; g) the term “international traffic” means any transport by a ship or aircraft, except when the ship or aircraft is operated solely between places in one of the Contracting States; h) the term “national” means: aa) in respect of the United States, United States citizens and any legal person, partnership, or association deriving its status as such from the law in force in the United States; and bb) in respect of the Federal Republic of Germany, any German within the meaning of paragraph 1 of Article 116 of the Basic Law of the Federal Republic of Germany and any legal person, partnership, or association deriving its status as such from the law in force in the Federal Republic of Germany; and i) the term “competent authority” means: aa) in the United States, the Secretary of the Treasury or his delegate; and bb) in the Federal Republic of Germany, the Federal Minister of Finance or his delegate.
2. As regards the application of this Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of Article 25 (Mutual Agreement Procedure), have the meaning that it has under the laws of that State concerning the taxes to which this Convention applies.
Article 4: Residence
1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. The term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or of profits attributable to a permanent establishment in that State or capital situated therein.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows: a) he shall be deemed to by a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests); b) if the State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national; and d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then the competent authorities of the Contracting States shall seek to determine through consultation the Contracting State of which the person shall be deemed to be a resident for the purposes of this Convention, and, if they are unable so to determine, such person shall not be considered to be a resident of either Contracting State for purposes of enjoying benefits under this Convention.
Protocol Article 4
2. With reference to paragraph 1 of Article 4 (Residence) a) The Federal Republic of Germany shall treat a United States citizen or an alien lawfully admitted for permanent residence (a “green card” holder) as a resident of the United States only if such person has a substantial presence, permanent home, or habitual abode in the United States. b) It is understood that a German Investment Fund and a German Investmentaktiengesellschaft (collectively referred to as Investmentvermögen) to which the provisions of the Investment Act (Investmentgesetz) apply are residents of the Federal Republic of Germany and that a U.S. Regulated Investment Company (RIC) and a U.S. Real Estate Investment Trust (REIT) are residents of the United States.
Article 5: Permanent Establishment
1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
2. The term “permanent establishment” includes especially: a) a place of management; b) a branch; c) an office; d) a factory; e) a workshop; and f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources.
3. A building site or a construction, assembly or installation project constitutes a permanent establishment only if it lasts more than twelve months.
4. Notwithstanding the foregoing provisions of this Article, the term “permanent establishment” shall be deemed not to include: a) the use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to the enterprise; b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display, or delivery; c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; e) the maintenance of a fixed place of business solely for the purpose of advertising, of the supply of information, of scientific activities, or of similar activities that have a preparatory or auxiliary character for the enterprise; or f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of preparatory or auxiliary character.
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person (other than an agent of an independent status to whom paragraph 6 applies) is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 that, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.
6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
7. The fact that a company that is a resident of a Contracting State controls or is controlled by a company that is a resident of the other Contracting State, or that carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.
Protocol Article 5
3. With reference to Article 5 (Permanent Establishment): A resident of a Contracting State that performs in the other Contracting State concerts, theatrical or artistic performances, or similar shows and revues and that may not be taxed in that other State under the provisions of Article 17 (Artistes and Athletes) shall not be deemed to have a permanent establishment in that State if its presence does not exceed in the aggregate 183 days in the calendar year concerned.
Article 6: Income From Immovable (Real) Property
1. Income derived by a resident of a Contracting State from immovable (real) property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
2. The term “immovable property” shall have the meaning that it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property; livestock and equipment used in agriculture and forestry; rights to which the provisions of general law respecting landed property apply; usufruct of immovable property; and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources, and other natural resources. Ships and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.
Article 7: Business Profits
1. The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the business profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the business profits that it might be expected to make if it were a distinct and independent enterprise engaged in the same or similar activities under the same or similar conditions.
3. In determining the business profits of a permanent establishment, there shall be allowed as deductions expenses that are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.
4. No business profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.
5. For the purposes of this Convention, the business profits to be attributed to the permanent establishment shall include only the profits derived from the assets or activities of the permanent establishment.
6. Where business profits include items of income that are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.
7. For the purposes of this Convention the term “business profits” includes income derived from the rental of tangible personal property and the rental or licensing of cinematographic films or works on film, tape, or other means of reproduction for use in radio or television broadcasting and income from the performance of professional services and of other activities of an independent character.
Protocol Article 7
4. With reference to Article 7 (Business Profits): It is understood that the business profits to be attributed to a permanent establishment shall include only the profits derived from the assets used, risks assumed, and activities performed by the permanent establishment. The principles of the OECD Transfer Pricing Guidelines will apply for purposes of determining the profits attributable to a permanent establishment, taking into account the different economic and legal circumstances of a single entity. Accordingly, any of the methods described therein as acceptable methods for determining an arm’s-length result may be used to determine the income of a permanent establishment so long as those methods are applied in accordance with the Guidelines. In particular, in determining the amount of attributable profits, the permanent establishment shall be treated as having the same amount of capital that it would need to support its activities if it were a distinct and separate enterprise engaged in the same or similar activities. With respect to financial institutions other than insurance companies, a Contracting State may determine the amount of capital to be attributed to a permanent establishment by allocating the institution's total equity between its various offices on the basis of the proportion of the financial institution's risk-weighted assets attributable to each of them. A financial institution may determine the amount of the capital attributed to its permanent establishment using its risk weighted assets only if it risk weights its assets in the ordinary course of its business.
5. With reference to paragraph 1 and 2 of Article 7 (Business Profits) and paragraph 3 of Article 13 (Gains): For the implementation of paragraphs 1 and 2 of Article 7 and paragraph 3 of Article 13 any income, gain, or expense attributable to a permanent establishment is taxable or deductible in the Contracting State where such permanent establishment is situated even if the payments are deferred until such permanent establishment ceases to exist. Nothing in the preceding sentence shall prevent the application to such deferred payments of rules regarding the accrual of income and expenses according to the domestic law of a Contracting State.
6. With reference to Article 7 (Business Profits) and Article 13 (Gains): Gains from the alienation of movable property that at any time formed part of the business property of a permanent establishment that a resident of one Contracting State has or had in the other Contracting State may be taxed by that other State only to the extent of the gain that accrued during that time. Notwithstanding any provision of Article 7 or Article 13, such tax may be imposed on such gains at the time when realized and recognized under the laws of that other State, if it is within ten years of the date on which the property ceases to be part of the business property of the permanent establishment (or such shorter period provided by the laws of either Contracting State).
Article 8: Shipping and Air Transport
1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.
2. Profits of an enterprise of a Contracting State from the use or rental of containers (including trailers, barges, and related equipment for the transport of containers) used in international traffic shall be taxable only in that State.
3. The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business, or an international operating agency.
Article 9: Associated Enterprises
1. Where a) an enterprise of a Contracting State participates directly or indirectly in the management, control, or capital of an enterprise of the other Contracting State, or b) the same persons participate directly or indirectly in the management, control, or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations that differ from those that would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that State, and taxes accordingly, profits on which an enterprise of the other Contracting State has been charged to tax in that other State, and that other Contracting State agrees that profits so included are profits that would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those that would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be paid to the other provisions of this Convention and the competent authorities or the Contracting States shall if necessary consult each other.
Protocol Article 9
7. With reference to Article 9 (Associated Enterprises): Either State may apply the rules of its national law that permit the distribution, apportionment, or allocation of income, deductions, credits, or allowances between related persons with a view to apportioning or allocating such deductions, credits, or allowances in accordance with the general principles of paragraph 1 of Article 9. Article 9 shall not be construed to limit either Contracting State in allocating income between persons that are related other than by direct or indirect participation within the meaning of paragraph 1, such as by commercial or contractual relationships resulting in controlling influence, so long as such allocation is otherwise in accordance with the general principles of paragraph 1 of Article 9.
Article 10: Dividends
1. Dividends paid by a company that is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the dividends are derived and beneficially owned by a resident of the other Contracting State, the tax so charged shall not exceed: a) 5 percent of the gross amount of the dividends if the beneficial owner is a company that owns directly at least 10 percent of the voting stock of the company paying the dividends; b) 15 percent of the gross amount of the dividends in all other cases.This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
3. Notwithstanding the provisions of paragraph 2, such dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident if the beneficial owner is: a) a company that is a resident of the other Contracting State that has owned directly shares representing 80 percent or more of the voting power in the company paying the dividends for a 12-month period ending on the date entitlement to the dividend is determined and: aa) satisfies the conditions of clause aa) or bb) of subparagraph c) of paragraph 2 of Article 28 (Limitation on Benefits); bb) satisfies the conditions of clauses aa) and bb) of subparagraph f) of paragraph 2 of Article 28, provided that the company satisfies the conditions described in paragraph 4 of Article 28 with respect to the dividends; cc) is entitled to benefits with respect to the dividends under paragraph 3 of Article 28; or dd) has received a determination pursuant to paragraph 7 of Article 28 with respect to this paragraph; or b) a pension fund that is a resident of the other Contracting State, provided that such dividends are not derived from the carrying on of a business, directly or indirectly, by such pension fund.
4. Subparagraph a) of paragraph 2 and subparagraph a) of paragraph 3 shall not apply in the case of dividends paid by a United States person that is a U.S. Regulated Investment Company (RIC), a United States person that is a U.S. Real Estate Investment Trust (REIT) or a German Investment Fund or a German Investmentaktiengesellschaft (collectively referred to as Investmentvermögen). In the case of dividends paid by a RIC or an Investmentvermögen, subparagraph b) of paragraph 2 and subparagraph b) of paragraph 3 shall apply. In the case of dividends paid by a REIT subparagraph b) of paragraph 2 and subparagraph b) of paragraph 3 shall apply only if: a) the beneficial owner of the dividends is an individual or a pension fund, in either case holding an interest of not more than 10 percent in the REIT; b) the dividends are paid with respect to a class of stock that is publicly traded and the beneficial owner of the dividends is a person holding an interest of not more than 5 percent of any class of the REIT’s stock; or c) the beneficial owner of the dividends is a person holding an interest of not more than 10 percent in the REIT and the REIT is diversified.
For purposes of this paragraph a REIT shall be diversified if no single interest in real property exceeds 10 percent of its total interests in real property. For the purposes of this paragraph foreclosure property shall not be an interest in real property. Where a REIT holds an interest in a partnership, it shall be treated as owning directly a proportion of the partnership’s interests in real property corresponding to its interest in the partnership.
5. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, founders' shares, or other rights (not being debt-claims) participating in profits, as well as other income from other rights that is subjected to the same taxation treatment as income from shares by the laws of the Contracting State of which the company making the distribution is a resident. The term “dividends” also includes in the Federal Republic of Germany income under a sleeping partnership (Stille Gesellschaft), a participating loan (partiarisches Darlehen), or “Gewinnobligation”, as well as distributions on certificates of a German Investmentvermögen.
6. Notwithstanding the first sentence of paragraph 2 of this Article, paragraph 3 of this Article and paragraph 1 of Article 11 (Interest), income from arrangements carrying the right to participate in profits (including in the Federal Republic of Germany income under a sleeping partnership (Stille Gesellschaft), a participating loan (partiarisches Darlehen), or “Gewinnobligation”, or “jouissance” shares or “jouissance” rights and in the United States contingent interest of a type that would not qualify as portfolio interest) that is deductible in determining the profits of the payor may be taxed in the Contracting State in which it arises according to the laws of that State.
7. The provisions of paragraphs 2 and 3 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State, of which the company paying the dividends is a resident, through a permanent establishment situated therein, and the holding in respect of which the dividends are paid forms part of the business property of such permanent establishment. In such case, the provisions of Article 7 (Business Profits) shall apply.
8. A Contracting State may not impose any tax on dividends paid by a company which is a resident of the other Contracting State, except insofar as such dividends are paid to a resident of the first-mentioned State or insofar as the holding in respect of which the dividends are paid forms part of the business property of a permanent establishment situated in that State, nor may it impose tax on a company’s undistributed profits except as provided in paragraph 9 of this Article, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that State.
9. A company that is a resident of a Contracting State and that has a permanent establishment in the other Contracting State, or that is subject to tax on a net basis in that other Contracting State on items of income that may be taxed in that other State under Article 6 (Income from Immovable (Real) Property) or under paragraph 1 of Article 13 (Gains), may be subject in that other Contracting State to a tax in addition to the tax allowable under the other provisions of this Convention. Such tax, however, may be imposed only on: a) the portion of the business profits of the company attributable to the permanent establishment, and b) the portion of the income referred to in the preceding sentence that is subject to tax under Article 6 or paragraph 1 of Article 13, that represents the “dividend equivalent amount” of those profits and income; the term “dividend equivalent amount” shall, for the purposes of this subparagraph, aa) in the case of the United States, have the meaning that it has under the law of the United States as it may be amended from time to time without changing the general principle thereof; and bb) in the case of the Federal Republic of Germany, be that portion of the income described in subparagraph a) that is comparable to the amount that would be distributed as a dividend by a locally incorporated subsidiary.
10. The tax referred to in subparagraphs a) and b) of paragraph 9 of this Article shall not be imposed at a rate exceeding the rate specified in subparagraph a) of paragraph 2. In any case, it shall not be imposed on a company that: a) satisfies the conditions of clause aa) or bb) of subparagraph c) of paragraph 2 of Article 28 (Limitation on Benefits); b) satisfies the conditions of clauses aa) and bb) of subparagraph f) of paragraph 2 of Article 28, provided that the company satisfies the conditions described in paragraph 4 of that Article with respect to an item of income, profit or gain described in paragraph 9 of this Article; c) is entitled under paragraph 3 of Article 28 to benefits with respect to an item of income, profit or gain described in paragraph 9 of this Article; or d) has received a determination pursuant to paragraph 7 of Article 28 with respect to this paragraph.
11. The term “pension fund” as used in this Article means any person that: a) is established under the laws of a Contracting State; b) is established and maintained in that Contracting State primarily to administer or provide pensions or other similar remuneration, including social security payments, disability pensions and widow’s pensions or to earn income for the benefit of one or more of such persons; and c) is either, aa) in the case of the United States, exempt from tax in the United States with respect to the activities described in subparagraph b) of this paragraph, or bb) in the case of the Federal Republic of Germany, a plan the contributions to which are eligible for preferential treatment under the Income Tax Act.
Protocol Article 10
8. With reference to paragraph 3 of Article 10 (Dividends): a) If the Federal Republic of Germany introduces a taxation regime that exempts from taxation Real Estate Investment Companies, subparagraph b) of paragraph 3 of Article 10 shall not apply to dividends paid by such a company that is a resident of the Federal Republic of Germany. b) It is understood that in the case of the Federal Republic of Germany, subparagraph b of paragraph 3 of Article 10 applies to the person treated as the owner of the assets of the pension fund under section 39 of the Fiscal Code, provided the dividends may only be used for providing retirement benefits through such fund.
9. With reference to paragraph 9 of Article 10 (Dividends): The general principle of the “dividend equivalent amount”, as used in the United States law, is to approximate that portion of the income mentioned in paragraph 9 that is comparable to the amount that would be distributed as a dividend if such income were earned by a locally incorporated subsidiary.
Article 11: Interest
1. Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.
2. The term “interest” as used in this Article means income from debt claims of every kind, whether or not secured by mortgage, and, in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as all other income that is treated as income from money lent by the taxation law of the Contracting State in which the income arises. Penalty charges for late payment shall not be regarded as interest for the purposes of this convention. However, the term “interest” does not include income dealt with in Article 10 (Dividends).
3. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein and the debt claim in respect of which the interest is paid forms part of the business property of such permanent establishment. In such a case the provisions of Article 7 (Business Profits) shall apply.
4. Where, by reason of a special relationship between the payor 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 that would have been agreed upon by the payor 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 Contracting State, due regard being had to the other provisions of this Convention.
5. Where a company that is a resident of a Contracting State derives profits or income from the other Contracting State, then that other State may not impose any tax on interest paid by the company except insofar as such interest is paid by a permanent establishment of such company located in that other State, or out of income described in subparagraph b) of paragraph 9 of Article 10 (Dividends), or insofar as such interest is paid to a resident of that other State, or insofar as the debt claim underlying such interest payment forms part of the business property of a permanent establishment situated in that other State.
6. Notwithstanding the provisions of paragraph 1, interest that is an excess inclusion with respect to a residual interest in a U.S. real estate mortgage investment conduit may be taxed by the United States in accordance with its domestic law.
Protocol Article 11
10. With reference to Article 11 (Interest): The excess of the amount of interest deductible by a United States permanent establishment of a German company over the interest actually paid by such permanent establishment shall be treated as interest derived and beneficially owned by a resident of the Federal Republic of Germany.
Article 12: Royalties
1. Royalties derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.
2. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work (but not including cinematographic films, or works on film, tape, or other means of reproduction for use in radio or television broadcasting); for the use of, or the right to use. Any patent, trade mark, design or model, plan, secret formula or process, or other like right or property; or for information concerning industrial, commercial, or scientific experience. The term “royalties” also includes gains derived from the alienation of any such right or property that are contingent on the productivity, use, or further alienation thereof.
3. The provisions of paragraph 1 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein and the right or property in respect of which the royalties are paid forms part of the business property of such permanent establishment. In such a case the provisions of Article 7 (Business Profits) shall apply.
4. Where, by reason of a special relationship between the payor and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right, or information for which they are paid, exceeds the amount that would have been agreed upon by the payor and the beneficial owner in the absence of such relationship, the provisions or this Article shall apply only to the last-mentioned amount. In such a case the excess part or the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.
Protocol Article 12
11. With reference to Article 12 (Royalties): Where an artiste resident in one Contracting State records a performance in the other Contracting State, has a copyrightable interest in the recording, and receives consideration for the right to use the recording based on the sale or public playing of such recording, then such consideration shall be governed by this Article.
Article 13: Gains
1. Gains derived by a resident of a Contracting State from the alienation of Immovable property referred to in Article 6 (Income from immovable (Real) Property) and situated in the other contracting State may be taxed in that other State.
2. For the purposes of this Article, the term “immovable property situated in the other Contracting State” shall include a) immovable property referred to in Article 6 (Income from Immovable (Real) Property); and b) shares or comparable interests in a company that is, or is treated as, a resident of that other contracting State, the assets of which company consist or consisted wholly or principally of immovable property situated in such other Contracting State, and an interest in a partnership, trust, or estate, to the extent that its assets consist of immovable property situated in that other contracting State.
3. Gains from the alienation of movable property forming part of the business property of a permanent establishment that an enterprise of a Contracting State has in the other Contracting State, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State.
4. Gains from the alienation of ships, aircraft, or containers operated in international traffic or movable property pertaining to the operation of such ships, aircraft, or containers shall be taxable only in the Contracting State in which the profits of the enterprise deriving such income are taxable according to Article 8 (Shipping and Air Transport).
5. Gains from the alienation of any property other than that referred to in the preceding paragraphs shall be taxable only in the Contracting State of which the alienator is a resident.
6. Where an individual who, upon ceasing to be a resident of one of the Contracting States, is treated under the taxation law of that State as having alienated property and is taxed in that State by reason thereof, the individual may elect to be treated for purposes of taxation in the other Contracting State as if the individual had, immediately before ceasing to be a resident of the first-mentioned State, alienated and reacquired the property for an amount equal to its fair market value at that time.
Protocol Article 13
12. With reference to paragraph 2 of Article 13 (Gains): The term “immovable property situated in the other Contracting State”, as described in this paragraph, when the United States is that other Contracting State includes a United States real property interest.
13. With reference to paragraph 3 of Article 13 (Gains): Nothing in this Article shall prevent gains from the alienation by a resident of a Contracting State of an interest in a partnership, trust, or estate that has a permanent establishment situated in the other Contracting State from being treated as gain under paragraph 3.
Article 14: Independent Personal Services
(deleted)
Article 15: Dependent Personal Services
1. Subject to the provisions of articles 16 (Directors' Fees), 17 (Artistes and Athletes), 18 (Pensions, Annuities, Alimony, Child Support, and Social Security), 19 (Government Service), and 20 (Visiting Professors and Teachers; Students and Trainees), salaries, wages, and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State, unless the employment is exercised in the other contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and c) the remuneration is not borne by a permanent establishment that the employer has in the other State.
3. Notwithstanding the foregoing provisions of this Article, remuneration derived by a resident of a Contracting State in respect of an employment as a member of the regular complement of a ship or aircraft operated in international traffic may be taxed only in that State.
Article 16: Directors' Fees
Directors' fees and other similar payments derived by a resident of a Contracting State for services rendered in the other Contracting State in his capacity as a member of the board of directors of a company that is a resident of the other Contracting State may be taxed in that other Contracting State.
Article 17: Artistes and Athletes
1. Notwithstanding the provisions of Articles 7 (Business Profits) and 15 (Dependent Personal Services), income derived by a resident of a Contracting State as an entertainer (such as a theatre, motion picture, radio or television artiste, or a musician), or as an athlete, from his personal activities as such exercised in the other Contracting State may be taxed in that other State, except where the amount of the gross receipts derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities does not exceed $20,000 (twenty thousand United States dollars) or its equivalent in Euro for the calendar year concerned.
2. Where income in respect of activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete but to another person, that income of that other person may, notwithstanding the provisions of Article 7 (Business profits) be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, unless it is established that neither the entertainer or athlete nor persons related thereto participate directly or indirectly in the profits of that other person in any manner, including the accrual or receipt of deferred remuneration, bonuses, fees, dividends, partnership income, or other income or distributions.
3. The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by entertainers or athletes if the visit to that State is substantially supported, directly or indirectly, by public funds of the other Contracting State or a political subdivision or a local authority thereof. In such a case the income shall be taxable only in the Contracting State of which the entertainer or athlete is a resident.
Protocol Article 17
14. With reference to paragraph 1 of Article 17 (Artists and Athletes): If an artiste or athlete is not subject to tax in the Federal Republic of Germany under the provisions of paragraph 1 of Article 17, tax may be withheld at source in the Federal Republic of Germany, and shall be refunded to the taxpayer only upon application at the end of the calendar year concerned. Paragraph 6 of Article 29 (Refund of Withholding Tax) shall remain unaffected.
Article 18A: Pension Plans
1. Where an individual who is a resident of a Contracting State is a member or beneficiary of, or participant in, a pension plan established in the other Contracting State, income earned by the pension plan may be taxed as income of that individual only when, and, to the extent that, it is paid to, or for the benefit of, that individual from the pension plan (and not transferred to another pension plan in that other Contracting State).
2. Where an individual who is a beneficiary of, or participant in, a pension plan established in a Contracting State exercises an employment or self-employment in the other Contracting State: a) contributions paid by or on behalf of that individual to the pension plan during the period or attributable to the period that he exercises an employment or self-employment in the other State shall be deductible (or excludable) in computing his taxable income in that other State; and b) any benefits accrued under the pension plan, or contributions made to the pension plan by or on behalf of the individual’s employer, during that period shall not be treated as part of the employee’s taxable income; any such contributions shall be allowed as a deduction in computing the business profits of his employer in that other State.
The relief available under this paragraph shall not exceed the relief that would be allowed by the other State to residents of that State for contributions to, or benefits accrued under, a pension plan or plans established in that State. The competent authorities of the Contracting States shall determine the relief available under this paragraph pursuant to the preceding sentence.
3. The provisions of paragraph 2 shall not apply unless: a) contributions by or on behalf of the individual, or by or on behalf of the individual’s employer were made before the individual began to exercise an employment or self-employment in the other State; and b) the pension plan is accepted by the competent authority of that State as generally corresponding to a pension plan recognized as such for tax purposes by that State.
4. The term “pension plan” means an arrangement established in a Contracting State which is operated principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements.
5. a) Where a citizen of the United States who is a resident of the Federal Republic of Germany exercises an employment in the Federal Republic of Germany the income from which is taxable in the Federal Republic of Germany and is borne by an employer who is a resident of the Federal Republic of Germany or by a permanent establishment situated in the Federal Republic of Germany, and the individual is a beneficiary of, or participant in, a pension plan established in the Federal Republic of Germany, aa) contributions paid by or on behalf of that individual to the pension plan during the period or attributable to the period that he exercises the employment in the Federal Republic of Germany, and that are attributable to the employment, shall be deductible (or excludable) in computing his taxable income in the United States; and bb) any benefits accrued under the pension plan, or contributions made to the pension plan by or on behalf of the individual’s employer, during that period or attributable to that period, and that are attributable to the employment, shall not be treated as part of the employee’s taxable income in computing his taxable income in the United States.This paragraph shall apply only to the extent that the contributions or benefits qualify for tax relief in the Federal Republic of Germany.
b) The relief available under this paragraph shall not exceed the relief that would be allowed by the United States to its residents for contributions to, or benefits accrued under, a generally corresponding pension plan established in the United States.
c) For purposes of determining an individual’s eligibility to participate in and receive tax benefits with respect to a pension plan established in the United States, contributions made to, or benefits accrued under, a pension plan established in the Federal Republic of Germany shall be treated as contributions or benefits under a generally corresponding pension plan established in the United States to the extent relief is available to the individual under this paragraph.
This paragraph shall not apply unless the competent authority of the United States has agreed that the pension plan generally corresponds to a pension plan established in the United States.
Protocol Article 18A
16. With reference to paragraph 4 of Article 18A (Pension Plans): a) For purposes of paragraph 4 of Article 18A, the term “pension plan” shall include the following and any identical or substantially similar plans established pursuant to legislation enacted after the date of signature of this Protocol: aa) In the case of the United States, qualified plans under section 401(a) of the Internal Revenue Code, individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k), individual retirement accounts, individual retirement annuities, and section 408(p) accounts, and Roth IRAs under Section 408A), section 403(a) qualified annuity plans, section 403(b) plans, and section 457(b) governmental plans. bb) In the case of the Federal Republic of Germany, arrangements under section 1 of the German law on employment-related pensions (Betriebsrentengesetz).
b) For purposes of subparagraph b) of paragraph 3 and subparagraph d) of paragraph 5 of Article 18A, it is understood that: aa) The Federal Republic of Germany recognizes qualified plans specifically listed in clause aa) of subparagraph a), other than Roth IRAs, as arrangements that correspond to pension plans referred to under section 1 of the German law on employment-related pensions (Betriebsrentengesetz). The Federal Republic of Germany shall provide the corresponding relief under section 3 No. 63 of the Income Tax Act; and bb) The United States recognizes arrangements under section 1 of the German law on employment-related pensions (Betriebsrentengesetz) as arrangements that correspond to pension plans referred to in clause aa) of subparagraph a) above.
Article 18: Pensions, Annuities, Alimony, Child Support, and Social Security
1. Subject to the provisions of Article 19 (Government Service), pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State in consideration of past employment shall be taxable only in that State.
2. Subject to the provisions of Article 19 (Government Service), annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State. The term “annuities” as used in this paragraph means a stated sum paid periodically at stated times during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered).
3. Alimony paid by a resident of a Contracting State and deductible therein to a resident of the other Contracting State shall be taxable only in that other State. The term “alimony” as used in this Article means periodic payments (made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support) that are taxable to the recipient under the laws of the State of which he is a resident.
4. Non-deductible alimony, and periodic payments for the support of a minor child (made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support), paid by a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in the first-mentioned State.
5. Social security benefits paid under the social security legislation of a Contracting State and other public pensions (not dealt with in Article 19 (Government Service)) paid by a Contracting State to a resident of the other Contracting State shall be taxable only in that other Contracting State. In applying the preceding sentence, that other Contracting State shall treat such benefit or pension as though it were a social security benefit paid under the social security legislation of that other Contracting State.
Protocol Article 18
15. With reference to paragraph 3 of Article 18 (Pensions, Annuities, Alimony, Child Support, and Social Security): In determining the taxable income of an individual who is a resident of the Federal Republic of Germany there shall be allowed as a deduction in respect of alimony or similar allowances paid to an individual who is a resident of the United States the amount that would be allowed as a deduction if that last-mentioned individual were subject to unlimited tax liability in the Federal Republic of Germany.
Article 19: Government Service
1. Notwithstanding the provisions of Articles 15 (Dependent Personal Services), 16 (Directors’ Fees), and 17 (Artistes and Athletes): a) salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision, local authority or an instrumentality thereof to an individual in respect of services rendered to that Contracting State or a political subdivision, local authority or an instrumentality thereof shall, subject to the provisions of subparagraph b), be taxable only in that State; b) such remuneration, however, shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who: aa) is a national of that State; or bb) did not become a resident of that State solely for the purpose of rendering the services.
2. a) Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a political subdivision, local authority or an instrumentality thereof to an individual in respect of services rendered to that State or subdivision, authority or instrumentality shall be taxable only in that State. b) However, such pensions and other remuneration shall be taxable only in the other Contracting State if the individual is a aa) resident of, and a national of, that State; or bb) the pension is not subject to tax in the Contracting State for which the services were performed because the services were performed entirely in the other Contracting State.
3. Pensions, annuities, and other amounts paid by one of the Contracting States or by a juridical person organized under the public laws of that State as compensation for an injury or damage sustained as a result of hostilities or political persecution shall be exempt from tax by the other State.
4. The provisions of Articles 15 (Dependent Personal Services), 16 (Directors’ Fees), 17 (Artistes and Athletes), and 18 (Pensions, Annuities, Alimony, Child Support, and Social Security) shall apply to salaries, wages and other similar remuneration, and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State or by a political subdivision, local authority or an instrumentality thereof.
5. In this Article, the term “instrumentality” means any agent or entity created or organized by a Contracting State, one of its states or a political subdivision or local authority thereof in order to carry out functions of a governmental nature which is specified and agreed to in letters exchanged between the competent authorities of the Contracting States.
Article 20: Visiting Professors and Teachers; Students and Trainees
1. Remuneration that a professor or teacher who is a resident of a Contracting State and who is temporarily present in the other Contracting State for the primary purpose of carrying out advanced study or research or for teaching a
