(1) Tax shall be determined in the case of a resident of
Germany as follows:
a) Unless foreign tax credit is to be allowed under sub-para-
graph b), there shall be exempted from the assessment basis
of the German tax any item of income arising in Albania and
any item of capital situated within Albania which, according to
this Agreement, may be taxed in Albania.
In the case of items of income from dividends the preceding
provision shall apply only to such dividends as are paid to a
company (not including partnerships) being a resident of
Germany by a company being a resident of Albania at least
25 per cent of the capital of which is owned directly by the
German company and which were not deducted when
determining the profits of the company distributing these
dividends.
There shall be exempted from the assessment basis of the
taxes on capital any shareholding the dividends of which
if paid, would be exempted, according to the foregoing
sentences.
b) Subject to the provisions of German tax law regarding credit
for foreign tax, there shall be allowed as a credit against
German tax on income payable in respect of the following
items of income the Albanian tax paid under the laws of
Albania and in accordance with this Agreement:
aa) dividends not dealt with in sub-paragraph a);
bb) interest;
cc) royalties;
dd) items of income that may be taxed in Albania according
to paragraph 2 of Article 13;
ee) items of income that may be taxed in Albania according
to number 5 of the attached Protocol;
ff)
directors’ fees;
gg) items of income that may be taxed according to
Article 17.
c) The provisions of sub-paragraph b) shall apply instead of the
provisions of sub-paragraph a) to items of income as defined
in Articles 7 and 10 and to the assets from which such
income is derived if the resident of Germany does not prove
that the gross income of the permanent establishment in the
business year in which the profit has been realised or of the
company resident in Albania in the business year for which
the dividends were paid was derived exclusively or almost
exclusively from activities within the meaning of nos. 1 to 6
of paragraph 1 of section 8 of the German Law on External
Tax Relations (Aussensteuergesetz); the same shall apply to
immovable property used by a permanent establishment and
to income from this immovable property of the permanent
establishment (paragraph 4 of Article 6) and to profits from
the alienation of such immovable property (paragraph 1 of
Article 13) and of the movable property forming part of
the business property of the permanent establishment
(paragraph 3 of Article 13).
d) Germany, however, retains the right to take into account in
the determination of its rate of tax the items of income and
capital, which are under the provisions of this Agreement
exempted from German tax.
e) Notwithstanding the provisions of sub-paragraph a) double
taxation shall be avoided by allowing a tax credit as laid down
in sub-paragraph b)
aa) if in the Contracting States items of income or capital are
placed under differing provisions of this Agreement
or attributed to different persons (except pursuant to
Article 9) and this conflict cannot be settled by a proce-
dure in accordance with paragraph 3 of Article 25 and if
as a result of this difference in placement or attribution
the relevant income or capital would remain untaxed or
be taxed lower than without this conflict or
bb) if after due consultation with the competent authority of
Albania, Germany notifies Albania through diplomatic
channels of other items of income to which it intends
to apply the provisions of sub-paragraph b). Double
Taxation is then avoided for the notified income by
allowing a tax credit from the first day of the calendar
year, next following that in which the notification was
made.
(2) Tax shall be determined in the case of a resident of
Albania as follows:
a) Where a resident of Albania derives income or owns capital
which, in accordance with the provisions of this Agreement
may be taxed in Germany, Albania shall allow:
aa) as a deduction from Albanian tax on the income of that
resident an amount equal to the income tax paid in
Germany; and
bb) as a deduction from Albanian tax on the capital of that
resident, an amount equal to the capital tax paid in
Germany.
Such deduction in either case shall not, however, exceed
that part of the Albanian tax on income or on capital as
computed before the deduction is given, which is attributable
as the case may be, to the income or the capital, which may
be taxed in Germany.
b) Where in accordance with any provision of the Agreement
income derived or capital owned by a resident of Albania is
exempt from tax in Albania, Albania may nevertheless, in
calculating the amount of tax on the remaining income or
capital of such a resident, take into account the exempted
income or capital.