1. In Armenia, double taxation shall be avoided as follows
a) where a resident of Armenia derives income or owns capital
which, in accordance with the provisions of this Agreement,
may be taxed in the Federal Republic of Germany, Armenia
shall allow:
(i) as a deduction from the tax on the income of that resi-
dent, an amount equal to the tax on income paid in the
Federal Republic of Germany;
(ii) as a deduction from the tax on the capital of that resident,
an amount equal to the tax on capital paid in the Federal
Republic of Germany.
Such deduction in either case shall not, however, exceed that
part of the Armenian tax on income or 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 the Federal Republic of Germany.
b) Where in accordance with any provision of this Agreement,
income derived or capital owned by a resident of Armenia is
exempt from tax in Armenia, Armenia may nevertheless, in
calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted in-
come or capital.
2. Where a resident of the Federal Republic of Germany de-
rives income or owns capital which, in accordance with the pro-
visions of this Agreement, may be taxed in Armenia, the following
shall apply:
a) Except as provided in subparagraph c), the income shall be
exempted 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 partnerships) resi-
dent in the Federal Republic of Germany by a company resi-
dent in Armenia at least 10 per cent of the capital of which is
owned directly by the company resident in the Federal Re-
public 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 Armenian tax pur-
poses or to dividends that are attributed under the law of the
Federal Republic of Germany to a person that is not a com-
pany resident in the Federal Republic of Germany. There shall
be exempted from the assessment basis of the German taxes
on capital such capital as is taxable in Armenia under para-
graphs 1 and 2 of Article 21, as well as any shareholding the
dividends of which, if paid, would be exempted from the tax
base, according to the foregoing sentences.
b) The Federal Republic of Germany retains the right to take into
account in the determination of its rate of tax the items of in-
come and capital which under the provisions of this Agree-
ment 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 for-
eign tax, Armenian tax paid under the laws of Armenia and
in accordance with the provisions of this Agreement on such
items of income:
(i)
dividends within the meaning of Article 10 to which sub-
paragraph a) does not apply;
(ii) interest;
(iii) royalties;
(iv) capital gains to which paragraph 4 of Article 13 applies;
(v) income to which Article 15 applies;
(vi) income to which Article 16 applies;
(vii) income to which Article 17 applies.
d) The provisions of subparagraph a) are to be applied to items
of income within the meaning of Article 7 and Article 10 and
to profits from the alienation of property within the meaning
of paragraph 2 of Article 13 only to the extent that the items
of income or profits were derived from the production, pro-
cessing, 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 or profits are economically attributable to
these activities. This applies only if a business undertaking
that is adequately equipped for its business purpose exists.
This applies accordingly to capital underlying the income
within the meaning of Article 7 and Article 10. 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 subpara-
graph c), if
(i) in the Contracting States items of income or capital, or
elements thereof, are placed under different provisions of
this Agreement and if, as a consequence of this different
placement, such income or capital would be subject to
double taxation, non-taxation or lower taxation and in the
case of double taxation this conflict cannot be resolved
by a procedure pursuant to paragraphs 2 or 3 of Arti-
cle 24;
(ii) Armenia may, under the provisions of the Agreement, tax
items of income or capital, or elements thereof, but does
not actually do so;
(iii) after consultation, the Federal Republic of Germany noti-
fies the Republic of Armenia through diplomatic channels
of items of income or capital, or elements thereof, to
which it intends to apply the provisions on tax credit un-
der subparagraph c). Double taxation is then eliminated
for the notified items of income or capital, or elements
thereof, by allowing a tax credit from the first day of the
calendar year following that in which the notification was
made.