(1) Dividends paid by a company which 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
beneficial owner of the dividends is a resident of the other
Contracting State, the tax so charged shall not exceed:
a) 5 per cent of the gross amount of the dividends, if the bene-
ficial owner of the dividends is a company (other than a
partnership) which holds directly at least 10 per cent of the
voting power of the company paying the dividends through-
out a 6 month period that includes the day of payment of the
dividend;
b) 15 per cent of the gross amount of the dividends in all other
cases.
In the case of dividends paid by a German Real Estate Aktien -
gesellschaft with listed share capital, only subparagraph b) ap-
plies. 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, dividends
shall not be taxed in the Contracting State of which the company
paying the dividends is a resident if the beneficial owner of the
dividends is a company (other than a partnership) that is a resi-
dent of the other Contracting State that has held directly shares
representing 80 per cent or more of the voting power of the com-
pany paying the dividends for a 12 month period ending on the
date the dividend is declared and the company that is the bene-
ficial owner of the dividends:
a) has its principal class of shares listed on a recognised stock
exchange specified in sub-subparagraph 1(m)i) or ii) of Arti-
cle 3 and regularly traded on one or more recognised stock
exchanges;
b) is owned directly or indirectly by one or more companies
(provided that where the beneficial owner company is so
owned indirectly, each intermediate company is a resident of
a Contracting State or a company referred to in sub-subpara-
graph ii)):
i)
whose principal class of shares is listed on a recognised
stock exchange specified in sub-subparagraph 1(m)i) or
ii) of Article 3 and regularly traded on one or more recog-
nised stock exchanges; or
ii) each of which, if it directly held the shares in respect
of which the dividends are paid, would be entitled to
equivalent benefits in respect of such dividends under a
tax treaty between the State of which that company is a
resident and the Contracting State of which the company
paying the dividends is a resident; or
c) does not meet the requirements of subparagraphs a) or b)
of this paragraph but the competent authority of the first-
mentioned Contracting State determines that the conditions
of paragraph 2 of Article 23 are not met. The competent
authority of the first-mentioned Contracting State shall
consult the competent authority of the other Contracting
State before refusing to grant benefits of this Agreement
under this subparagraph.
(4) The term “dividends” as used in this Article means income
from shares or other rights, not being debt-claims, participating
in profits, as well as other amounts which are subjected to the
same taxation treatment as income from shares by the laws of
the Contracting State of which the company making the distri-
bution is a resident for the purposes of its tax, and shall include,
in the case of the Federal Republic of Germany, distributions on
certificates of a German collective investment vehicle.
(5) The provisions of paragraphs 1, 2 and 3 shall not apply if
the beneficial owner of the dividends, being a resident of a Con-
tracting 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 is effectively connected
with such permanent establishment. In such case the provisions
of Article 7 shall apply.
(6) Where a company which is a resident of a Contracting
State derives profits or income from the other Contracting State,
that other State may not impose any tax on the dividends paid
by the company – being dividends beneficially owned by a per-
son who is not a resident of the other Contracting State – except
insofar as the holding in respect of which such dividends are paid
is effectively connected with a permanent establishment situated
in that other State, nor subject the company’s undistributed
profits to a tax on the company’s undistributed profits, even if
the dividends paid or the undistributed profits consist wholly or
partly of profits or income arising in such other State.
(7) Notwithstanding paragraph 6, dividends paid by a com -
pany that is deemed to be a resident only of one Contracting
State pursuant to paragraph 3 of Article 4 may be taxed in the
other Contracting State, but only to the extent that the underlying
profits arising in that State out of which the dividends are paid
are not subject to tax at the corporate level. Where such divi-
dends are beneficially owned by a resident of the first-mentioned
State, paragraph 2 of this Article shall apply as if the company
paying the dividends were a resident only of the other State.