(1) In the case of a resident of Canada,
double taxation shall be avoided as fol-
lows:
a) Subject to the existing provisions of the
law of Canada regarding the deduction
from tax payable in Canada of tax paid
in a territory outside Canada and to any
subsequent modification of those pro-
visions, which shall not affect the gen-
eral principle hereof, and unless a
greater deduction or relief is provided
under the laws of Canada, German tax
(other than capital tax) payable in
accordance with this Agreement on
profits, income or gains arising in the
Federal Republic of Germany shall be
deducted from any Canadian tax pay-
able in respect of such profits, income
or gains.
b) Subject to the existing provisions of the
law of Canada regarding the allowance
as a credit against Canadian tax of tax
payable in a territory outside Canada
and to any subsequent modification of
those provisions – which shall not affect
the general principle hereof – where a
company which is a resident of the
Federal Republic of Germany pays a
dividend to a company which is a resi-
dent of Canada and which controls
directly or indirectly at least 10 per cent
of the voting power in the first-men-
tioned company, the credit shall take
into account the tax payable in the Fed-
eral Republic of Germany by that first-
mentioned company in respect of the
profits out of which such dividend is
paid.
c) Where in accordance with any provi-
sion of the Agreement income derived
or capital owned by a resident of Cana-
da is exempt from tax in Canada, Cana-
da may nevertheless, in calculating the
amount of tax on other income or capi-
tal, take into account the exempted
income or capital.
d) For the purposes of this paragraph,
profits, income or gains of a resident of
Canada shall be deemed to arise from
sources in the Federal Republic of Ger-
many if they may be taxed in the Feder-
al Republic of Germany in accordance
with this Agreement.
(2) Where a resident of the Federal
Republic of Germany derives income or
owns capital which, in accordance with the
provisions of this Agreement, may be taxed
in Canada, double taxation shall be
avoided as follows:
a) Subject to the provisions of subpara-
graph (b), there shall be excluded from
the basis upon which German tax is
imposed, any item of income from
sources within Canada and any item of
capital situated within Canada, which
according to the foregoing Articles of
this Agreement may be taxed, or shall
be taxable only, in Canada; in the deter-
mination of its rate of tax applicable to
any item of income or capital not so
excluded, the Federal Republic of Ger-
many will, however, take into account
the items of income and capital, which
according to the foregoing Articles may
be taxed in Canada.
The foregoing provisions of this para-
graph shall also apply to dividends on
shares which are paid to a company
which is a resident of the Federal
Republic of Germany by a company
which is a resident of Canada if at least
10 per cent of the capital of the Cana-
dian company is held directly by the
German company. There shall also be
excluded from the basis upon which
German tax is imposed any participa-
tion the dividends of which are ex-
cluded or, if paid, would be excluded,
according to the immediately foregoing
sentence from the basis upon which
German tax is imposed.
b) 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
Canadian tax (including taxes on
income paid to any political subdivision
or local authority in Canada) paid in
accordance with the provisions of this
Agreement referred to below on the fol-
lowing items of income:
aa) dividends within the meaning of
Article 10 which are not dealt with
in subparagraph (a) above;
bb) interest within the meaning of Arti-
cle 11 and royalties within the
meaning of Article 12;
cc) gains from the alienation of prop-
erty taxable in Canada by reason
only of Article 13, paragraph 4 and
subparagraph (a) of paragraph 7;
dd) income within the meaning of Arti-
cle 15, paragraph 3 and Articles 16
and 17;
ee) pensions and annuities within
the meaning of Article 18, para-
graphs 1 and 2 and subpara-
graph (c) of paragraph 3;
ff)
income taxable in Canada by rea-
son only of Article 21.
c) Instead of the provisions of subpara-
graph (a), the provisions of subpara-
graph (b) shall apply to income within
the meaning of Articles 7 and 10 and to
items of capital underlying such income
unless the resident of the Federal
Republic of Germany proves that the
gross receipts of the permanent estab-
lishment in the business year in which
the profit was realised, or the gross
receipts of the company resident in
Canada in the business year for which
the dividend was distributed, derive
exclusively or almost exclusively from
activities coming under Section 8 para-
graph 1 subparagraphs 1 to 6 of the
German Law on External Tax Relations
(“Aussensteuergesetz”) or from partici-
pations coming under Section 8 para-
graph 2 of that Law; the same shall
apply to immovable property forming
part of the business property of a per-
manent establishment (paragraph 4 of
Article 6) and to gains from the aliena-
tion of such immovable property (para-
graph 1 of Article 13) and of movable
property forming part of the business
property of the permanent establish-
ment (paragraph 2 of Article 13).