(1) Tax shall be determined in the case of a resident of the
German sovereign territory 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 Macedonian income and any
item of capital situated within Macedonian sovereign
territory which, according to this Agreement, may be taxed
there.
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
the German sovereign territory by a company being a
resident of the Macedonian sovereign territory at least 10
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 Macedonian tax paid under the laws of
Macedonia 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 by the Macedonian
side according to paragraph 2 of Article 13;
ee) directors’ fees;
ff)
items of income within the meaning of 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 the German
sovereign territory 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
the Macedonian sovereign territory in the business year for
which the dividends were paid was derived exclusively or
almost exclusively from activities within the meaning of
numbers 1 – 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) The German side, 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 sovereign territories of the Contracting Parties
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 procedure 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 Macedonian
authority the competent German authority notifies the
former 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 the
Macedonian sovereign territory as follows:
a) Where a resident of the sovereign territory of Macedonia
derives income or owns capital which, in accordance with
the provisions of this Agreement may be taxed by the
German side, the Macedonian side shall allow
aa) as a deduction from the tax on the income of that
resident, an amount equal to the income tax paid on the
German side;
bb) as a deduction from the tax on the capital of that
resident, an amount equal to the capital tax paid on the
German side;
Such deduction in either case shall not, however, exceed
that part of the income tax or capital tax, as computed
before the deduction is given, which is attributable, as the
case may be, to the income which may be taxed by the
German side or to the capital which may be taxed by the
German side.
b) Where in accordance with any provision of the Agreement
income derived or capital owned by a resident of the
Macedonian sovereign territory is exempt from Macedonian
taxation, the Macedonian side may nevertheless, in
calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted
income or capital.