(1) In the case of Romania, double taxation shall be avoided as
follows:
Where a resident of Romania derives income or owns capital
which, in accordance with the provisions of this Convention may
be taxed in the Federal Republic of Germany, Romania shall
allow:
a) as a deduction from the tax on the income of that resident, an
amount equal to the income tax paid in the Federal Republic
of Germany;
b) as a deduction from the tax on the capital of that resident, an
amount equal to the capital tax paid in the Federal Republic
of Germany.
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 or capital which may be taxed in the Federal Repub-
lic of Germany.
(2) Tax shall be determined in the case of a resident of the Fed-
eral Republic 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 Romania and
any item of capital situated within Romania which, according
to this Convention, may be taxed in Romania.
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
Federal Republic of Germany by a company being a resident
of Romania 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 dis-
tributing 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 sen-
tences.
b) Subject to the provisions of German tax law regarding credit
for foreign tax, there shall be allowed as a credit against Ger-
man tax on income payable in respect of the following items
of income the Romanian tax paid under the laws of Romania
and in accordance with this Convention:
aa) dividends not dealt with in sub-paragraph a);
bb) interest;
cc) royalties;
dd) items of income that may be taxed in Romania accord-
ing to paragraph 2 of Article 13;
ee) items of income that may be taxed in Romania accord-
ing to paragraph 3 of Article 15;
ff)
directors’ fees;
gg) items of income in 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 Federal Republic 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 Romania 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 Ger-
man Law on External Tax Relations (Aussensteuergesetz) or
from participations within the meaning of paragraph 2 of Sec-
tion 8 of that Law; the same shall apply to immovable proper-
ty 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 Federal Republic of 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 Convention 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 Convention or
attributed to different persons (except pursuant to Arti-
cle 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 authority of
Romania the Federal Republic of Germany notifies
Romania 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 in which the notification was
made.