(1) Tax shall be determined in the case of a resident of the
Federal 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 Singa-
pore and any item of capital situated within Singapore
which, according to this Agreement, may be taxed in Singa-
pore. In the case of items of income from dividends the pre-
ceding provision shall apply only to such dividends as are
paid to a company (not including partnerships) being a resi-
dent of the Federal Republic of Germany by a company
being a resident of Singapore at least 10 per cent of the cap-
ital 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 sen-
tences.
b) Subject to the provisions of German tax law regarding cred-
it for foreign tax, there shall be allowed as a credit against
German tax payable in respect of the following items of
income the Singapore tax paid under the laws of Singapore
and in accordance with this Agreement:
aa) dividends not dealt with in sub-paragraph a) above;
bb) interest;
cc) royalties;
dd) items of income that may be taxed in Singapore
according to paragraph 2 of Article 13;
ee) items of income that may be taxed in Singapore
according to paragraph 3 of Article 15;
ff)
directors’ fees as defined in Article 16;
gg) items of income as defined in Article 17.
c) The provisions of sub-paragraph b) above shall apply
instead of the provisions of sub-paragraph a) above 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 realized or of the company
resident in Singapore 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 German Law on External
Tax Relations (Aussensteuergesetz); the same shall apply to
immovable property used by a 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 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 Contracting States 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 proce-
dure in accordance with paragraph 3 of Article 26 and
if as a result of this difference in placement or attribu-
tion 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
Singapore the Federal Republic of Germany notifies
through diplomatic channels of other items of income
to which it intends to apply the provisions of sub-para-
graph 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.
f)
For the purposes of credit referred to in sub-paragraph b),
where the rate of Singapore tax on interest to which para-
graph 2 of Article 11 applies is reduced below 8 per cent of
the gross amount of such interest by virtue of special incen-
tive measures designed to promote economic development
in Singapore, the amount of Singapore tax shall be deemed
to be 8 per cent of the gross amount of such interest.
g) For the purposes of credit referred to in sub-paragraph b),
where the rate of Singapore tax on royalties to which para-
graph 2 of Article 12 applies is reduced below 8 per cent of
the gross amount of such royalties by virtue of special
incentive measures designed to promote economic devel-
opment in Singapore, the amount of Singapore tax shall be
deemed to be 8 per cent of the gross amount of such royal-
ties.
h) The provisions of sub-paragraphs f) and g) shall cease to
have effect for interest and royalties which arise or accrue in
Singapore after 31 December 2005.
(2) Tax shall be determined in the case of a resident of Singa-
pore as follows:
Where a resident of Singapore derives income from the
Federal Republic of Germany which, in accordance with the
provisions of this Agreement, may be taxed in the Federal
Republic of Germany, Singapore shall, subject to its laws
regarding the allowance as a credit against Singapore tax of tax
payable in any country other than Singapore, allow the German
tax paid, whether directly or by deduction, as a credit against
the Singapore tax payable on the income of that resident.
Where such income is a dividend paid by a company (not
including a partnership) which is a resident of the Federal
Republic of Germany to a resident of Singapore which is a com-
pany owning directly or indirectly not less than 10 per cent of
the share capital of the first-mentioned company, the credit
shall take into account the German tax paid by that company on
the portion of its profits out of which the dividend is paid.