(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 the Republic
of Slovenia and any item of capital situated within the Repub-
lic of Slovenia which, according to this Agreement, may be
taxed in the Republic of Slovenia.
In the case of items of income from dividends the preceding
provisions 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 the Republic of Slovenia 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 senten-
ces.
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 Slovenian tax paid under the laws of the
Republic of Slovenia 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 in the Republic of
Slovenia according to number 4 of the Protocol;
ee) directors’ fees;
items of income within the meaning of Article 17.
ff)
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 in-
come is derived if the resident of the Federal Republic of Ger-
many 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 Republic of
Slovenia 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 and to income
from such property (paragraph 4 of Article 6) and to profits
from the alienation of such immovable the property (para-
graph 1 of Article 13) and of the movable property forming
part of the business property of the permanent establishment
(paragraph 2 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 under the provisions of
this Agreement are 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 the 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 proper consultation the Federal Republic of Ger-
many notifies the Republic of Slovenia through diploma-
tic 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 allow-
ing 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
Republic of Slovenia as follows:
a) Where a resident of the Republic of Slovenia derives income
or owns capital which, in accordance with the provisions of
this Agreement, may be taxed in the Federal Republic of Ger-
many, the Republic of Slovenia shall allow:
aa) as a deduction from the tax on the income of that resi-
dent, an amount equal to the income tax paid in the
Federal Republic of Germany;
bb) as a deduction from the tax on the capital of that resi-
dent, an amount equal to the capital tax paid in the
Federal Republic of Germany.
Such deduction in either case shall not, however, exceed that
portion 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 Republic of Germany.
b) Where in accordance with any provision of the Agreement
income derived or capital owned by a resident of the Repub-
lic of Slovenia is exempt from tax in the Republic of Slovenia,
the Republic of Slovenia 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.