(1) In the case of a resident of the Federal Republic of Germany‚ tax shall be determined
as follows:
a)
Unless foreign tax credit is to be allowed under subparagraph (b)‚ there shall
be exempted from the assessment basis of the German tax any item of income
arising in South Africa and any item of capital situated within South Africa
which‚ according to this Agreement‚ may be taxed in South Africa. 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 so
exempted. 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 South Africa 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 preceding provisions of this subparagraph.
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 South African tax paid under the
laws of South Africa and in accordance with this Agreement:
i.
dividends not dealt with in subparagraph (a);
ii. items of income that may be taxed in South Africa according to
paragraph 2 of Article 13;
iii. items of income that may be taxed in South Africa according to
paragraph 3 of Article 14;
iv. directors’ fees;
v. items of income of entertainers and sportspersons;
vi. items of income that may be taxed in South Africa according to
paragraph 1 of Article 17.
c)
The provisions of subparagraph (b) shall apply instead of the provisions of
subparagraph (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 South Africa in the business year for which the
dividends were paid was derived exclusively or almost exclusively from
activities within the meaning of numbers 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)
Notwithstanding the provisions of subparagraph (a) double taxation shall be
eliminated by allowing a tax credit as laid down in subparagraph (b):
i. 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
procedure in accordance with paragraph 3 of Article 24 and if as a result
of this difference in placement or attribution the relevant income or capital
would remain untaxed or the tax on that income or capital would be lower
than the tax which would have applied but for this difference in placement
or attribution; or
ii. if after proper consultation and subject to the limitations of its domestic
law‚ a Contracting State notifies the other Contracting State‚ through the
diplomatic channel‚ of other income to which it intends to apply the
provisions of this paragraph. The notification shall not take effect until the
first day of the calendar year following the year in which the notification
was made and all legal requirements under the domestic law of the
notifying State for the notification to take effect have been fulfilled.
(2) In the case of a resident of South Africa‚ subject to the provisions of the law of South
Africa regarding the deduction from tax payable in South Africa of tax payable in any
country other than South Africa (which shall not affect the general principle hereof)‚
German tax paid by residents of South Africa in respect of income taxable in the Federal
Republic of Germany‚ in accordance with the provisions of this Agreement‚ shall be
deducted from the taxes due according to South African fiscal law. Such deduction shall
not‚ however‚ exceed an amount which bears to the total South African tax payable the
same ratio as the income concerned bears to the total income.
(3) For the purposes of this Article‚ profits‚ income or gains of a resident of a Contracting
State (with the exception of income mentioned in paragraph 2 of Article 10 and in
paragraphs 2 and 3 of Article 17) shall be deemed to arise from sources in the other
Contracting State if they are taxed in that other State in accordance with this Agreement.