(1) Double taxation for the residents of Turkey shall be elimi-
nated as follows:
a) Subject to the provisions of the laws of Turkey regarding the
allowance as a credit against Turkish tax of tax payable in a
territory outside Turkey (as they may be amended from time
to time without changing the general principles hereof),
German tax payable under the laws of Germany and in
accordance with this Agreement in respect of income (includ-
ing profits and chargeable gains) derived by a resident of
Turkey from sources within Germany shall be allowed as a
deduction from the Turkish tax on such income. Such deduc-
tion, however, shall not exceed the amount of Turkish tax, as
computed before the deduction is made, attributable to such
income.
b) Where in accordance with any provision of the Agreement
income derived by a resident of Turkey is exempt from tax in
Turkey, Turkey may nevertheless, in calculating the amount
of tax on the remaining income of such resident, take into
account the exempted income.
(2) Double taxation for the residents of Germany shall be elim-
inated 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 Turkey which,
according to this Agreement, may be taxed in Turkey.
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
Germany by a company being a resident of Turkey at least
25 per cent of the capital of which is owned directly by the
German company and which were not deducted when deter-
mining the profits of the company distributing these divi-
dends.
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 Turkish tax paid under the laws of Turkey 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 Turkey according
to paragraphs 2 and 5 of Article 13;
ee) items of income that may be taxed in Turkey according
to Protocol item 6 with reference to Article 15;
ff)
directors’ fees;
gg) items of income that may be taxed according to Art -
icle 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 in-
come is derived if the resident 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 Turkey 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 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 (para-
graph 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, 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 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 accor-
dance with paragraph 3 of Article 24 and if as a result of
this difference in placement or attribution the relevant in-
come would remain untaxed or be taxed lower than
without this conflict or
bb) if after due consultation with the competent authority of
the Republic of Turkey, the Federal Republic of Germany
notifies the Republic of Turkey through diplomatic chan-
nels of other items of income to which it intends to ap-
ply 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 follow-
ing that in which the notification was made.