1. Dividends paid by a company that is a resident of a
Contracting State to a resident of the other Contracting State
may be taxed in that other State.
2. However, such dividends may also be taxed in the
Contracting State of which the company paying the dividends is
a resident and according to the laws of that State, but if the
dividends are derived and beneficially owned by a resident of
the other Contracting State, the tax so charged shall not
exceed:
a) 5 percent of the gross amount of the dividends if the
beneficial owner is a company that owns directly at least 10
percent of the voting stock of the company paying the
dividends;
b) 15 percent of the gross amount of the dividends in all other
cases.
This paragraph shall not affect the taxation of the company in
respect of the profits out of which the dividends are paid.
3. Notwithstanding the provisions of paragraph 2, such
dividends shall not be taxed in the Contracting State of which
the company paying the dividends is a resident if the beneficial
owner is:
a) a company that is a resident of the other Contracting State
that has owned directly shares representing 80 percent or
more of the voting power in the company paying the
dividends for a 12-month period ending on the date
entitlement to the dividend is determined and:
aa) satisfies the conditions of clause aa) or bb) of sub-
paragraph c) of paragraph 2 of Article 28 (Limitation on
Benefits);
bb) satisfies the conditions of clauses aa) and bb) of sub-
paragraph f) of paragraph 2 of Article 28, provided that
the company satisfies the conditions described in
paragraph 4 of Article 28 with respect to the dividends;
cc) is entitled to benefits with respect to the dividends
under paragraph 3 of Article 28; or
dd) has received a determination pursuant to paragraph 7
of Article 28 with respect to this paragraph; or
b) a pension fund that is a resident of the other Contracting
State, provided that such dividends are not derived from the
carrying on of a business, directly or indirectly, by such
pension fund.
4. Subparagraph a) of paragraph 2 and subparagraph a) of
paragraph 3 shall not apply in the case of dividends paid by a
United States person that is a U. S. Regulated Investment
Company (RIC), a United States person that is a U. S. Real
Estate Investment Trust (REIT) or a German Investment Fund or
a German Investmentaktiengesellschaft (collectively referred to
as Investmentvermögen). In the case of dividends paid by a RIC
or an Investmentvermögen, subparagraph b) of paragraph 2
and subparagraph b) of paragraph 3 shall apply. In the case of
dividends paid by a REIT subparagraph b) of paragraph 2 and
subparagraph b) of paragraph 3 shall apply only if:
a) the beneficial owner of the dividends is an individual or a
pension fund, in either case holding an interest of not more
than 10 percent in the REIT;
b) the dividends are paid with respect to a class of stock that
is publicly traded and the beneficial owner of the dividends
is a person holding an interest of not more than 5 percent of
any class of the REIT’s stock; or
c) the beneficial owner of the dividends is a person holding an
interest of not more than 10 percent in the REIT and the
REIT is diversified.
For purposes of this paragraph a REIT shall be diversified if no
single interest in real property exceeds 10 percent of its total
interests in real property. For the purposes of this paragraph
foreclosure property shall not be an interest in real property.
Where a REIT holds an interest in a partnership, it shall be
treated as owning directly a proportion of the partnership’s
interests in real property corresponding to its interest in the
partnership.
5. The term “dividends” as used in this Article means income
from shares, “jouissance” shares or “jouissance” rights,
founders’ shares, or other rights (not being debt-claims)
participating in profits, as well as other income from other rights
that is subjected to the same taxation treatment as income from
shares by the laws of the Contracting State of which the
company making the distribution is a resident. The term
“dividends” also includes in the Federal Republic of Germany
income under a sleeping partnership (Stille Gesellschaft), a
participating loan (partiarisches Darlehen), or “Gewinnobligation”,
as well as distributions on certificates of a German Invest-
mentvermögen.
6. Notwithstanding the first sentence of paragraph 2 of this
Article, paragraph 3 of this Article and paragraph 1 of Article 11
(Interest), income from arrangements carrying the right to
participate in profits (including in the Federal Republic of
Germany income under a sleeping partnership (Stille
Gesellschaft), a participating loan (partiarisches Darlehen), or
“Gewinnobligation”, or “jouissance” shares or “jouissance”
rights and in the United States contingent interest of a type that
would not qualify as portfolio interest) that is deductible in
determining the profits of the payor may be taxed in the
Contracting State in which it arises according to the laws of that
State.
7. The provisions of paragraphs 2 and 3 shall not apply if the
beneficial owner of the dividends, being a resident of a
Contracting State, carries on business in the other Contracting
State, of which the company paying the dividends is a resident,
through a permanent establishment situated therein, and the
holding in respect of which the dividends are paid forms part of
the business property of such permanent establishment. In
such case, the provisions of Article 7 (Business Profits) shall
apply.
8. A Contracting State may not impose any tax on dividends
paid by a company which is a resident of the other Contracting
State, except insofar as such dividends are paid to a resident of
the first-mentioned State or insofar as the holding in respect of
which the dividends are paid forms part of the business
property of a permanent establishment situated in that State,
nor may it impose tax on a company’s undistributed profits
except as provided in paragraph 9 of this Article, even if the
dividends paid or the undistributed profits consist wholly or
partly of profits or income arising in that State.
9. A company that is a resident of a Contracting State and
that has a permanent establishment in the other Contracting
State, or that is subject to tax on a net basis in that other
Contracting State on items of income that may be taxed in that
other State under Article 6 (Income from Immovable (Real)
Property) or under paragraph 1 of Article 13 (Gains), may be
subject in that other Contracting State to a tax in addition to the
tax allowable under the other provisions of this Convention.
Such tax, however, may be imposed only on:
a) the portion of the business profits of the company
attributable to the permanent establishment, and
b) the portion of the income referred to in the preceding
sentence that is subject to tax under Article 6 or paragraph 1
of Article 13, that represents the “dividend equivalent
amount” of those profits and income; the term “dividend
equivalent amount” shall, for the purposes of this sub-
paragraph,
aa) in the case of the United States, have the meaning that
it has under the law of the United States as it may be
amended from time to time without changing the
general principle thereof; and
bb) in the case of the Federal Republic of Germany, be that
portion of the income described in subparagraph a)
that is comparable to the amount that would be
distributed as a dividend by a locally incorporated
subsidiary.
10. The tax referred to in subparagraphs a) and b) of
paragraph 9 of this Article shall not be imposed at a rate
exceeding the rate specified in subparagraph a) of paragraph 2.
In any case, it shall not be imposed on a company that:
a) satisfies the conditions of clause aa) or bb) of sub-
paragraph c) of paragraph 2 of Article 28 (Limitation on
Benefits);
b) satisfies the conditions of clauses aa) and bb) of sub-
paragraph f) of paragraph 2 of Article 28, provided that the
company satisfies the conditions described in paragraph 4
of that Article with respect to an item of income, profit or
gain described in paragraph 9 of this Article;
c) is entitled under paragraph 3 of Article 28 to benefits with
respect to an item of income, profit or gain described in
paragraph 9 of this Article; or
d) has received a determination pursuant to paragraph 7 of
Article 28 with respect to this paragraph.
11. The term “pension fund” as used in this Article means
any person that:
a) is established under the laws of a Contracting State;
b) is established and maintained in that Contracting State
primarily to administer or provide pensions or other similar
remuneration, including social security payments, disability
pensions and widow’s pensions or to earn income for the
benefit of one or more of such persons; and
c) is either,
aa) in the case of the United States, exempt from tax in the
United States with respect to the activities described in
subparagraph b) of this paragraph, or
bb) in the case of the Federal Republic of Germany, a plan
the contributions to which are eligible for preferential
treatment under the Income Tax Act.