(1)
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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