ARTICLE 23

Elimination of Double Taxation in the State of Residence

(1) Tax shall be determined in the case of a resident of Germany as follows:

• (a) Unless foreign tax credit is to be allowed under sub-paragraph (b), there shall be exempted from the assessment basis of the German tax any item of income arising in Albania and any item of capital situated within Albania which, according to this Agreement, may be taxed in Albania.
• 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 Albania at least 25 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 sentences.
• (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 Albanian tax paid under the laws of Albania 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 Albania according to paragraph (2) of Article 13;
  • (ee) items of income that may be taxed in Albania according to paragraph (3) of Article 15;
  • (ff) directors' fees;
  • (gg) items of income that may be taxed according to Article 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 income 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 Albania 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 (paragraph (3) of Article 13).
• (d) Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital, 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 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 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 due consultation with the competent authority of Albania, Germany notifies Albania through diplomatic 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 allowing 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 Albania as follows:

• (a) Where a resident of Albania derives income or owns capital which, in accordance with the provisions of this Agreement may be taxed in Germany, Albania shall allow:
  • (aa) as a deduction from Albanian tax on the income of that resident an amount equal to the income tax paid in Germany; and
  • (bb) as a deduction from Albanian tax on the capital of that resident, an amount equal to the capital tax paid in Germany.
• Such deduction in either case shall not, however, exceed that part of the Albanian tax on income or on capital as computed before the deduction is given, which is attributable as the case may be, to the income or the capital, which may be taxed in Germany.
• (b) Where in accordance with any provision of the Agreement income derived or capital owned by a resident of Albania is exempt from tax in Albania, Albania may nevertheless, in calculating the amount of tax on the remaining income or capital of such a resident, take into account the exempted income or capital.