ARTICLE 22

Elimination of Double Taxation

(1) In Armenia, double taxation shall be avoided as follows:

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

(2) Where a resident of the Federal Republic of Germany derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in Armenia, the following shall apply:

• (a) Except as provided in sub-paragraph c), the income shall be exempted from the basis upon which German tax is imposed. In the case of dividends, this applies only to such dividends as are paid to a company (not including partnerships) resident in the Federal Republic of Germany by a company resident in Armenia at least 10 per cent of the capital of which is owned directly by the company resident in the Federal Republic of Germany. The exemption from the basis provided by the first sentence of this sub-paragraph shall not apply to dividends paid by a tax exempt company or to dividends that the distributing company may deduct for Armenian tax purposes or to dividends that are attributed under the law of the Federal Republic of Germany to a person that is not a company resident in the Federal Republic of Germany. There shall be exempted from the assessment basis of the German taxes on capital such capital as is taxable in Armenia under paragraphs 1 and 2 of Article 21, as well as any shareholding the dividends of which, if paid, would be exempted from the tax base, according to the foregoing sentences.
• (b) The Federal Republic of Germany retains the right to take into account in the determination of its rate of tax the items of income and capital which under the provisions of this Agreement are exempted from German tax.
• (c) With respect to the following items of income, there shall be allowed as a credit against German tax on income, subject to the provisions of German tax law regarding credit for foreign tax, Armenian tax paid under the laws of Armenia and in accordance with the provisions of this Agreement on such items of income:
  • (i) dividends within the meaning of Article 10 to which sub-paragraph a) does not apply;
  • (ii) interest;
  • (iii) royalties;
  • (iv) capital gains to which paragraph 4 of Article 13 applies;
  • (v) income to which Article 15 applies;
  • (vi) income to which Article 16 applies;
  • (vii) income to which Article 17 applies.
• (d) The provisions of sub-paragraph a) are to be applied to items of income within the meaning of Article 7 and Article 10 and to profits from the alienation of property within the meaning of paragraph 2 of Article 13 only to the extent that the items of income or profits were derived from the production, processing, working or assembling of goods and merchandise, the exploration and extraction of natural resources, banking and insurance, trade or the rendering of services or if the items of income or profits are economically attributable to these activities. This applies only if a business undertaking that is adequately equipped for its business purpose exists. This applies accordingly to capital underlying the income within the meaning of Article 7 and Article 10. If sub-paragraph a) is not to be applied, double taxation shall be eliminated by means of a tax credit as provided for in sub-paragraph c).
• (e) Notwithstanding sub-paragraph a), double taxation shall be eliminated by a tax credit as provided for in sub-paragraph c), if:
  • (i) in the Contracting States items of income or capital, or elements thereof, are placed under different provisions of this Agreement and if, as a consequence of this different placement, such income or capital would be subject to double taxation, non-taxation or lower taxation and in the case of double taxation this conflict cannot be resolved by a procedure pursuant to paragraphs 2 or 3 of Article 24;
  • (ii) Armenia may, under the provisions of the Agreement, tax items of income or capital, or elements thereof, but does not actually do so;
  • (iii) after consultation, the Federal Republic of Germany notifies the Republic of Armenia through diplomatic channels of items of income or capital, or elements thereof, to which it intends to apply the provisions on tax credit under sub-paragraph c). Double taxation is then eliminated for the notified items of income or capital, or elements thereof, by allowing a tax credit from the first day of the calendar year following that in which the notification was made.