ARTICLE 23

Relief from Double Taxation

(1) In the case of a resident of Canada, double taxation shall be avoided as follows:

• (a) Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions, which shall not affect the general principle hereof, and unless a greater deduction or relief is provided under the laws of Canada, German tax (other than capital tax) payable in accordance with this Agreement on profits, income or gains arising in the Federal Republic of Germany shall be deducted from any Canadian tax payable in respect of such profits, income or gains.
• (b) Subject to the existing provisions of the law of Canada regarding the allowance as a credit against Canadian tax of tax payable in a territory outside Canada and to any subsequent modification of those provisions-which shall not affect the general principle hereof-where a company which is a resident of the Federal Republic of Germany pays a dividend to a company which is a resident of Canada and which controls directly or indirectly at least 10 per cent of the voting power in the first- mentioned company, the credit shall take into account the tax payable in the Federal Republic of Germany by that first-mentioned company in respect of the profits out of which such dividend is paid.
• (c) Where in accordance with any provision of the Agreement income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.
• (d) For the purposes of this paragraph, profits, income or gains of a resident of Canada shall be deemed to arise from sources in the Federal Republic of Germany if they may be taxed in the Federal Republic of Germany in accordance with this Agreement.

(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 Canada, double taxation shall be avoided as follows:

• (a) Subject to the provisions of sub-paragraph (b), there shall be excluded from the basis upon which German tax is imposed, any item of income from sources within Canada and any item of capital situated within Canada, which according to the foregoing Articles of this Agreement may be taxed, or shall be taxable only, in Canada; in the determination of its rate of tax applicable to any item of income or capital not so excluded, the Federal Republic of Germany will, however, take into account the items of income and capital, which according to the foregoing Articles may be taxed in Canada.
• The foregoing provisions of this paragraph shall also apply to dividends on shares which are paid to a company which is a resident of the Federal Republic of Germany by a company which is a resident of Canada if at least 10 per cent of the capital of the Canadian company is held directly by the German company. There shall also be excluded from the basis upon which German tax is imposed any participation the dividends of which are excluded or, if paid, would be excluded, according to the immediately foregoing sentence from the basis upon which German tax is imposed.
• (b) 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, the Canadian tax (including taxes on income paid to any political subdivision or local authority in Canada) paid in accordance with the provisions of this Agreement referred to below on the following items of income:
  • (aa) dividends within the meaning of Article 10 which are not dealt with in sub-paragraph (a) above;
  • (bb) interest within the meaning of Article 11 and royalties within the meaning of Article 12;
  • (cc) gains from the alienation of property taxable in Canada by reason only of Article 13, paragraph (4) and sub-paragraph (a) of paragraph (7);
  • (dd) income within the meaning of Article 15, paragraph (3) and Articles 16 and 17;
  • (ee) pensions and annuities within the meaning of Article 18, paragraphs (1) and (2) and sub-paragraph (c) of paragraph (3);
  • (ff) income taxable in Canada by reason only of Article 21.
• (c) Instead of the provisions of sub-paragraph (a), the provisions of sub-paragraph (b) shall apply to income within the meaning of Articles 7 and 10 and to items of capital underlying such income unless the resident of the Federal Republic of Germany proves that the gross receipts of the permanent establishment in the business year in which the profit was realised, or the gross receipts of the company resident in Canada in the business year for which the dividend was distributed, derive exclusively or almost exclusively from activities coming under Section 8 paragraph (1) sub-paragraphs (1) to (6) of the German Law on External Tax Relations ("Aussensteuergesetz") or from participations coming under Section 8 paragraph (2) of that Law; the same shall apply to immovable property forming part of the business property of a permanent establishment (paragraph (4) of Article 6) and to gains from the alienation of such immovable property (paragraph (1) of Article 13) and of movable property forming part of the business property of the permanent establishment (paragraph (2) of Article 13).