ARTICLE 24

Elimination of Double Taxation

(1) For a person who is a resident of the Federal Republic of Germany, double taxation shall be avoided as follows:

• (1) The following income derived from Switzerland which in accordance with the preceding Articles is taxable in Switzerland shall be exempted from German taxes:
  • (a) Profits within the meaning of Article 7 from the activities of a permanent establishment, providing such profits were provably derived from the manufacturing, processing, or assembly of products, the prospecting and extraction of mineral resources, bank and insurance transactions, trade, or providing services within the scope of general commerce; the same shall apply to income from immovable property used for the purposes of such a permanent establishment (Article 6 paragraph 4), gains from the alienation of such immovable property (Article 13 paragraph 1), and the movable property representing the business capital of the permanent establishment (Article 13 paragraph 2). The foregoing shall not apply to income from a participation as a silent partner in a company which is a resident of Switzerland if such income is not taxed in Switzerland in accordance with Article 7;
  • (b) Dividends within the meaning of Article 10 distributed by a corporation which is a resident of Switzerland to a corporation in the Federal Republic of Germany:
    • (i) if the company which is a resident of the Federal Republic of Germany holds at least 20 percent of the capital of the company paying the dividends and
    • (ii) if the company which is a resident of Switzerland for the accounting period in which it distributed the dividends derived its gross income exclusively or nearly exclusively from activities subject to the provisions of section 8 paragraph 1 numbers 1 through 6 of the German Law on External Taxation or from holdings subject to the provisions of section 8 paragraph 2 of that law; the law as amended on January 1, 1990 shall be authoritative;
  • (c) Income from independent activities or independent personal services within the meaning of Article 14, providing they are not subject to Article 17; the same shall apply to income from immovable property used for the performance of independent personal services (Article 6 paragraph 4) and for the gains from the alienation of such immovable property (Article 13 paragraph 1) and from the movable property which is part of the permanent establishment (Article 13 paragraph 2);
  • (d) Wages, salaries, and similar remuneration within the meaning of Article 15, providing they are not subject to Article 17 and providing the work is performed in Switzerland.
• However, the Federal Republic of Germany shall include such income in assessing the rate of its taxes on the income which in accordance with this provision is not to be excluded from the tax base of the German tax.
• The preceding provisions shall apply analogously for the property situated in Switzerland if, subject to the provisions of letters a through c, the income derived therefrom should be exempted or was exempted from the German tax.
• (2) Where number 1 does not apply, the Swiss taxes levied in accordance with this Agreement on income derived from Switzerland and property situated there which is not refundable shall be credited to that portion of the German tax (with the exception of business tax) which in accordance with the provisions of German law on crediting foreign taxes applies to such income or capital.
• (3) In the case of general partnerships or limited partnerships in which in addition to persons who are residents of the Federal Republic of Germany persons who are not residents of the Federal Republic of Germany hold shares, and which has its place of management in the Federal Republic of Germany, the provisions of German law on crediting foreign taxes shall also apply analogously to that portion of the income derived from Switzerland which is subjected to German taxation and which is allocated to the persons who are not residents of the Federal Republic of Germany.
• (4) If a company which is a resident of the Federal Republic of Germany uses income derived from sources within Switzerland for distributing dividends, numbers 1 through 3 shall not interfere with the calculation of the distribution rate in accordance with the provisions of the tax laws of the Federal Republic of Germany.

(2) For a person who is a resident of Switzerland, double taxation shall be avoided as follows:

• (1) Where a person who is a resident of Switzerland derives income or has capital, and if in accordance with the provisions of this Agreement (excluding Article 4 paragraphs 3, 4 and 9 and Article 23) such income or capital may be taxed in the Federal Republic of Germany, Switzerland shall exempt such income (excluding dividends) or such capital from taxation; however, in assessing the tax for the remaining income or the remaining capital of such resident, Switzerland may use the tax rate which would apply if the income in question or the capital in question were not exempt from taxation.
• (2) Where a person who is a resident of Switzerland derives dividends which in accordance with Article 10 may be taxed in the Federal Republic of Germany, Switzerland shall grant a relief to this person upon request. Such relief shall consist of:
  • (a) crediting the taxes levied in the Federal Republic of Germany in accordance with Article 10 to the Swiss taxes owed on the income of such person; however, the amount so credited shall not exceed that portion of the Swiss tax assessed prior to the crediting which is attributed to the dividends; or
  • (b) a flat-rate reduction of the Swiss tax; or
  • (c) a full or partial exemption of the dividends from the Swiss tax, but at least a deduction of the taxes levied in the Federal Republic of Germany on the gross amount of the dividends.
• However, the relief shall consist of deducting the taxes levied in the Federal Republic of Germany on the gross yield of the dividends if in accordance with Article 23 the recipient, being a resident of Switzerland, cannot claim the limitation of the German tax on the dividends provided in Article 10.
• (3) If a person who is a resident of Switzerland derives interest, royalties, or capital gains which in accordance with Article 23 may be taxed in the Federal Republic of Germany, Switzerland shall grant the deduction of the taxes levied in the Federal Republic of Germany on the gross yield of such interest, royalties, or capital gains.
• (4) Notwithstanding number 1, Switzerland shall continue for five years from the entry into force of this Agreement to exempt the shares of a person who is a resident of Switzerland in a limited liability company which is a resident of the Federal Republic of Germany from the Swiss tax on capital; however, Switzerland reserves the right, in assessing the tax on the remaining capital of such resident, to apply the tax rate which would apply if such shares were not exempt from taxation.
• (5) In accordance with the provisions on the implementation of inter-governmental conventions of the federal government for the avoidance of double taxation, Switzerland shall determine the nature of the relief provided in numbers 2 and regulate the procedure.