ARTICLE 21

Elimination of Double Taxation

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

• (a) There shall be exempted from the assessment basis of the German tax any item of income arising in the Republic of Finland which, according to this Convention, is actually taxed in the Republic of Finland and is not dealt with in sub-paragraph (b) of this paragraph.
• 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 the Federal Republic of Germany by a company being a resident of the Republic of Finland at least 10% 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.
• (b) Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German tax payable in respect of the following items of income Finnish tax paid under the provisions of Finnish law and in accordance with this Convention:
  • (i) dividends not dealt with in sub-paragraph (a) of this paragraph;
  • (ii) items of income that may be taxed in the Republic of Finland according to paragraph (2) of Article 13 (Capital gains);
  • (iii) items of income that may be taxed in the Republic of Finland according to paragraph (3) of Article 14 (Income from employment);
  • (iv) directors' fees;
  • (v) items of income that may be taxed in the Republic of Finland according to Article 16 (Artistes and athletes);
  • (vi) items of income that may be taxed in the Republic of Finland according to Article 17 (Pensions, annuities and similar payments).
• (c) The provisions of sub-paragraph (b) of this paragraph 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 the Federal Republic of Germany does not prove that the gross income of the permanent establishment in the business year in which the profit has been realized or of the company resident in the Republic of Finland in the business year for which the dividends were paid was derived exclusively or almost exclusively from activities within the meaning 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 (5) 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) The Federal Republic of Germany, however, retains the right to take into account in the determination of its rate of tax the items of income, which are under the provisions of this Convention exempted from German tax.
• (e) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, double taxation shall be avoided by allowing a tax credit as laid down in sub-paragraph (b) of this paragraph:
  • (i) if in the Contracting States items of income are placed under different provisions of this Convention 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 23 and if as a result of this difference in placement or attribution, the relevant income would remain untaxed or be taxed lower than without this conflict; or
  • (ii) if after due consultation with the competent authority of the Republic of Finland, the Federal Republic of Germany notifies the Republic of Finland through diplomatic channels of other items of income to which it intends to apply the provisions of sub-paragraph (b) of this paragraph. Double taxation is then avoided for the notified income by allowing a tax credit from the first day of the calendar year following that in which the notification was made.

(2) Subject to the provisions of Finnish law regarding the elimination of international double taxation (which shall not affect the general principle hereof), double taxation shall be eliminated in the Republic of Finland as follows:

• (a) Where a resident of the Republic of Finland derives income which, in accordance with the provisions of this Convention, may be taxed in the Federal Republic of Germany, the Republic of Finland shall, subject to the provisions of sub-paragraph (b) of this paragraph, allow as a deduction from the Finnish tax of that person, an amount equal to the German tax paid under German law and in accordance with the Convention, as computed by reference to the same income by reference to which the Finnish tax is computed.
• (b) Dividends paid by a company being a resident of the Federal Republic of Germany to a company which is a resident of the Republic of Finland and which controls directly at least 10% of the voting power in the company paying the dividends shall be exempt from Finnish tax.
• (c) Where in accordance with any provision of the Convention, income derived by a resident of the Republic of Finland is exempt from tax in the Republic of Finland, the Republic of Finland may nevertheless, in calculating the amount of tax on the remaining income of such person, take into account the exempted income.