ARTICLE 20

ELIMINATION OF DOUBLE TAXATION

(1) In the case of residents of the Federal Republic, double taxation shall be avoided as follows:

• *(a) Subject to the provisions of sub-paragraphs b), c) and d), there shall be excluded from the basis upon which German tax is imposed, any item of income from sources within France and any element of capital situated within France which, in accordance with this Convention, may be taxed in France.
• (b) In respect of dividends, sub-paragraph (a) shall apply only to net income corresponding to dividends paid by a joint stock company resident in France to a joint stock company resident in the Federal Republic which owns at least 10 per cent of the capital stock of the first-mentioned company. This provision shall also apply to shares the dividends of which would come within the scope of the preceding sentence.
• *(c) The French tax levied in accordance with this Convention on dividends other than those referred to in sub-paragraph b) above and on items of income arising in France, referred to in paragraph (4) of Article 7, Article 11, paragraph (6) of Article 13 and Article 13B, shall be allowed as a credit against the German tax attributable to the same income, subject to the provisions of German tax law regarding credit for foreign tax.
• #(d) Notwithstanding the provisions of sub-paragraph a) and other provisions of this Convention, double taxation shall be avoided by allowing a tax credit as laid down in sub-paragraph c) if the Federal Republic of Germany notifies France through diplomatic channels of other items of income to which it intends to apply the provisions of sub-paragraph c). The provisions of the preceding sentence shall apply only to income referred to in Articles 4 and 12. Double taxation is then avoided for the notified income by allowing a tax credit according to sub-paragraph c) from the first day of the calendar year next following that in which the notification was made.

(2) In the case of residents of France, double taxation shall be avoided as follows:

• *(a) Items of income arising in the Federal Republic of Germany and which may be taxed in that State in accordance with this Convention may also be taxed in France if they are derived by a resident of France and are not exempt from corporation tax under French domestic law. The German tax shall not be deducted when calculating taxable income in France. However, the recipient shall be entitled to a tax credit for the French tax based on that income. This tax credit shall be equal to:
  • *(aa) in the case of income referred to in paragraphs (1), (4) and (6) of Article 7, paragraphs (2), (5), (9) and (10) of Article 9, paragraph (2) of Article 11, paragraph (6) of Article 13 and paragraphs (1) and (2) of Article 13B, the amount of tax paid in the Federal Republic of Germany in accordance with the provisions of these Articles. However, it shall not exceed the amount of French tax attributable to such income.
  • *(bb) in the case of all other income, the amount of French tax attributable to such income, provided that the resident of France is subject to German tax in respect of such income. This provision shall apply in particular to income referred to in Article 3, paragraphs (1) and (3) of Article 4, paragraph (1) of Article 6, paragraphs (2), (3) and (5) of Article 7, paragraph (1) of Article 12, paragraphs (1) and (2) of Article 13, and Article 14.
• *(b) Where a company which is a resident of France is taxed in that State in accordance with French domestic law on a consolidated tax base, including in particular the profits or losses of subsidiaries that are residents of the Federal Republic of Germany or permanent establishments situated in the Federal Republic of Germany, the provisions of this Convention shall not prevent the application of French domestic law. In such case, the German tax shall not be deducted from income, but the resident of France shall be entitled to a tax credit against French tax. Such tax credit shall be equal to the amount of tax paid in the Federal Republic of Germany. Such tax credit shall not exceed the amount of French tax attributable to such income.
• (c) Capital that is taxable in the Federal Republic pursuant to Article 19 shall also be taxable in France. Residents of France shall be entitled to a tax credit for the amount of the tax levied on that capital in the Federal Republic, but such credit may not exceed the amount of French tax on that capital. This credit may be deducted from the solidarity tax on capital the base of which includes the capital in question.

(3) When a company which is a resident of the Federal Republic of Germany allocates income arising in France for distribution as dividends, nothing in paragraph (1) shall prevent the levying of a compensatory tax in the form of a business tax on sums distributed in accordance with the tax laws of the Federal Republic of Germany.