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ARTICLE 23
Elimination of Double Taxation
(1) Tax shall be determined in the case of a resident of the Federal Republic of Germany as follows:
- (a) Unless the provisions of sub-paragraph (b) apply, there shall be excluded from the basis upon which German tax is imposed, any item of income derived from and any element of capital situated within Iceland which according to this Agreement, may be taxed in Iceland. 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 and elements of capital so excluded. In the case of dividends, the foregoing provisions shall apply only to such dividends as are paid to a company being a resident of the Federal Republic of Germany by a company being a resident of Iceland, at least 25 per cent of the capital of which is owned directly by the German company. There shall also be excluded from the basis upon which German tax is imposed any shareholding the dividends of which, if paid, would be excluded from the basis upon which tax is imposed according to the immediately foregoing sentence.
- (b) Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German income tax the Icelandic tax paid in accordance with this Agreement on:
- (aa) Dividends to which sub-paragraph (a) does not apply;
- (bb) Remuneration to which Article 16 applies.
The credit shall not, however, exceed that part of the German tax, as computed before the credit is given, which is appropriate to such items of income.
(2) Tax shall be determined in the case of a resident of Iceland as follows:
- (a) Unless the provisions of sub-paragraph (b) apply, these shall be excluded from the basis upon which Icelandic tax is imposed any item of income derived from and any element of capital situated within the Federal Republic of Germany which, according to this Agreement, may be taxed in the Federal Republic of Germany. Iceland, however, retains the right to take into account in the determination of its rate of tax the items of income and elements of capital so excluded.
- (b) There shall be allowed as a credit against Icelandic income tax the German tax paid in accordance with this Agreement on:
- (aa) Dividends;
- (bb) Remuneration to which Article 16 applies.
The credit shall not, however, exceed that part of the Icelandic tax, as computed before the credit is given, which is appropriate to such items of income.