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ARTICLE 24
Elimination of Double Taxation
(1) It is agreed that double taxation shall be avoided in accordance with the provisions of the following paragraphs.
(2)
- (a) Subject to the provisions of sub-paragraph (b), where a resident of the Italian Republic derives items of income which may be taxed in the Federal Republic of Germany, the Italian Republic, in determining its income taxes referred to in Article 2, may include such items of income in the taxable base upon which such taxes are imposed, unless specific provisions of this Convention provide otherwise.
- In such a case, the Italian Republic shall deduct from the taxes so determined the income tax paid in the Federal Republic of Germany (including, if applicable, the trade tax insofar as levied on profits); the deductible amount shall not, however, exceed that portion of the Italian tax which such items of income bear to the entire income.
- Nevertheless, no deduction shall be granted if the item of income is subjected in the Italian Republic, according to Italian law and upon request of the recipient of that income, to taxation by way of withholding at source.
- (b) Income from dividends referred to in sub-paragraph (a) of paragraph (6) of Article 10 shall be excluded from the base upon which Italian tax is levied if the dividends are paid to a company (not including partnerships) being a resident of the Italian Republic by a company being a resident of the Federal Republic of Germany at least 25% of the capital of which is owned directly by the Italian company.
(3) 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 base upon which German tax is imposed any item of income from sources within the Italian Republic and any item of capital situated within the Italian Republic which, according to this Convention, may be taxed in the Italian Republic. 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 capital so excluded.
- As regards income from dividends referred to in sub-paragraph (a) of paragraph (6) of Article 10, the above provisions shall apply only if the dividends 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 Italian Republic at least 10% of the capital of which is owned directly by the German company.
- For the purposes of taxation of capital, there shall likewise be excluded from the base upon which German tax is imposed any shareholding the dividends of which, if paid, would be excluded from the tax base according to the immediately foregoing sentence.
- (b) Italian tax levied, under the laws of the Italian Republic and in accordance with this Convention, on the following items of income from sources within the Italian Republic shall be allowed as a credit against the German individual or corporate income tax payable on the same income:
- (i) dividends in the sense of Article 10, insofar as not dealt with in sub-paragraph (a);
- (ii) interest in the sense of Article 11;
- (iii) royalties in the sense of Article 12;
- (iv) income and remuneration to which the provisions of Articles 16 and 17 apply.
The Italian tax allowed as a credit by virtue of the preceding provision shall not, however, exceed that part of the German tax, as computed before the deduction is given, which is attributable to the items of income which may be taxed in the Italian Republic.