ARTICLE 23

Avoidance of Double Taxation in the State of Residence

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

• (a) Where a resident of Kazakhstan derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in the Federal Republic of Germany, Kazakhstan shall allow:
  • (aa) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in the Federal Republic of Germany,
  • (bb) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in the Federal Republic of Germany.
• The amount of the tax to be deducted pursuant to the above provision shall not exceed the tax which would have been charged on the same income in Kazakhstan under the rates applicable therein.
• (b) Where a resident of Kazakhstan derives income or owns capital, which in accordance with the provisions of this Agreement, shall be taxable only in the Federal Republic of Germany, Kazakhstan may include this income or capital in the tax base but only for purposes of determining the rate of tax on such other income or capital as is taxable in Kazakhstan.

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

• (a) Unless foreign tax credit is to be allowed under sub-paragraph (b), there shall be exempted from the assessment basis of the German tax any item of income arising in Kazakhstan and any item of capital situated within Kazakhstan which, according to this Agreement, may be taxed in Kazakhstan. 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 exempted. 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 Kazakhstan at least 10 per cent 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.
• There shall be exempted from the assessment basis of the taxes on capital any shareholding the dividends of which if paid, would be exempted, according to the foregoing sentences.
• (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 payable in respect of the following items of income the Kazakhstan tax paid under the laws of Kazakhstan and in accordance with this Agreement:
  • (aa) dividends not dealt with in sub-paragraph (a) above;
  • (bb) interest;
  • (cc) royalties;
  • (dd) items of income that may be taxed in Kazakhstan according to paragraph (2) of Article 13;
  • (ee) items of income that may be taxed in Kazakhstan according to paragraph (3) of Article 15;
  • (ff) directors' fees;
  • (gg) items of income of artistes and sportsmen.
• (c) The provisions of sub-paragraph (b) above shall apply instead of the provisions of sub-paragraph (a) above 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 realised or of the company resident in Kazakhstan in the business year for which the dividends were paid was derived exclusively or almost exclusively from activities within the meaning of nos. 1 to 6 of paragraph (1) of section 8 of the German Law on External Tax Relations (AuBensteuergesetz) or from participations within the meaning of paragraph (2) of section 8 of that Law; the same shall apply to immovable property used by a permanent establishment (paragraph (3) 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) Notwithstanding the provisions of sub-paragraph (a) above double taxation shall be avoided by allowing a tax credit as laid down in sub-paragraph (b) above:
  • (aa) if in the Contracting States items of income or capital are placed under differing provisions of the Agreement 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 25 and if as a result of this difference in placement or attribution the relevant income or capital would remain untaxed or be taxed too lowly or
  • (bb) if after proper consultation and subject to the limitations of its domestic law a Contracting State notifies the other Contracting State through diplomatic channels of other income to which it intends to apply the provisions of sub-paragraph (d). The notification shall not take effect until the first day of the calendar year following the year in which the notification was made and all legal requirements under the domestic law of the notifying State for the notification to take effect have been fulfilled.