Methods for the Elimination of Double Taxation
(1) A person resident of the Russian Federation may avoid double taxation as under:
- When a person resident in the Russian Federation receives income or owns capital which according to the provisions of this Agreement may be taxed in the Federal Republic of Germany, in that case the tax amount that has been paid in the Federal Republic of Germany shall be deducted from the tax levied from such person in the Russian Federation. However, such deduction shall not exceed that amount of tax that has been assessed on this income or capital according to the laws and provisions of the Russian Federation.
(2) A person resident in the Federal Republic of Germany may avoid double taxation as under:
- (a) The income from the Russian Federation as well as the properties situated there, which according to the provisions of this Agreement may be taxed there, are exempted from German tax, unless the tax credit in accordance with sub-paragraph (b) is to be carried out. However, the Federal Republic of Germany reserves the right to consider the income and the property so exempted from tax when determining the tax rate. Dividends are considered tax-exempt only if these dividends are paid to an enterprise resident in the Federal Republic of Germany by an enterprise resident in the Russian Federation whose capital is owned directly at least up to 10 percent by the German enterprise.
- Holdings shall be exempt from tax on capital, when their dividends, if any are paid or would be paid, are to be exempt or would be exempt, in accordance to the present clause.
- (b) Under the German income tax, corporate tax and property tax laws, taxes are to be raised on income originating from the Russian Federation or the property situated there. Taking into account the requirements of the German tax laws about granting credit to foreign taxes, the Russian tax that has been paid according to the Russian law and in consonance with this agreement is credited for the following:
- (aa) dividends to which sub-paragraph (a) does not apply;
- (bb) directors' fees;
- (cc) income of artists and sports persons.
- (c) Notwithstanding the provisions of sub-paragraph (a), income to which Articles 7 and 10 applies, and gains from the alienation of the business property of a permanent establishment as well as the capital underlying such gains, shall be exempt from the German tax only when the person, being a resident of the Federal Republic of Germany, can prove that in the fiscal year in which the gains were realized, or the person, being a resident of the Russian Federation, can prove that in the year in which the dividends were paid, the gross income of the permanent establishment exclusively or almost exclusively relates to activities covered by Article 8 paragraph (1) No. 1 to 6 of the German Law on External Tax Relations or from holdings covered by Article 8 paragraph (2) of that law.
- (d) If a company resident in the Federal Republic of Germany, uses income from the Russian Federation for distributing profits, in that case clause (a) shall not exclude the tax burden on the distribution from being determined according to the provisions of the German tax laws.
- (e) Notwithstanding the provisions of clause (a) double taxation through tax credit in accordance with clause (b) shall be avoided:
- (aa) if in the Contracting States income or capital are allocated to different provisions of the Agreement or allocated to different persons (not being persons to whom Article 9 applies) and such conflict cannot be resolved according to a process in accordance with paragraph (3) of Article 25, and if due to this varying allocation or attribution the income or capital would remain untaxed or be under taxed or
- (bb) if one Contracting State, after appropriate consultation and subject to the limitations of its internal laws notifies to the other Contracting State through diplomatic channels, of other income to which it intends to apply this sub-clause. Such notification shall become effective only on the first day of the calendar year following the year in which the notification was communicated and all legal conditions according to the internal law of the notifying State are fulfilled for the notification to become effective.