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ARTICLE 23

Avoidance of Double Taxation in the State of Residence

(1) The taxes are determined as follows for a person who is resident in the Federal Republic of Germany:

  • (a) Earnings from Turkmenistan as well as assets located in Turkmenistan and which can be taxed in Turkmenistan according to this Convention and do not fall under letter (b) will be excluded from the basis for assessment used for the German taxes.
  • For earnings from dividends the above provisions only apply if these dividends are paid to a company domiciled in the Federal Republic of Germany (but not to a business partnership) by a company resident in Turkmenistan, whose capital belongs at least to 25 percent to the German company and which is not deducted from the distributing company when profits are determined.
  • For the purposes of taxes on assets, participations are also excluded from the basis for assessing the German taxes if their distributions, should any be paid, would be excluded from the basis for tax assessment according to the sentences above.
  • (b) Turkmen taxes will be credited to the German taxes on income for the following earnings taking into account the regulations of German tax law relating to the crediting of foreign taxes; this applies to those taxes that have been paid for these earnings under Turkmen law and in conformity with this Convention:
    • (aa) Dividends that do not fall under letter (a);
    • (bb) Interest;
    • (cc) Royalties;
    • (dd) Earnings, that can be taxed in Turkmenistan according to Paragraph (2) of Article 13;
    • (ee) Earnings, that can be taxed in Turkmenistan according to Paragraph (3) of Article 15;
    • (ff) compensation for supervisory boards and boards of directors;
    • (gg) Earnings in the sense of Article 17.
  • (c) Instead of applying the provisions of Letter (a), the provisions of Letter (b) apply to earnings in the sense of Article 7 and 10 and the assets from which these earnings are derived, if the person resident in the Federal Republic of Germany does not demonstrate that the permanent establishment in the fiscal year, in which it obtained the profit or the company resident in Turkmenistan gained in the fiscal year for which it performed the distribution, drew its gross earnings exclusively or almost exclusively from activities falling under Section 8 Paragraph (1) Numbers 1 to 6 of the German Foreign Tax Act; the same applies to immoveable assets that serve a permanent establishment and the earnings gained from it (paragraph (4) of Article 6) as well as to the profits from the sale of these immoveable assets (paragraph (1) of Article 13) and the moveable assets which constitute business assets of the permanent establishment (paragraph (3) of Article 13).
  • (d) The Federal Republic of Germany reserves the right, however, to take into consideration the earnings and assets excluded from German tax according to the provisions of this Convention in determining the tax rate for the other income or assets.
  • (e) Irrespective of the Provisions of Letter (a), double taxation will be avoided by crediting taxes according to Letter (b),
    • (aa) if earnings or assets in the Contracting States are assigned to different provisions of the Convention or credited to different persons (except under Article 9) and this conflict cannot be resolved by a procedure as laid out in paragraph (3) of Article 25 and if, due to this different assignment or crediting, the earnings or assets in question remain untaxed or taxed at a lower rate than they would be without this conflict or
    • (bb) if the competent authority of the Federal Republic of Germany, after consultation with the competent authority of Turkmenistan through diplomatic channels, is notified of other earnings for which it intends to apply the crediting method according to Letter (b). The double taxation is avoided for the earnings for which notification is provided through tax crediting as described in Letter (b) from the first day of the calendar year that follows the calendar year in which the notification is sent.

(2) In the case of a person resident in Turkmenistan, the tax will be determined as follows: If a person who is resident in Turkmenistan draws earnings or has assets and these earnings or assets can be taxed according to this Convention in the Federal Republic of Germany, Turkmenistan grants:

  • (a) that the amount be credited to the tax to be assessed on the income of this person which corresponds to the amount of income tax paid in the Federal Republic of Germany.
  • (b) that the amount be credited to the tax to be assessed on the assets of this person which corresponds to the tax paid on assets in the Federal Republic of Germany;

These amounts to be credited may however in no case exceed the portion of the tax due on income or assets, which can be taxed in the Federal Republic of Germany calculated before the credit is given.

Earnings or assets of a person resident in Turkmenistan, which can be excluded from taxation in Turkmenistan under any provision of this Convention can, however, be included in Turkmenistan in calculating the tax on the remaining income or assets of this person who is resident there.