ARTICLE 23

Elimination of Double Taxation in the State of Residence

(1) For residents of the Republic of Tunisia, the tax shall be established as follows:

• (a) The tax paid in the Federal Republic of Germany on income or capital, as the case may be, which in accordance with this Convention is taxable in the Federal Republic of Germany shall be deducted from the tax due on such income or capital in the Republic of Tunisia.
• However, the amount deducted may not exceed the portion of the income tax or the capital tax calculated prior to the deduction, corresponding, as the case may be, to taxable income or capital, in the Federal Republic of Germany.
• (b) For the purposes of the application of this provision, the tax paid in the Federal Republic of Germany includes the tax which should have been paid in the Federal Republic of Germany but which has been the subject of an exemption or a reduction under German national law.

(2) For residents of the Federal Republic of Germany, the tax shall be established as follows:

• (a) Income arising from the Republic of Tunisia and items of capital located in the Republic of Tunisia which are taxable in the Republic of Tunisia under this Convention and not subject to sub-paragraph (b) shall be excluded from the German tax base.
• In the case of dividends defined in paragraph (3) of Article 10, the first sentence shall apply only where the dividends are paid by a company which is a resident in the Republic of Tunisia to a company (other than a partnership) which is a resident in the Federal Republic of Germany, which directly holds at least 10 per cent of the capital of the first mentioned company.
• For the purposes of the taxation of capital, the participations shall also be excluded from German tax slab for which the dividends, in case of distribution, would be excluded from tax assessment under the meaning of the preceding sentences.
• (b) The Tunisian tax paid in accordance with Tunisian legislation and the provisions of this Convention shall be deducted from the German income tax, subject to the provisions of the German tax law concerning the imputation of foreign tax, on the following income:
  • (aa) dividends that are not covered in sub-paragraph (a);
  • (bb) interest;
  • (cc) royalties;
  • (dd) income that is taxable in the Republic of Tunisia in accordance with paragraph (2) of Article 13;
  • (ee) income that is taxable in the Republic of Tunisia in accordance with paragraph (3) of Article 15;
  • (ff) directors' fees;
  • (gg) the income referred to in Article 17.
• (c) The provisions of sub-paragraph (b) shall apply, instead of the provisions of sub-paragraph (a), to the income referred to in Articles 7 and 10 and to the items of capital generating such income where the resident of Germany does not provide evidence that the permanent establishment, during the financial year in which it made the profits, or the resident company of the Republic of Tunisia, during the financial year for which it distributed the dividends, derived its gross income exclusively or almost exclusively from activities referred to in paragraph 4 of the Protocol; this also applies to immovable property which is used by a permanent establishment and to the income derived therefrom (Article 6, paragraph (4)) and to gains from the alienation of such immovable property (Article 13, paragraph (1)) and movable property forming part of the assets of the permanent establishment (Article 13, paragraph (3)).
• (d) The Federal Republic of Germany, however, reserves the right to take into account, in determining the rate of tax, the income and items of capital exempted from German tax in accordance with the provisions of this Convention.
• (e) Double taxation shall be avoided by way of imputation of tax as provided for in sub-paragraph (b)(aa) where, in the Contracting States, income or items of capital are treated according to different provisions of the Convention or attributed to different persons (except under Article 9), without it being possible to settle such divergence by a procedure as provided for in paragraph (3) of Article 25, and which would result in non-taxation of the income or items of capital in question or a lower taxation, in the absence of such difference in treatment or attribution or (bb) where the Federal Republic of Germany, after consultation, notifies through the diplomatic channel about other income to which it intends to apply the imputation method referred to in sub-paragraph (b). Double taxation shall be avoided, as regards the income reported, by charging the tax as provided for in sub-paragraph (b) from the first day of the calendar year following the year in the course of which the notification took place,
• (f) The provisions of paragraph (b) shall apply, instead of those of sub-paragraph (a), to income which is exempt from taxation in the Republic of Tunisia; except for the dividends referred to in the second sentence of sub-paragraph (a).