PROTOCOL AMENDING THE CONVENTION BETWEEN

THE UNITED STATES OF AMERICA AND

THE FEDERAL REPUBLIC OF GERMANY

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND CAPITAL AND TO CERTAIN 

OTHER TAXES, 

SIGNED ON 29th AUGUST 1989

The United States of America and the Federal Republic of Germany, desiring to 

amend the Convention Between the United States of America and the Federal Republic 

of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

with Respect to Taxes on Income and Capital and to Certain Other Taxes, and the related 

Protocol signed at Bonn on August 29, 1989 (hereinafter referred to as “the Convention” 

and “Protocol to the Convention”, respectively). 

Have agreed as follows: 
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ARTICLE I 

Article 1 (Personal Scope) of the Convention is deleted and the following Article 

substituted: 

“Article 1 

General Scope 

1. This Convention shall apply to persons who are residents of one or both of the 

Contracting States, except as otherwise provided in this Convention. 

2. This Convention shall not restrict in any manner any exclusion, exemption, deduction, 

credit, or other allowance now or hereafter accorded: 

a) by the laws of either Contracting State; or 

b) by any other agreement to which the Contracting States are party. 

3. 

a) Notwithstanding the provisions of subparagraph b) of paragraph 2: 

aa) the Contracting States agree that any question arising as to the interpretation or 

application of the Convention and, in particular, whether a taxation measure is 

within the scope of the Convention, shall be determined exclusively in accordance 

with the provisions of Article 25 (Mutual Agreement Procedure) of the 

Convention; and 

bb) the provisions of any other agreement shall not apply to a taxation measure unless 

the competent authorities agree that the measure is not within the scope of Article 24 

(Nondiscrimination) of this Convention. 

b) For the purposes of this paragraph, a “measure” is a law, regulation, rule, procedure, 

decision, administrative action, or any similar provision or action. 

4. 

a) Except to the extent provided in paragraph 5, this Convention shall not affect the 

taxation by the United States of its residents (as determined under Article 4 

(Residence)) and its citizens. 

b) Notwithstanding the other provisions of this Convention, a former citizen or long-term 

resident of the United States may, for the period of ten years following the loss of such 

status, be taxed in accordance with the laws of the United States. 
3 

5. The provisions of paragraph 4 shall not affect the benefits conferred by the United 

States: 

a) under paragraph 2 of Article 9 (Associated Enterprises), paragraph 6 of Article 13 

(Gains), paragraphs 3, 4 and 5 of Article 18 (Pensions, Annuities, Alimony, Child 

Support, and Social Security), paragraph 1 and 5 of Article 18A (Pension Plans), 

paragraph 3 of Article 19 (Government Service), and under Articles 23 (Relief from 

Double Taxation), 24 (Nondiscrimination), and 25 (Mutual Agreement Procedure); 

and 

b) under paragraph 2 of Article18A (Pension Plans), subparagraph b) of paragraph 1 of 

Article 19 (Government Service), and under Articles 20 (Visiting Professors and 

Teachers; Students and Trainees) and 30 (Members of Diplomatic Missions and 

Consular Posts), upon individuals who are neither citizens of, nor have immigrant 

status in, the United States. 

6. Nothing in the Convention shall be construed to prevent the Federal Republic of 

Germany from imposing its taxes on amounts included in the income of a resident of the 

Federal Republic of Germany according to part 4, 5, and 7 of the German 

"Außensteuergesetz". Where such imposition of tax gives rise to double taxation, the 

competent authorities shall consult for the elimination of such double taxation according 

to paragraph 3 of Article 25 (Mutual Agreement Procedure). 

7. In the case of an item of income, profit or gain derived by or through a person that is 

fiscally transparent under the laws of either Contracting State, such item shall be 

considered to be derived by a resident of a State to the extent that the item is treated for 

the purposes of the taxation law of such State as the income, profit or gain of a resident.” 

ARTICLE II 

Article 4 (Residence) of the Convention is amended by deleting paragraph 1 and 

substituting the following paragraph: 

“1. For the purposes of this Convention, the term "resident of a Contracting State" 

means any person who, under the laws of that State, is liable to tax therein by 

reason of his domicile, residence, place of management, place of incorporation, or 

any other criterion of a similar nature, and also includes that State and any political 
4 

subdivision or local authority thereof. The term, however, does not include any 

person who is liable to tax in that State in respect only of income from sources in 

that State or of profits attributable to a permanent establishment in that State or 

capital situated therein.” 

ARTICLE III 

Article 7 (Business Profits) of the Convention is modified by: 

a) deleting paragraph 3 and substituting the following paragraph:

“3. In determining the business profits of a permanent establishment, there shall be 

allowed as deductions expenses that are incurred for the purposes of the permanent 

establishment, including executive and general administrative expenses so incurred, 

whether in the State in which the permanent establishment is situated or elsewhere.”; and

b) in paragraph 7, adding the words “and income from the performance of professional 

services and of other activities of an independent character”.

ARTICLE IV 

Article 10 (Dividends) of the Convention is deleted and the following Article substituted: 

“Article 10 

Dividends 

1. Dividends paid by a company that is a resident of a Contracting State to a resident of 

the other Contracting State may be taxed in that other State. 

2. However, such dividends may also be taxed in the Contracting State of which the 

company paying the dividends is a resident and according to the laws of that State, but if 

the dividends are derived and beneficially owned by a resident of the other Contracting 

State, the tax so charged shall not exceed: 

a) 5 percent of the gross amount of the dividends if the beneficial owner is a company 

that owns directly at least 10 percent of the voting stock of the company paying the 

dividends; 

b) 15 percent of the gross amount of the dividends in all other cases. 

This paragraph shall not affect the taxation of the company in respect of the profits out of 

which the dividends are paid. 
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3. Notwithstanding the provisions of paragraph 2, such dividends shall not be taxed in the 

Contracting State of which the company paying the dividends is a resident if the 

beneficial owner is: 

a) a company that is a resident of the other Contracting State that has owned directly 

shares representing 80 percent or more of the voting power in the company paying 

the dividends for a 12-month period ending on the date entitlement to the dividend 

is determined and: 

aa) satisfies the conditions of clause aa) or bb) of subparagraph c) of paragraph 2 of 

Article 28 (Limitation on Benefits); 

bb) satisfies the conditions of clauses aa) and bb) of subparagraph f) of paragraph 2 

of Article 28, provided that the company satisfies the conditions described in 

paragraph 4 of Article 28 with respect to the dividends; 

cc) is entitled to benefits with respect to the dividends under paragraph 3 of Article 

28; or 

dd) has received a determination pursuant to paragraph 7 of Article 28 with respect 

to this paragraph; or 

b) a pension fund that is a resident of the other Contracting State, provided that such 

dividends are not derived from the carrying on of a business, directly or indirectly, 

by such pension fund. 

4. Subparagraph a) of paragraph 2 and subparagraph a) of paragraph 3 shall not apply in 

the case of dividends paid by a United States person that is a U.S. Regulated Investment 

Company (RIC), a United States person that is a U.S. Real Estate Investment Trust 

(REIT) or a German Investment Fund or a German Investmentaktiengesellschaft 

(collectively referred to as Investmentvermögen). In the case of dividends paid by a RIC 

or an Investmentvermögen, subparagraph b) of paragraph 2 and subparagraph b) of 

paragraph 3 shall apply. In the case of dividends paid by a REIT subparagraph b) of 

paragraph 2 shall apply only if: 

a) the beneficial owner of the dividends is an individual holding an interest of not 

more than 10 percent in the REIT; 
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b) the dividends are paid with respect to a class of stock that is publicly traded and the 

beneficial owner of the dividends is a person holding an interest of not more than 5 

percent of any class of the REIT’s stock; or 

c) the beneficial owner of the dividends is a person holding an interest of not more 

than 10 percent in the REIT and the REIT is diversified. 

For purposes of this paragraph a REIT shall be diversified if no single interest in real 

property exceeds 10 percent of its total interests in real property. For the purposes of 

this paragraph foreclosure property shall not be an interest in real property. Where a 

REIT holds an interest in a partnership, it shall be treated as owning directly a 

proportion of the partnership’s interests in real property corresponding to its interest in 

the partnership. 

5. The term "dividends" as used in this Article means income from shares, "jouissance" 

shares or "jouissance" rights, founders' shares, or other rights (not being debt-claims) 

participating in profits, as well as other income from other rights that is subjected to the 

same taxation treatment as income from shares by the laws of the Contracting State of 

which the company making the distribution is a resident. The term "dividends" also 

includes in the Federal Republic of Germany income under a sleeping partnership (Stille 

Gesellschaft), a participating loan (partiarisches Darlehen), or "Gewinnobligation", as 

well as distributions on certificates of a German Investmentvermögen. 

6. Notwithstanding the first sentence of paragraph 2 of this Article, paragraph 3 of this 

Article and paragraph 1 of Article 11 (Interest), income from arrangements carrying the 

right to participate in profits (including in the Federal Republic of Germany income 

under a sleeping partnership (Stille Gesellschaft), a participating loan (partiarisches 

Darlehen), or “Gewinnobligation", or "jouissance" shares or "jouissance" rights and in 

the United States contingent interest of a type that would not qualify as portfolio interest) 

that is deductible in determining the profits of the payor may be taxed in the Contracting 

State in which it arises according to the laws of that State. 

7. The provisions of paragraphs 2 and 3 shall not apply if the beneficial owner of the 

dividends, being a resident of a Contracting State, carries on business in the other 

Contracting State, of which the company paying the dividends is a resident, through a 

permanent establishment situated therein, and the holding in respect of which the 
7 

dividends are paid forms part of the business property of such permanent establishment. 

In such case, the provisions of Article 7 (Business Profits) shall apply. 

8. A Contracting State may not impose any tax on dividends paid by a company which is 

a resident of the other Contracting State, except insofar as such dividends are paid to a 

resident of the first-mentioned State or insofar as the holding in respect of which the 

dividends are paid forms part of the business property of a permanent establishment 

situated in that State, nor may it impose tax on a company’s undistributed profits except 

as provided in paragraph 9 of this Article, even if the dividends paid or the undistributed 

profits consist wholly or partly of profits or income arising in that State. 

9. A company that is a resident of a Contracting State and that has a permanent establishment in the other Contracting State, or that is subject to tax on a net basis in that other 

Contracting State on items of income that may be taxed in that other State under Article 6 

(Income from Immovable (Real) Property) or under paragraph 1 of Article 13 (Gains), 

may be subject in that other Contracting State to a tax in addition to the tax allowable 

under the other provisions of this Convention. Such tax, however, may be imposed only 

on:

a) the portion of the business profits of the company attributable to the permanent 

establishment, and 

b) the portion of the income referred to in the preceding sentence that is subject to tax 

under Article 6 or paragraph 1 of Article 13, 

that represents the "dividend equivalent amount" of those profits and income; the term

"dividend equivalent amount" shall, for the purposes of this subparagraph, 

aa) in the case of the United States, have the meaning that it has under the law of the 

United States as it may be amended from time to time without changing the general 

principle thereof; and 

bb) in the case of the Federal Republic of Germany, be that portion of the income 

described in subparagraph a) that is comparable to the amount that would be distributed 

as a dividend by a locally incorporated subsidiary. 

10. The tax referred to in subparagraphs a) and b) of paragraph 9 of this Article shall not 

be imposed at a rate exceeding the rate specified in subparagraph a) of paragraph 2. In 

any case, it shall not be imposed on a company that:
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a) satisfies the conditions of clause aa) or bb) of subparagraph c) of paragraph 2 of 

Article 28 (Limitation on Benefits); 

b) satisfies the conditions of clauses aa) and bb) of subparagraph f) of paragraph 2 of 

Article 28, provided that the company satisfies the conditions described in 

paragraph 4 of that Article with respect to an item of income, profit or gain 

described in paragraph 9 of this Article; 

c) is entitled under paragraph 3 of Article 28 to benefits with respect to an item of 

income, profit or gain described in paragraph 9 of this Article; or 

d) has received a determination pursuant to paragraph 7 of Article 28 with respect to 

this paragraph. 

11. The term "pension fund" as used in this Article means any person that: 

a) is established under the laws of a Contracting State; 

b) is established and maintained in that Contracting State primarily to administer or 

provide pensions or other similar remuneration, including social security payments, 

disability pensions and widow’s pensions or to earn income for the benefit of one 

or more of such persons; and 

c) is either, 

aa) in the case of the United States, exempt from tax in the United States with 

respect to the activities described in subparagraphb) of this paragraph, or 

bb) in the case of the Federal Republic of Germany, a plan the contributions to 

which are eligible for preferential treatment under the Income Tax Act.” 

ARTICLE V 

Article 11 (Interest) of the Convention is modified by: 

a) inserting the following new paragraph 6: 

“6. Notwithstanding the provisions of paragraph 1, interest that is an excess inclusion 

with respect to a residual interest in a U.S. real estate mortgage investment conduit may 

be taxed by the United States in accordance with its domestic law.”; and 

b) in paragraph 5, deleting the words “paragraph 8 (a)(bb)” where they appear and 

substituting the words “subparagraph b) of paragraph 9”. 
9

ARTICLE VI 

Article 13 (Gains) of the Convention is modified by deleting paragraph 6 and substituting 

the following new paragraph: 

“6. Where an individual who, upon ceasing to be a resident of one of the Contracting 

States, is treated under the taxation law of that State as having alienated property and is 

taxed in that State by reason thereof, the individual may elect to be treated for purposes 

of taxation in the other Contracting State as if the individual had, immediately before 

ceasing to be a resident of the first-mentioned State, alienated and reacquired the property 

for an amount equal to its fair market value at that time.” 

ARTICLE VII 

1. Article 14 (Independent Personal Services) of the Convention shall be deleted and the 

Articles following Article 14 shall not be re-numbered. 

2. Paragraph 3 of Article 11 (Interest) of the Convention shall be modified by deleting 

the words “, or performs in that other State independent personal services from a fixed 

base situated therein,”, "or fixed base", and “or Article 14 (Independent Personal 

Services), as the case may be,” where they appear. 

3. Paragraph 5 of Article 11 of the Convention shall be modified by deleting the words 

“or a fixed base” where they appear. 

4. Paragraph 3 of Article 12 (Royalties) of the Convention shall be modified by deleting 

the words “, or performs in that other State independent personal services from a fixed 

base situated therein,” and “or Article 14 (Independent Personal Services), as the case 

may be,” where they appear. 

5. Paragraph 3 of Article 13 (Gains) of the Convention shall be modified by deleting the 

words “or of movable property pertaining to a fixed base available to a resident of a 

Contracting State in the other Contracting State for the purpose of performing 

independent personal services” and "or of such fixed base" where they appear. 

6. Subparagraph c) of paragraph 2 of Article 15 (Dependent Personal Services) of the 

Convention shall be modified by deleting the words “or a fixed base” where they appear. 
10

7. Paragraph 1 of Article 17 (Artistes and Athletes) of the Convention shall be modified 

by deleting the words “, 14 (Independent Personal Services)” where they appear. 

8. Paragraph 2 of Article 17 of the Convention shall be modified by deleting the words 

“and 14 (Independent Personal Services),” where they appear. 

9. Paragraph 2 of Article 21 (Other Income) of the Convention shall be modified by 

deleting the words “; or the recipient performs in that other State independent personal 

services from a fixed base situated therein, and the income is attributable to the fixed 

base” where they appear. 

10. Paragraph 2 of Article 22 (Capital) of the Convention shall be modified by deleting 

the words “, or by movable property pertaining to a fixed base available to a resident of a 

Contracting State in the other Contracting State for the purpose of performing 

independent personal services,” where they appear. 

ARTICLE VIII 

Article 18 (Pensions, Annuities, Alimony, and Child Support) of the Convention is 

modified by: 

a) deleting the title “Article 18 (Pensions, Annuities, Alimony, and Child Support)”and 

replacing it with the title “Article 18 (Pensions, Annuities, Alimony, Child Support, and 

Social Security)”; 

b) by adding a new paragraph 5 as follows:

“5. Social security benefits paid under the social security legislation of a Contracting 

State and other public pensions (not dealt with in Article 19 (Government Service)) paid 

by a Contracting State to a resident of the other Contracting State shall be taxable only in 

that other Contracting State. In applying the preceding sentence, that other Contracting 

State shall treat such benefit or pension as though it were a social security benefit paid 

under the social security legislation of that other Contracting State.”

ARTICLE IX 

The following new Article 18A (Pension Plans) shall be added to the Convention: 
11 

“Article 18A 

Pension Plans 

1. Where an individual who is a resident of a Contracting State is a member or 

beneficiary of, or participant in, a pension plan established in the other Contracting State, 

income earned by the pension plan may be taxed as income of that individual only when, 

and, to the extent that, it is paid to, or for the benefit of, that individual from the pension 

plan (and not transferred to another pension plan in that other Contracting State). 

2. Where an individual who is a beneficiary of, or participant in, a pension plan 

established in a Contracting State exercises an employment or self-employment in the 

other Contracting State: 

a) contributions paid by or on behalf of that individual to the pension plan during the 

period or attributable to the period that he exercises an employment or selfemployment in the other State shall be deductible (or excludable) in computing 

his taxable income in that other State; and 

b) any benefits accrued under the pension plan, or contributions made to the pension 

plan by or on behalf of the individual’s employer, during that period shall not be 

treated as part of the employee’s taxable income; any such contributions shall be 

allowed as a deduction in computing the business profits of his employer in that 

other State. 

The relief available under this paragraph shall not exceed the relief that would be allowed 

by the other State to residents of that State for contributions to, or benefits accrued under, 

a pension plan or plans established in that State. The competent authorities of the 

Contracting States shall determine the relief available under this paragraph pursuant to 

the preceding sentence. 

3. The provisions of paragraph 2 shall not apply unless: 

a) contributions by or on behalf of the individual, or by or on behalf of the 

individual’s employer were made before the individual began to exercise an 

employment or self-employment in the other State; and 

b) the pension plan is accepted by the competent authority of that State as generally 

corresponding to a pension plan recognized as such for tax purposes by that State. 
12 

4. The term “pension plan” means an arrangement established in a Contracting State 

which is operated principally to administer or provide pension or retirement benefits or to 

earn income for the benefit of one or more such arrangements.

5. a) Where a citizen of the United States who is a resident of the Federal Republic of 

Germany exercises an employment in the Federal Republic of Germany the income from 

which is taxable in the Federal Republic of Germany and is borne by an employer who is 

a resident of the Federal Republic of Germany or by a permanent establishment situated

in the Federal Republic of Germany, and the individual is a beneficiary of, or participant 

in, a pension plan established in the Federal Republic of Germany,

aa) contributions paid by or on behalf of that individual to the pension planduring the 

period or attributable to the period that he exercises the employment in the Federal 

Republic of Germany, and that are attributable to the employment, shall be deductible (or 

excludable) in computing his taxable income in the United States; and

bb) any benefits accrued under the pension plan, or contributions made to the pension 

plan by or on behalf of the individual’s employer, during that period or attributable to that 

period, and that are attributable to the employment, shall not be treated as part of the 

employee’s taxable income in computing his taxable income in the United States. 

This paragraph shall apply only to the extent that the contributions or benefits qualify for 

tax relief in the Federal Republic of Germany.

b) The relief available under this paragraph shall not exceed the relief that would be 

allowed by the United States to its residents for contributions to, or benefits accrued 

under, a generally corresponding pension planestablished in the United States.

c) For purposes of determining an individual’s eligibility to participate in and receive tax 

benefits with respect to a pension plan established in the United States, contributions 

made to, or benefits accrued under, a pension plan established in the Federal Republic of 

Germany shall be treated as contributions or benefits under a generally corresponding 

pension planestablished in the United States to the extent relief is available to the 

individual under this paragraph.

d) This paragraph shall not apply unless the competent authority of the United States has 

agreed that the pension plan generally corresponds to a pension plan established in the 

United States.”
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ARTICLE X 

Article 19 (Government Service; Social Security) of the Convention is deleted and the 

following Article substituted: 

“Article 19 

Government Service 

1. Notwithstanding the provisions of Articles 15 (Dependent Personal Services), 16 

(Directors’ Fees), and 17 (Artistes and Athletes): 

a) salaries, wages and other similar remuneration, other than a pension, paid by a 

Contracting State or a political subdivision, local authority or an instrumentality 

thereof to an individual in respect of services rendered to that Contracting State or a 

political subdivision, local authority or an instrumentality thereof shall, subject to 

the provisions of subparagraph b), be taxable only in that State; 

b) such remuneration, however, shall be taxable only in the other Contracting State if 

the services are rendered in that State and the individual is a resident of that State 

who: 

aa) is a national of that State; or 

bb) did not become a resident of that State solely for the purpose of rendering the 

services. 

2. a) Notwithstanding the provisions of paragraph 1, pensions and other similar 

remuneration paid by, or out of funds created by, a Contracting State or a political 

subdivision, local authority or an instrumentality thereof to an individual in respect 

of services rendered to that State or subdivision, authority or instrumentality shall 

be taxable only in that State. 

b) However, such pensions and other remuneration shall be taxable only in the

other Contracting State if the individual is a

aa) resident of, and a national of, that State; or 

bb) the pension is not subject to tax in the Contracting State for which the services 

were performed because the services were performed entirely in the other 

Contracting State. 
14 

3. Pensions, annuities, and other amounts paid by one of the Contracting States or by a 

juridical person organized under the public laws of that State as compensation for an 

injury or damage sustained as a result of hostilities or political persecution shall be 

exempt from tax by the other State. 

4. The provisions of Articles 15 (Dependent Personal Services) , 16 (Directors’ Fees), 17 

(Artistes and Athletes), and 18 (Pensions, Annuities, Alimony, Child Support, and Social 

Security) shall apply to salaries, wages and other similar remuneration, and to pensions, 

in respect of services rendered in connection with a business carried on by a Contracting 

State or by a political subdivision, local authority or an instrumentality thereof. 

5. In this Article, the term "instrumentality" means any agent or entity created or 

organized by a Contracting State, one of its states or a political subdivision or local 

authority thereof in order to carry out functions of a governmental nature which is 

specified and agreed to in letters exchanged between the competent authorities of the 

Contracting States.” 

ARTICLE XI 

Article 20 (Visiting Professors and Teachers; Students and Trainees) of the Convention is 

modified by: 

a) deleting paragraph 1 and substituting the following paragraph: 

“1. Remuneration that a professor or teacher who is a resident of a Contracting State and 

who is temporarily present in the other Contracting State for the primary purpose of 

carrying out advanced study or research or for teaching at an accredited university or 

other recognized educational institution, or an institution engaged in research for the 

public benefit, receives for such work shall be taxable only in the first-mentioned 

Contracting State for a period not exceeding two years from the date of his arrival. This 

Article shall not apply to income from research if such research is undertaken not in the 

public interest but primarily for the private benefit of a specific person or persons. The 

benefits provided in this paragraph shall not be granted to an individual who, during the 

immediately preceding period, enjoyed the benefits of paragraph 2, 3, or 4.”; and 

b) in paragraph 4, deleting the words “$5,000 (five thousand United States dollars)” and 

substituting the words “$9,000 (nine thousand United States dollars)”. 
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ARTICLE XII 

Article 23 (Relief from Double Taxation) of the Convention is deleted and the following 

Article substituted: 

“Article 23

Relief from Double Taxation

1. In accordance with the provisions and subject to the limitations of the law of the 

United States (as it may be amended from time to time without changing the general 

principle hereof), the United States shall allow to a resident or citizen of the United States 

as a credit against the United States tax on income: 

a) the income tax paid or accrued to the Federal Republic of Germany by or on behalf of 

such resident or citizen; and

b) in the case of a United States company owning at least 10 percent of the voting stock 

of a company that is a resident of the Federal Republic of Germany and from which the 

United States company receives dividends, the income tax paid or accrued to the Federal 

Republic of Germany by or on behalf of the payer with respect to the profits out of which 

the dividends are paid. 

For the purposes of this paragraph, the taxes referred to in subparagraph b) of paragraph 1 

of Article 2 (Taxes Covered) and paragraph 2 of Article 2 , other than the capital tax 

(Vermögensteuer), shall be considered income taxes.

2. For the purposes of applying paragraph 1 of this Article, an item of gross income, as 

determined under the laws of the United States, derived by a resident of the United States 

that, under this Convention, may be taxed in the Federal Republic of Germany shall be 

deemed to be income from sources in the Federal Republic of Germany.

3. Where a resident of the Federal Republic of Germany derives income or owns capital 

which, in accordance with the provisions of this Convention, may be taxed in the United 

States or is exempt from United States tax under paragraph 3 of Article 10 (Dividends), 

tax shall be determined as follows:

a) Except as provided in subparagraph b), the income or capital shall be excluded from 

the basis upon which German tax is imposed. The Federal Republic of Germany, 

however, retains the right to take into account in the determination of its rate of tax 

items of income and capital excluded under the provisions of this Convention. In 

the case of income from dividends the foregoing provisions shall apply only to such 
16 

income from distributions of profits on corporate rights subject to corporate income 

tax under United States law 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 the United States at least 10 percent of the voting shares of which is owned 

directly by the German company. The exclusion provided by the first sentence of 

this subparagraph shall not apply to dividends paid by a U.S. Regulated Investment 

Company (RIC) or a U.S. Real Estate Investment Trust (REIT) and distributions 

that are deductible for United States tax purposes by the company distributing 

them. For the purposes of taxes on capital there shall also be excluded from the 

basis upon which German tax is imposed any shareholding the dividends of which, 

if paid, would be excluded, according to the two immediately foregoing sentences, 

from the basis upon which German tax is imposed. 

b) There shall be allowed as a credit against German tax on income, subject to the 

provisions of German tax law regarding credit for foreign tax, the United States tax 

paid in accordance with the law of the United States and with the provisions of this 

Convention on the following items of income: 

aa) income from dividends within the meaning of Article 10 (Dividends) to which 

subparagraph a) does not apply; 

bb) gains to which Article 13 (Gains) applies provided such gains are taxable in the 

United States by reason only of subparagraph b) of paragraph 2 of Article 13; 

cc) income to which Article 16 (Directors' Fees) applies;

dd) income to which Article 17 (Artistes and Athletes) applies;

ee) income which would, but for Article 28 (Limitation on Benefits), remain 

exempt from United States tax under this Convention. 

For the purposes of this paragraph, income, profit or gain derived by a resident of 

the Federal Republic of Germany that, under this Convention, may be taxed in the 

United States shall be deemed to be income from sources within the United States. 

4. a) Notwithstanding subparagraph a) of paragraph 3, double taxation shall be avoided 

by a credit as provided for in subparagraph b) of paragraph 3, if income or capital 

would be subject to double taxation due to the placement of such income or capital 
17 

under different provisions of the Convention and this conflict cannot be settled by a 

procedure pursuant to Article 25 (Mutual Agreement Procedure). 

b) The provisions of subparagraph a) of paragraph 3 shall not apply to income or 

capital where the United States applies the provisions of the Convention to exempt 

such income or capital from tax, or applies paragraphs 2 or 3 of Article 10 

(Dividends) to such income, or may under the provisions of the Convention tax 

such income or capital but is prevented from doing so under its laws. 

c) The provisions of subparagraph b) and not the provisions of subparagraph a) of 

paragraph 3 shall apply to items of income or capital of which the Federal Republic 

of Germany has, after due consultation, notified the United States through 

diplomatic channels. In such a case, the provisions of subparagraph b) shall apply 

for any taxable year following the year of such notification. 

5. Where a United States citizen is a resident of the Federal Republic of Germany: 

a) With respect to items of income not excluded from the basis of German tax under 

paragraph 3 that are exempt from United States tax or that are subject to a reduced 

rate of United States tax when derived by a resident of the Federal Republic of 

Germany who is not a United States citizen, the Federal Republic of Germany shall 

allow as a credit against German tax, subject to the provisions of German tax law 

regarding credit for foreign tax, only the tax paid, if any, that the United States may 

impose under the provisions of this Convention, other than taxes that may be 

imposed solely by reason of citizenship under paragraph 4 of Article 1 (General 

Scope); 

b) For purposes of computing United States tax, the United States shall allow as a 

credit against United States tax the income tax paid to the Federal Republic of 

Germany after the credit referred to in subparagraph a); the credit so allowed shall 

not reduce that portion of the United States tax that is creditable against the German 

tax in accordance with subparagraph a); and 

c) For the exclusive purpose of relieving double taxation in the United States under 

subparagraph b), items of income referred to in subparagraph a) shall be deemed 

to arise in the Federal Republic of Germany to the extent necessary to avoid 

double taxation of such income under subparagraph b).” 
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ARTICLE XIII 

Paragraph 5 of Article 25 (Mutual Agreement Procedure) of the Convention shall be 

deleted and replaced with the following paragraph: 

“5. Where, pursuant to a mutual agreement procedure under this Article, the 

competent authorities have endeavored but are unable to reach a complete agreement in a 

case, the case shall be resolved through arbitration conducted in the manner prescribed 

by, and subject to, the requirements of paragraph 6 and any rules or procedures agreed 

upon by the Contracting States, if: 

a) tax returns have been filed with at least one of the Contracting States with respect 

to the taxable years at issue in the case;

b) the case 

aa) is a case that 

A) involves the application of one or more Articles that the Contracting States have 

agreed shall be the subject of arbitration, and 

B) is not a particular case that the competent authorities agree, before the date on 

which arbitration proceedings would otherwise have begun, is not suitable for 

determination by arbitration, or

bb) is a particular case that the competent authorities agree is suitable for 

determination by arbitration; and

c) all concerned persons agree according to the provisions of subparagraph d) of 

paragraph 6. 

6. For the purposes of paragraph 5 and this paragraph, the following rules and 

definitions shall apply:

a) The term “concerned person” means the presenter of a case to a competent 

authority for consideration under this Article and all other persons, if any, whose tax 

liability to either Contracting State may be directly affected by a mutual agreement 

arising from that consideration;

b) The “commencement date” for a case is the earliest date on which the information 

necessary to undertake substantive consideration for a mutual agreement has been 

received by both competent authorities;

c) Arbitration proceedings in a case shall begin on the later of: 
19

aa) Two years after the commencement date of that case, unless both competent 

authorities have previously agreed to a different date, and

bb) The earliest date upon which the agreement required by subparagraph d) has been 

received by both competent authorities;

d) The concerned person(s), and their authorized representatives or agents, must 

agree prior to the beginning of arbitration proceedings not to disclose to any other person 

any information received during the course of the arbitration proceeding from either 

Contracting State or the arbitration board, other than the determination of such board; 

e) Unless any concerned person does not accept the determination of an arbitration 

board, the determination shall constitute a resolution by mutual agreement under this 

Article and shall be binding on both Contracting States with respect to that case; and 

f) For purposes of an arbitration proceeding under paragraph 5 and this paragraph, 

the members of the arbitration board and their staffs shall be considered “persons or 

authorities” to whom information may be disclosed under Article 26 (Exchange of 

Information and Administrative Assistance) of the Convention.” 

ARTICLE XIV 

Article 28 (Limitation on Benefits) of the Convention is deleted and the following Article 

substituted: 

“Article 28 

Limitation on Benefits 

1. Except as otherwise provided in this Article, a resident of one of the Contracting States 

that derives income from the other Contracting State shall be entitled, in that other 

Contracting State, to all the benefits of this Convention otherwise accorded to residents of 

a Contracting State only if such resident is a “qualified person” as defined in paragraph 2 

of this Article and satisfies any other conditions specified in the Convention for the 

obtaining of such benefits. 

2. A resident of one of the Contracting States is a qualified person for a taxable year only 

if such resident is either: 

a) an individual; 

b) a Contracting State, political subdivision or local authority thereof; 
20

c) a company, if 

aa) its principal class of shares (and any disproportionate class of shares) is 

regularly traded on one or more recognized stock exchanges, and either 

A) its principal class of shares is primarily traded on a recognized stock 

exchange located in the Contracting State of which the company is a resident; 

or 

B) the company’s primary place of management and control is in the 

Contracting State of which it is a resident; or 

bb) shares representing at least 50 percent of the aggregate voting power and value 

(and at least 50 percent of any disproportionate class of shares) of the company 

are owned directly or indirectly by five or fewer companies entitled to benefits 

under clause aa) of this subparagraph, provided that, in the case of indirect 

ownership, each intermediate owner is a resident of either Contracting State; 

d) an entity organized under the laws of one of the Contracting States and established 

and maintained in that Contracting State exclusively for a religious, charitable, 

educational, scientific, or other similar purpose; 

e) an entity organized under the laws of one of the Contracting States and established 

and maintained in that Contracting State to provide, pursuant to a plan, pensions or 

other similar benefits to employed and self-employed persons, provided that: 

aa) more than 50 percent of the entity’s beneficiaries, members or participants are 

individuals resident in either Contracting State; or 

bb) the organization sponsoring such person is entitled to the benefits of the 

Convention pursuant to this paragraph; 

f) a person other than an individual, if: 

aa) on at least half the days of the taxable year at least 50 percent of each class of 

shares or other beneficial interests in the person is owned, directly or indirectly, 

by residents of that Contracting State that are entitled to the benefits of this 

Convention under subparagraph a), subparagraph b), clause aa) of subparagraph 

c), subparagraph d) or subparagraph e) of this paragraph, provided that, in the 

case of indirect ownership, each intermediate owner is a resident of that 

Contracting State; and 
21 

bb) less than 50 percent of the person’s gross income for the taxable year is paid or 

accrued, directly or indirectly, to persons who are not residents of either 

Contracting State entitled to the benefits of this Convention under subparagraph 

a), subparagraph b), clause aa) of subparagraph c), subparagraph d) or 

subparagraph e) of this paragraph in the form of payments that are deductible for 

purposes of the taxes covered by this Convention in the person’s State of 

residence. 

3. Notwithstanding that a company that is a resident of a Contracting State may not be a 

qualified person, it shall be entitled to all the benefits of this Convention otherwise 

accorded to residents of a Contracting State with respect to an item of income if it 

satisfies any other specified conditions for the obtaining of such benefits and: 

a) shares representing at least 95 percent of the aggregate voting power and value (and 

at least 50 percent of any disproportionate class of shares) of the company are 

owned, directly or indirectly, by seven or fewer persons who are equivalent 

beneficiaries; and 

b) less than 50 percent of the company’s gross income for the taxable year in which 

the item of income arises is paid or accrued, directly or indirectly, to persons who 

are not equivalent beneficiaries, in the form of payments that are deductible for the 

purposes of the taxes covered by this Convention in the Contracting State of which 

the company is a resident. 

4. 

a) Notwithstanding that a resident of a Contracting State may not be a qualified 

person, it shall be entitled to all the benefits of this Convention otherwise accorded 

to residents of a Contracting State with respect to an item of income derived from 

the other Contracting State, if the resident is engaged in the active conduct of a 

trade or business in the first-mentioned Contracting State (other than the activities 

of making or managing investments for the resident’s own account, unless these 

activities are banking, insurance or securities dealing carried on by a bank, 

insurance company or registered securities dealer), the income derived from the 

other Contracting State is derived in connection with, or is incidental to, that trade 
22 

or business and that resident satisfies any other specified conditions for the 

obtaining of such benefits. 

b) If a resident of one of the Contracting States or any of its associated enterprises 

carries on a trade or business activity in the other Contracting State which gives rise 

to an item of income, subparagraph a) of this paragraph shall apply to such item 

only if the trade or business activity in the first-mentioned Contracting State is 

substantial in relation to the trade or business activity in the other Contracting State. 

c) In determining whether a person is engaged in the active conduct of a trade or 

business in a Contracting State under subparagraph a) of this paragraph, activities 

conducted by persons connected to such person shall be deemed to be conducted by 

such person. A person shall be connected to another if one possesses at least 50 

percent of the beneficial interest in the other (or, in the case of a company, shares 

representing at least 50 percent of the aggregate voting power and value of the 

company or of the beneficial equity interest in the company) or another person 

possesses, directly or indirectly, at least 50 percent of the beneficial interest (or, in 

the case of a company, shares representing at least 50 percent of the aggregate 

voting power and value of the company or of the beneficial equity interest in the 

company) in each person. In any case, a person shall be considered to be connected 

to another if, on the basis of all the facts and circumstances, one has control of the 

other or both are under the control of the same person or persons. 

5. Notwithstanding the preceding provisions of this Article, where an enterprise of a 

Contracting State derives income from the other Contracting State, and that income is 

attributable to a permanent establishment which that enterprise has in a third jurisdiction, 

the tax benefits that would otherwise apply under the other provisions of the Convention 

will not apply to that income if the combined tax that is actually paid with respect to such 

income in the first-mentioned Contracting State and in the third jurisdiction is less than 

60 percent of the tax that would have been payable in the first-mentioned State if the 

income were earned in that Contracting State by the enterprise and were not attributable 

to the permanent establishment in the third jurisdiction. Any dividends, interest or 

royalties to which the provisions of this paragraph apply shall be subject to tax at a rate 

that shall not exceed 15 percent of the gross amount thereof. Any other income to which 
23 

the provisions of this paragraph apply will be subject to tax under the provisions of the 

domestic law of the other Contracting State, notwithstanding any other provision of the 

Convention. The provisions of this paragraph shall not apply if: 

a) in the case of royalties, the royalties are received as compensation for the use of, or 

the right to use, intangible property produced or developed by the permanent 

establishment itself; or 

b) in the case of any other income, the income derived from the other Contracting 

State is derived in connection with, or is incidental to, the active conduct of a trade 

or business carried on by the permanent establishment in the third jurisdiction 

(other than the business of making, managing or simply holding investments for the 

person’s own account, unless these activities are banking or securities activities 

carried on by a bank or registered securities dealer). 

6. Notwithstanding the preceding provisions of this Article, a German Investment Fund 

or German Investmentaktiengesellschaft (collectively referred to as Investmentvermögen) 

may only be granted the benefits of this Convention if at least 90 percent of the shares or 

other beneficial interests in the German Investmentvermögen are owned, directly or 

indirectly, by residents of the Federal Republic of Germany that are entitled to the 

benefits of this Convention under subparagraph a), subparagraph b), clause aa) of 

subparagraph c), subparagraph d) or subparagraph e) of paragraph 2 of this Article or by 

persons that are equivalent beneficiaries with respect to the income derived by the 

German Investmentvermögen for which benefits are being claimed. For the purposes of 

this paragraph, beneficiaries of entities that are subject to numbers 3 and 5 of paragraph 1 

of section 1 of the German Corporate Tax Act shall be treated as indirectly owning shares 

of a German Investmentvermögen. Foundations referred to in number 5 of paragraph 1 

of section 1 of the German Corporate Tax Act, other than those referred to in 

subparagraph d) of paragraph 2 of this Article, shall not be taken into account in 

determining whether a German Investmentvermögen meets the 90 percent minimum 

ownership threshold. 

7. A person resident of one of the Contracting States, who is not entitled to some or all of 

the benefits of this Convention because of the foregoing paragraphs, may, nevertheless, 

be granted benefits of this Convention if the competent authority of the Contracting State 
24 

in which the income in question arises so determines. In making such determination, the 

competent authority shall take into account as its guidelines whether the establishment, 

acquisition or maintenance of such person or the conduct of its operations has or had as 

one of its principal purposes the obtaining of benefits under this Convention. The 

competent authority of the Contracting State in which the income arises will consult with 

the competent authority of the other Contracting State before denying the benefits of the 

Convention under this paragraph. 

8. For the purposes of this Article the following rules and definitions shall apply: 

a) the term “recognized stock exchange” means: 

aa) the NASDAQ System and any stock exchange registered with the U.S. 

Securities and Exchange Commission as a national securities exchange under the 

U.S. Securities Exchange Act of 1934; 

bb) any German stock exchange on which registered dealings in shares take place; 

cc) any other stock exchange which the competent authorities agree to recognize 

for the purposes of this Article; 

b) 

aa) the term “principal class of shares” means the ordinary or common shares of the 

company, provided that such class of shares represents the majority of the voting 

power and value of the company. If no single class of ordinary or common 

shares represents the majority of the aggregate voting power and value of the 

company, the “principal class of shares” is that class or those classes that in the 

aggregate represent a majority of the aggregate voting power and value of the 

company; 

bb) the term “shares” shall include depository receipts thereof or trust certificates 

thereof; 

c) the term “disproportionate class of shares” means any class of shares of a company 

resident in one of the Contracting States that entitles the shareholder to 

disproportionately higher participation, through dividends, redemption payments or 

otherwise, in the earnings generated in the other Contracting State by particular 

assets or activities of the company; 
25 

d) the company’s primary place of management and control will be in the Contracting 

State of which it is a resident only if executive officers and senior management 

employees exercise day-to-day responsibility for more of the strategic, financial 

and operational policy decision making for the company (including its direct and 

indirect subsidiaries) in that Contracting State than in any other state and the staffs 

conduct more of the day-to-day activities necessary for preparing and making those 

decisions in that Contracting State than in any other state. 

e) an equivalent beneficiary is a resident of a member state of the European Union or 

of a European Economic Area state or of a party to the North American Free Trade 

Agreement but only if that resident: 

aa) 

A) would be entitled to all the benefits of a comprehensive convention for the 

avoidance of double taxation between any member state of the European 

Union or a European Economic Area state or any party to the North 

American Free Trade Agreement and the State from which the benefits of this 

Convention are claimed under provisions analogous to subparagraph a), 

subparagraph b), clause aa) of subparagraph c), subparagraph d) or 

subparagraph e) of paragraph 2 of this Article provided that if such 

convention does not contain a comprehensive limitation on benefits article, 

the person would be a qualified person under subparagraph a), subparagraph 

b), clause aa) of subparagraph c), subparagraph d) or subparagraph e) of 

paragraph 2 of this Article if such person were a resident of one of the States 

under Article 4 (Resident) of this Convention; and 

B) with respect to insurance premiums and to income referred to in Article 10 

(Dividends), 11 (Interest) or 12 (Royalties) of this Convention, would be 

entitled under such convention to a rate of tax with respect to the particular 

class of income for which benefits are being claimed under this Convention 

that is at least as low as the rate applicable under this Convention; or 

bb) is a resident of a Contracting State that is a qualified person by reason of 

subparagraph a), subparagraph b), clause aa) of subparagraph c), subparagraph 

d) or subparagraph e) of paragraph 2 of this Article. 
26 

For the purposes of applying paragraph 3 of Article 10 (Dividends) in order to 

determine whether a person, owning shares, directly or indirectly, in the company 

claiming the benefits of this Convention, is an equivalent beneficiary, such person 

shall be deemed to hold the same voting power in the company paying the dividend 

as the company claiming the benefits holds in such company; 

f) with respect to dividends, interest or royalties arising in the Federal Republic of 

Germany and beneficially owned by a company that is a resident of the United States, a 

company that is a resident of a member state of the European Union will be treated as 

satisfying the requirements of clause aa) B) of subparagraph e) for purposes of 

determining whether such United States resident is entitled to benefits under this 

paragraph if a payment of dividends, interest or royalties arising in the Federal Republic 

of Germany and paid directly to such resident of a member state of the European Union 

would have been exempt from tax pursuant to any directive of the European Union, 

notwithstanding that the income tax convention between the Federal Republic of 

Germany and that other member state of the European Union would provide for a higher 

rate of tax with respect to such payment than the rate of tax applicable to such United 

States company under Article 10 (Dividends), 11 (Interest), or 12 (Royalties) of this 

Convention.” 

ARTICLE XV 

Paragraph 1 of Article 17 (Artistes and Athletes) of the Convention and paragraph 4 and 

5 of Article 20 (Visiting Professors and Teachers; Students and Trainees) of the 

Convention are modified by deleting the words “Deutsche Mark” where they appear and 

replacing them with the word “Euro”. 

ARTICLE XVI 

The Protocol to the Convention is amended by deleting paragraphs 1 through 28 and 

replacing them with the following paragraphs: 

“1. WITH REFERENCE TO SUBPARAGRAPH b) OF PARAGRAPH 4 OF ARTICLE 1 

(GENERAL SCOPE) 

The term "long-term resident" shall mean any individual who is a lawful permanent 

resident of the United States in eight or more taxable years during the preceding 15 
27 

taxable years. In determining whether the threshold in the preceding sentence is met, an 

individual shall not be treated as a lawful permanent resident of the United States for any 

taxable year in which such individual is treated as a resident of a country other than the 

United States under the provisions of a tax treaty of the United States and the individual 

does not waive the benefits of such treaty provided by the United States to a resident of 

the other country. Consequently, if during each of the 15 taxable years preceding the loss 

of his status as a lawful permanent resident an individual was a resident of the Federal 

Republic of Germany (as determined under Article 4 (Residence)) and claimed the 

benefits provided by the United States to a resident of the Federal Republic of Germany, 

the individual shall not be considered a long-term resident. 

2. WITH REFERENCE TO PARAGRAPH 1 OF ARTICLE 4 (RESIDENCE) 

a) The Federal Republic of Germany shall treat a United States citizen or an alien 

lawfully admitted for permanent residence (a “green card” holder) as a resident of the 

United States only if such person has a substantial presence, permanent home, or habitual 

abode in the United States.

b) It is understood that a German Investment Fund and a German 

Investmentaktiengesellschaft (collectively referred to as Investmentvermögen) to which 

the provisions of the Investment Act (Investmentgesetz) apply are residents of the 

Federal Republic of Germany and that a U.S. Regulated Investment Company (RIC) and 

a U.S. Real Estate Investment Trust (REIT) are residents of the United States.

3. WITH REFERENCE TO ARTICLE 5 (PERMANENT ESTABLISHMENT) A resident of 

a Contracting State that performs in the other Contracting State concerts, theatrical or 

artistic performances, or similar shows and revues and that may not be taxed in that other 

State under the provisions of Article 17 (Artistes and Athletes) shall not be deemed to 

have a permanent establishment in that State if its presence does not exceed in the 

aggregate 183 days in the calendar year concerned. 

4. WITH REFERENCE TO ARTICLE 7 (BUSINESS PROFITS) 

It is understood that the business profits to be attributed to a permanent establishment 

shall include only the profits derived from the assets used, risks assumed, and activities 

performed by the permanent establishment. The principles of the OECD Transfer 

Pricing Guidelines will apply for purposes of determining the profits attributable to a 
28 

permanent establishment, taking into account the different economic and legal 

circumstances of a single entity. Accordingly, any of the methods described therein as 

acceptable methods for determining an arm’s-length result may be used to determine the 

income of a permanent establishment so long as those methods are applied in accordance 

with the Guidelines. In particular, in determining the amount of attributable profits, the 

permanent establishment shall be treated as having the same amount of capital that it 

would need to support its activities if it were a distinct and separate enterprise engaged in 

the same or similar activities. With respect to financial institutions other than insurance 

companies, a Contracting State may determine the amount of capital to be attributed to a 

permanent establishment by allocating the institution's total equity between its various 

offices on the basis of the proportion of the financial institution's risk-weighted assets 

attributable to each of them. A financial institution may determine the amount of the 

capital attributed to its permanent establishment using its risk weighted assets only if it 

risk weights its assets in the ordinary course of its business. 

5. WITH REFERENCE TO PARAGRAPHS 1 AND 2 OF ARTICLE 7 (BUSINESS 

PROFITS) AND PARAGRAPH 3 OF ARTICLE 13 (GAINS) 

For the implementation of paragraphs 1 and 2 of Article 7 and paragraph 3 of Article 13 

any income, gain, or expense attributable to a permanent establishment is taxable or 

deductible in the Contracting State where such permanent establishment is situated even 

if the payments are deferred until such permanent establishment ceases to exist. Nothing 

in the preceding sentence shall prevent the application to such deferred payments of rules 

regarding the accrual of income and expenses according to the domestic law of a 

Contracting State. 

6. WITH REFERENCE TO ARTICLE 7 (BUSINESS PROFITS) AND ARTICLE 13 

(GAINS) 

Gains from the alienation of movable property that at any time formed part of the 

business property of a permanent establishment that a resident of one Contracting State 

has or had in the other Contracting State may be taxed by that other State only to the 

extent of the gain that accrued during that time. Notwithstanding any provision of Article 

7 or Article 13, such tax may be imposed on such gains at the time when realized and 

recognized under the laws of that other State, if it is within ten years of the date on which 
29 

the property ceases to be part of the business property of the permanent establishment (or 

such shorter period provided by the laws of either Contracting State). 

7. WITH REFERENCE TO ARTICLE 9 (ASSOCIATED ENTERPRISES)

Either State may apply the rules of its national law that permit the distribution, 

apportionment, or allocation of income, deductions, credits, or allowances between 

related persons with a view to apportioning or allocating such deductions, credits, or 

allowances in accordance with the general principles of paragraph 1 of Article 9. Article 

9 shall not be construed to limit either Contracting State in allocating income between 

persons that are related other than by direct or indirect participation within the meaning 

of paragraph 1, such as by commercial or contractual relationships resulting in 

controlling influence, so long as such allocation is otherwise in accordance with the 

general principles of paragraph 1 of Article 9.

8. WITH REFERENCE TO PARAGRAPH 3 OF ARTICLE 10 (DIVIDENDS) 

a) If the Federal Republic of Germany introduces a taxation regime that exempts from 

taxation Real Estate Investment Companies, subparagraph b) of paragraph 3 of Article 10 

shall not apply.

b) It is understood that in the case of the Federal Republic of Germany, subparagraph b of 

paragraph 3 of Article 10 applies to the person treated as the owner of the assets of the 

pension fund under section 39 of the Fiscal Code, provided the dividends may only be used 

for providing retirement benefits through such fund.

9. WITH REFERENCE TO PARAGRAPH 9 OF ARTICLE 10 (DIVIDENDS)

The general principle of the "dividend equivalent amount", as used in the United States 

law, is to approximate that portion of the income mentioned in paragraph 9 that is 

comparable to the amount that would be distributed as a dividend if such income were 

earned by a locally incorporated subsidiary. 

10. WITH REFERENCE TO ARTICLE 11 (INTEREST)

The excess of the amount of interest deductible by a United States permanent 

establishment of a German company over the interest actually paid by such permanent 

establishment shall be treated as interest derived and beneficially owned by a resident of 

the Federal Republic of Germany.
30 

11. WITH REFERENCE TO ARTICLE 12 (ROYALTIES)

Where an artiste resident in one Contracting State records a performance in the other 

Contracting State, has a copyrightable interest in the recording, and receives 

consideration for the right to use the recording based on the sale or public playing of such 

recording, then such consideration shall be governed by this Article.

12. WITH REFERENCE TO PARAGRAPH 2 OF ARTICLE 13 (GAINS)

The term "immovable property situated in the other Contracting State", as described in 

this paragraph, when the United States is that other Contracting State includes a United 

States real property interest. 

13. WITH REFERENCE TO PARAGRAPH 3 OF ARTICLE 13 (GAINS)

Nothing in this Article shall prevent gains from the alienation by a resident of a 

Contracting State of an interest in a partnership, trust, or estate that has a permanent 

establishment situated in the other Contracting State from being treated as gain under 

paragraph 3.

14. WITH REFERENCE TO PARAGRAPH 1 OF ARTICLE 17 (ARTISTES AND 

ATHLETES) 

If an artiste or athlete is not subject to tax in the Federal Republic of Germany under the 

provisions of paragraph 1 of Article 17, tax may be withheld at source in the Federal 

Republic of Germany, and shall be refunded to the taxpayer only upon application at the 

end of the calendar year concerned. Paragraph 6 of Article 29 (Refund of Withholding 

Tax) shall remain unaffected. 

15. WITH REFERENCE TO PARAGRAPH 3 OF ARTICLE 18 (PENSIONS, 

ANNUITIES, ALIMONY, CHILD SUPPORT, AND SOCIAL SECURITY) 

In determining the taxable income of an individual who is a resident of the Federal 

Republic of Germany there shall be allowed as a deduction in respect of alimony or 

similar allowances paid to an individual who is a resident of the United States the amount 

that would be allowed as a deduction if that last-mentioned individual were subject to 

unlimited tax liability in the Federal Republic of Germany. 

16. WITH REFERENCE TO PARAGRAPH 4 OF ARTICLE 18A (PENSION PLANS) 

a) For purposes of paragraph 4 of Article 18A, the term "pension plan" shall include the 

following and any identical or substantially similar plans established pursuant to 

legislation enacted after the date of signature of this Protocol: 
31 

aa) In the case of the United States, qualified plans under section 401(a) of the Internal 

Revenue Code, individual retirement plans (including individual retirement plans that are 

part of a simplified employee pension plan that satisfies section 408(k), individual 

retirement accounts, individual retirement annuities, and section 408(p) accounts, and 

Roth IRAs under Section 408A), section 403(a) qualified annuity plans, section 403(b) 

plans, and section 457(b) governmental plans.

bb) In the case of the Federal Republic of Germany, arrangements under section 1 of the 

German law on employment-related pensions (Betriebsrentengesetz). 

b) For purposes of subparagraph b) of paragraph 3 and subparagraph d) of paragraph 5 of 

Article 18A, it is understood that:

aa) The Federal Republic of Germany recognizes qualified plans specifically listed in 

clause aa) of subparagraph a), other than Roth IRAs, as arrangements that correspond to 

pension plans referred to under section 1 of the German law on employment-related 

pensions (Betriebsrentengesetz). The Federal Republic of Germany shall provide the 

corresponding relief under section 3 No. 63 of the Income Tax Act; and 

bb) The United States recognizes arrangements under section 1 of the German law on 

employment-related pensions (Betriebsrentengesetz) as arrangements that correspond to 

pension plans referred to in clause aa) of subparagraph a) above. 

17. WITH REFERENCE TO PARAGRAPH 2 OF ARTICLE 20 (VISITING PROFESSORS 

AND TEACHERS; STUDENTS AND TRAINEES). 

Payments that are made out of public funds of a Contracting State or by a scholarship 

organization endowed with such funds shall be considered to arise in full from sources 

outside the other Contracting State. The preceding sentence shall also apply when such 

payments are made under programs funded jointly by organizations of both Contracting 

States if more than 50 percent of these funds are provided out of public funds of the firstmentioned State or by a scholarship organization endowed with such funds. The 

competent authorities shall consult with each other to identify those scholarship programs 

whose payments shall be treated as arising from sources outside a Contracting State 

under the foregoing rules. 

18. WITH REFERENCE TO PARAGRAPH 2 OF ARTICLE 21 (OTHER INCOME) 

Where the recipient and the payor of a dividend are both residents of the Federal 

Republic of Germany and the dividend is attributed to a permanent establishment that the 
32 

recipient of the dividend has in the United States, the Federal Republic of Germany may 

tax such a dividend at the rates provided for in paragraphs 2 and 3 of Article 10 

(Dividends). The United States shall give a credit for such tax according to the provisions 

of Article 23 (Relief from Double Taxation). 

19. WITH REFERENCE TO PARAGRAPH 1 OF ARTICLE 23 (RELIEF FROM 

DOUBLE TAXATION) 

For purposes of paragraph 1 of Article 23, the "general principle hereof" means the 

avoidance of double taxation by allowing a credit for taxes imposed on items of income 

arising in the Federal Republic of Germany, as determined under the applicable United 

States source rules, as modified by the Convention. While the details and limitations of 

the credit pursuant to this paragraph may change as provisions of United States law 

change, any such changes must preserve a credit for German taxes imposed with respect 

to items of income that the Federal Republic of Germany may tax pursuant to the 

Convention. 

20. WITH REFERENCE TO PARAGRAPH 1 OF ARTICLE 24 (NONDISCRIMINATION) 

Paragraph 1 of Article 24 does not obligate the United States to subject an individual who 

is a German national not resident in the United States to the same taxing regime as that 

applied to a citizen of the United States not resident in the United States. 

21. WITH REFERENCE TO PARAGRAPH 4 OF ARTICLE 24 (NONDISCRIMINATION) 

It is understood that paragraph 4 of Article 24 shall not be construed as obligating a 

Contracting State to permit cross-border consolidation of income or similar benefits 

between enterprises. 

22. WITH REFERENCE TO PARAGRAPHS 5 AND 6 OF ARTICLE 25 (MUTUAL 

AGREEMENT PROCEDURE) 

In respect of any case where the competent authorities have endeavored but are unable to 

reach an agreement under Article 25 regarding the application of one or more of the 

following Articles of the Convention: 4 (Residence) (but only insofar as it relates to the 

residence of a natural person), 5 (Permanent Establishment), 7 (Business Profits), 9 

(Associated Enterprises), 12 (Royalties), binding arbitration shall be used to determine 

such application, unless the competent authorities agree that the particular case is not 

suitable for determination by arbitration. In addition, the competent authorities may, on 

an ad hoc basis, agree that binding arbitration shall be used in respect of any other matter 
33 

to which Article 25 applies. If an arbitration proceeding (the Proceeding) under paragraph 

5 of Article 25 commences, the following rules and procedures will apply: 

a) The Proceeding will be conducted in the manner prescribed by, and subject to the 

requirements of, paragraphs 5 and 6 of Article 25 and these rules and procedures, as 

modified or supplemented by any other rules and procedures agreed upon by the 

competent authorities pursuant to subparagraph q) below. 

b) The determination reached by an arbitration board in the Proceeding shall be 

limited to a determination regarding the amount of income, expense or tax reportable to 

the Contracting States. 

c) Notwithstanding the initiation of the Proceeding, the competent authorities may 

reach a mutual agreement to resolve a case and terminate the Proceeding. 

Correspondingly, a concerned person may withdraw a request for the competent 

authorities to engage in the Mutual Agreement Procedure (and thereby terminate the 

Proceeding) at any time. 

d) The requirements of subparagraph d) of paragraph 6 of Article 25 will be met 

when the competent authorities have each received from each concerned person a 

statement agreeing that the concerned person and each person acting on the concerned 

person’s behalf will not disclose to any other person any information received during the 

course of the Proceeding from either Contracting State or the Arbitration Board, other 

than the determination of the Proceeding. A concerned person that has the legal authority 

to bind any other concerned person(s) on this matter may do so in a comprehensive 

statement. 

e) Each Contracting State will have 60 days from the date on which the Proceeding 

begins to send a written communication to the other Contracting State appointing one 

member of the arbitration board. Within 60 days of the date on which the second such 

communication is sent, the two members appointed by the Contracting States will appoint 

a third member, who will serve as Chair of the board. If either Contracting State fails to 

appoint a member, or if the members appointed by the Contracting States fail to agree 

upon the third member in the manner prescribed by this paragraph, the remaining 

member(s) will be appointed by the highest-ranking member of the Secretariat at the 

Centre for Tax Policy and Administration of the Organisation for Economic Co-operation 
34 

and Development (OECD) who is not a citizen of either Contracting State, by written 

notice to both Contracting States within 60 days of the date of such failure. The 

competent authorities will develop a non-exclusive list of individuals with familiarity in 

international tax matters who may potentially serve as the Chair of the board. In any case, 

the Chair shall not be a citizen of either Contracting State. 

f) The arbitration board may adopt any procedures necessary for the conduct of its 

business, provided that the procedures are not inconsistent with any provision of Article 

25 or the Protocol to the Convention. 

g) Each of the Contracting States will be permitted to submit, within 90 days of the 

appointment of the Chair of the arbitration board, a Proposed Resolution describing the 

proposed disposition of the specific monetary amounts of income, expense or taxation at 

issue in the case, and a supporting Position Paper, for consideration by the arbitration 

board. Copies of the Proposed Resolution and supporting Position Paper shall be 

provided by the board to the other Contracting State on the date on which the later of the 

submissions is submitted to the board. In the event that only one Contracting State 

submits a Proposed Resolution within the allotted time, then that Proposed Resolution 

shall be deemed to be the determination of the board in that case and the Proceeding shall 

be terminated. Each of the Contracting States may, if it so desires, submit a Reply 

Submission to the board within 180 days of the appointment of its Chair, to address any 

points raised by the Proposed Resolution or Position Paper submitted by the other 

Contracting State. Additional information may be submitted to the arbitration board only 

at its request, and copies of the board’s request and the Contracting State’s response shall 

be provided to the other Contracting State on the date on which the request or the 

response is submitted. Except for logistical matters such as those identified in 

subparagraphs l), n) and o) below, all communications from the Contracting States to the 

arbitration board, and vice versa, shall take place only through written communications 

between the designated competent authorities and the Chair of the board. 

h) The arbitration board will deliver a determination in writing to the Contracting 

States within six months of the appointment of its Chair. The board will adopt as its 

determination one of the Proposed Resolutions submitted by the Contracting States. 
35

i) In making its determination, the arbitration board will apply, as necessary and in 

descending order of priority: 

aa) the provisions of the Convention; 

bb) any agreed commentaries or explanations of the Contracting States 

concerning the Convention; 

cc) the laws of the Contracting States to the extent they are not inconsistent 

with each other; and 

dd) any OECD Commentary, Guidelines or Reports regarding relevant 

analogous portions of the OECD Model Tax Convention.

j) The determination of the arbitration board in a particular case shall be binding on 

the Contracting States. The determination of the board will not state a rationale. It will 

have no precedential value. 

k) As provided in subparagraph e) of paragraph 6 of Article 25, the determination of 

an arbitration board shall constitute a resolution by mutual agreement under Article 25. 

Each concerned person must, within 30 days of receiving the determination of the board 

from the competent authority to which the case was first presented, advise that competent 

authority whether that concerned person accepts the determination of the board. If any 

concerned person fails to so advise the relevant competent authority within this time 

frame, the determination of the board will be considered not to have been accepted in that 

case. Where the determination of the board is not accepted, the case may not 

subsequently be the subject of a Proceeding. 

l) Any meeting(s) of the arbitration board shall be in facilities provided by the 

Contracting State whose competent authority initiated the mutual agreement proceedings 

in the case. 

m) The treatment of any associated interest or penalties will be determined by 

applicable domestic law of the Contracting State(s) concerned. 

n) No information relating to the Proceeding (including the board's determination) 

may be disclosed by the members of the arbitration board or their staffs or by either 

competent authority, except as permitted by the Convention and the domestic laws of the 

Contracting States. In addition, all material prepared in the course of, or relating to, the 

Proceeding shall be considered to be information exchanged between the Contracting 
36 

States. All members of the arbitration board and their staffs must agree in statements sent 

to each of the Contracting States in confirmation of their appointment to the arbitration 

board to abide by and be subject to the confidentiality and nondisclosure provisions of 

Article 26 (Exchange of Information and Administrative Assistance) of the Convention 

and the applicable domestic laws of the Contracting States. In the event those provisions 

conflict, the most restrictive condition shall apply. 

o) The fees and expenses will be borne equally by the Contracting States. In 

general, the fees of members of the arbitration board will be set at the fixed amount of 

$2,000 (two thousand United States dollars) per day or the equivalent amount in euro, 

subject to modification by the competent authorities. In general, the expenses of 

members of the arbitration board will be set in accordance with the International Centre 

for Settlement of Investment Disputes (ICSID) Schedule of Fees for arbitrators (as in 

effect on the date on which the arbitration proceedings begin), subject to modification by 

the competent authorities. Any fees for language translation will also be borne equally 

by the Contracting States. Meeting facilities, related resources, financial management, 

other logistical support, and general administrative coordination of the Proceeding will be 

provided, at its own cost, by the Contracting State whose competent authority initiated 

the mutual agreement proceedings in the case. Any other costs shall be borne by the 

Contracting State that incurs them. 

p) For purposes of paragraphs 5 and 6 of Article 25 and this paragraph, each 

competent authority will confirm in writing to the other competent authority and to the 

concerned person(s) the date of its receipt of the information necessary to undertake 

substantive consideration for a mutual agreement. Such information will be: 

aa) in the United States, the information required to be submitted to the 

United States competent authority under Revenue Procedure 2002-52, section 

4.05 (or any applicable successor provisions) and, for cases initially submitted as 

a request for an Advance Pricing Agreement, the information required to be 

submitted to the Internal Revenue Service under Revenue Procedure 2006-9, 

section 4 (or any applicable successor provisions), and 

bb) in the Federal Republic of Germany, the information required to be 

submitted to the competent authority in the Federal Republic of Germany under 
37 

the circular of July 1, 1997, - IV C 5 - S 1300 - 189/96 -, published by the 

Ministry of Finance (or any applicable successor circular). 

However, this information shall not be considered received until both competent 

authorities have received copies of all materials submitted to either Contracting State by 

the concerned person(s) in connection with the mutual agreement procedure. 

q) The competent authorities of the Contracting States may modify or supplement 

the above rules and procedures as necessary to more effectively implement the intent of 

paragraph 5 of Article 25 to eliminate double taxation. 

23. WITH REFERENCE TO ARTICLE 26 (EXCHANGE OF INFORMATION AND 

ADMINISTRATIVE ASSISTANCE) 

a) It is understood that the powers of each Contracting State's competent authorities 

to obtain information include powers to obtain information held by financial institutions, 

nominees, or persons acting in an agency or fiduciary capacity, and information relating 

to the ownership of legal persons, and that each Contracting State's competent authority 

is able to exchange such information in accordance with Article 26. 

b) The Federal Republic of Germany shall under this Article exchange information 

with or without request to the extent provided for in the law of 19 December 1985 (EGAmtshilfe-Gesetz) as amended from time to time without changing the general principles 

thereof. 

24. WITH REFERENCE TO PARAGRAPH 6 OF ARTICLE 28 (LIMITATION ON 

BENEFITS) 

The competent authorities of the Contracting States shall establish procedures for 

determining indirect ownership for purposes of determining whether the 90 percent 

ownership threshold contained in paragraph 6 of Article 28 is satisfied. It is anticipated 

that these procedures may include the use of statistically valid sampling techniques.” 

ARTICLE XVII 

1. This Protocol shall be subject to ratification and the instruments of ratification shall be 

exchanged as soon as possible. 

2. This Protocol shall enter into force on the date on which the instruments of ratification 

are exchanged and shall have effect in both Contracting States: 
a) in respect of taxes withheld at source, for amounts paid or credited on or after the 

first day of January of the year in which this Protocol enters into force; 

b) in respect of other taxes on income for any taxable year beginning on or after the 

first day of January next following the date this Protocol enters into force; and 

c) in respect of taxes on capital for the taxes levied on items of capital owned on or 

after the first day of January next following the date this Protocol enters into force. 

3. Notwithstanding the provisions of paragraph 2, 

a) the provisions of paragraphs 2 and 3 of Article 1 (General Scope) shall have 

effect after the entry into force of this Protocol and shall apply in respect of any 

tax claim irrespective of whether such tax claim pre-dates the entry into force of 

this Protocol or the effective date of any of its provisions; and 

b) the amendments made by Article X of this Protocol shall not have effect with 

respect to individuals who, at the time of the signing of the Convention, were 

employed by the United States, a political subdivision or local authority thereof. 

4. Article XIII of this Protocol shall have effect with respect to 

a) cases that are under consideration by the competent authorities as of the date on 

which this Protocol enters into force, and 

b) cases that come under such consideration after that time, 

and the commencement date for a case described in subparagraph a) of this paragraph 

shall be the date on which this Protocol enters into force. 

5. Notwithstanding paragraph 2, where any person entitled to benefits under the 

Convention as unmodified by this Protocol would have been entitled to greater benefits 

thereunder than under the Convention as modified by this Protocol, the Convention as 

unmodified shall, at the election of such person, continue to have effect in its entirety 

with respect to such person for a twelve-month period from the date on which the 

provisions of this Protocol would have effect under paragraph 2 of this Article. 

6. The Notes exchanged on 29 August 1989 and referring to paragraph 5 of Article 25 

(Mutual Agreement Procedure) and Article 28 (Limitation on Benefits) as well as the 

German Note of 3 November 1989 referring to paragraph 21 of the Protocol to the 

Convention shall cease to have effect when the provisions of this Protocol take effect in 

accordance with this Article. 
39 

Done in duplicate at Berlin on the first day of June, 2006, in the English and German 

languages, both texts being equally authentic 

FOR THE FOR THE 

UNITED STATES OF AMERICA: FEDERAL REPUBLIC OF GERMANY: