PART 1Agreement Between Canada and the Federal Republic of Germany for the Avoidance of Double Taxation with Respect to Taxes on Income and Certain Other Taxes, the Prevention of Fiscal Evasion and the Assistance in Tax Matters
Canada and the Federal Republic of Germany, desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and certain other taxes, the prevention of fiscal evasion and the assistance in tax matters, have agreed as follows:
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This Agreement shall apply to persons who are residents of one or both of the Contracting States.
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1 This Agreement shall apply to taxes on income and on capital imposed by each Contracting State and, in the case of the Federal Republic of Germany, on behalf of its Laender, political subdivisions or local authorities, irrespective of the manner in which they are levied.
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3 The existing taxes to which the Agreement shall apply are:
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4 The Agreement shall apply also to any identical or substantially similar taxes on income and to taxes on capital which are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made to their respective taxation laws.
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1 For the purposes of this Agreement, unless the context otherwise requires:
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2 As regards the application of the Agreement by a Contracting State at any time, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the law of that State concerning the taxes to which the Agreement applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.
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1 For the purposes of this Agreement, the term resident of a Contracting State means:
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2 Where by reason of the provisions of paragraph l an individual is a resident of both Contracting States, then the individual’s status shall be determined as follows:
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3 Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle its status and to determine the application of the Agreement. Insofar as no such agreement has been reached, such person shall be deemed not to be a resident of either Contracting State for the purposes of enjoying benefits under the provisions of the Agreement.
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7 Where profits include items of income which are dealt with separately in other Articles of this Agreement, then, the provisions of those Articles shall not be affected by the provisions of this Article.
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6 Notwithstanding any provision in this Agreement, Canada may impose on the earnings of a company attributable to permanent establishments in Canada, or on the earnings attributable to the alienation of immovable property situated in Canada by a company carrying on a trade in immovable property, tax in addition to the tax which would be chargeable on the earnings of a company that is a resident of Canada, provided that the rate of such additional tax so imposed shall not exceed the percentage limitation provided for under subparagraph (a) of paragraph 2 of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term earnings means:
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7 Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
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3 Notwithstanding the provisions of paragraph 2, royalties arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner of the royalties shall be taxable only in that other State if they are:
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(b) royalties for the use of, or the right to use, computer software or any patent or for information concerning industrial, commercial or scientific experience (but not including any such royalty provided in connection with a rental or franchise agreement).
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7 Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
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3 In this Article, the term instrumentality means any agent or entity created or organized by the Government of either Contracting State or a “Land” or 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.
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1 In the case of a resident of Canada, double taxation shall be avoided as follows:
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(a) Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions, which shall not affect the general principle hereof, and unless a greater deduction or relief is provided under the laws of Canada, German tax (other than capital tax) payable in accordance with this Agreement on profits, income or gains arising in the Federal Republic of Germany shall be deducted from any Canadian tax payable in respect of such profits, income or gains.
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(c) Where in accordance with any provision of the Agreement income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.
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(d) For the purposes of this paragraph, profits, income or gains of a resident of Canada shall be deemed to arise from sources in the Federal Republic of Germany if they may be taxed in the Federal Republic of Germany in accordance with this Agreement.
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2 Where a resident of the Federal Republic of Germany derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in Canada, double taxation shall be avoided as follows:
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(a) Subject to the provisions of subparagraph (b), there shall be excluded from the basis upon which German tax is imposed, any item of income from sources within Canada and any item of capital situated within Canada, which according to the foregoing Articles of this Agreement may be taxed, or shall be taxable only, in Canada; in the determination of its rate of tax applicable to any item of income or capital not so excluded, the Federal Republic of Germany will, however, take into account the items of income and capital, which according to the foregoing Articles may be taxed in Canada.
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(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 Canadian tax (including taxes on income paid to any political subdivision or local authority in Canada) paid in accordance with the provisions of this Agreement referred to below on the following items of income:
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Article 25
Mutual Agreement Procedure
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1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Agreement, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident or, if that person’s case comes under paragraph 1 of Article 24, to that of the Contracting State of which that person is a national, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.
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2 The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Agreement.
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3 The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.
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5 The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying the provisions of this Agreement.
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6 If any question, difficulty or doubt arising as to the interpretation or application of the Agreement cannot be resolved or dealt with by the competent authorities as a result of the application of the provisions of paragraphs 1, 2 or 3, these questions, difficulties or doubts may, if the competent authorities agree, be submitted to an arbitration commission. The decisions of the commission shall be binding. The composition of the commission and the arbitration procedures shall be determined, after consultation between the competent authorities, through an exchange of diplomatic notes between the Contracting States.
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1 The competent authorities of the Contracting States shall exchange such information as is relevant for carrying out the provisions of this Agreement or of the domestic laws in the Contracting States concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of the taxes covered by the Agreement or, notwithstanding the provisions of paragraph 4, the taxes imposed by a “Land”, or a political subdivision or local authority of a Contracting State that are substantially similar to the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes. Such information may be disclosed in public court proceedings or in judicial decisions only if the competent authority of the Contracting State supplying the information raises no objection.
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4 For the purposes of this Article, the taxes covered by the Agreement are, notwithstanding the provisions of Article 2, all taxes imposed by a Contracting State.
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1 Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.
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2 Notwithstanding the provisions of Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Agreement to be a resident of the sending State if:
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3 The Agreement shall not apply to International Organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State, being present in a Contracting State and not liable in either Contracting State to the same obligations in respect of taxes on income or on capital as are residents thereof.
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1 With respect to income taxable in a Contracting State, the provisions of this Agreement shall not be construed to restrict in any manner any exemption, credit, allowance or other deduction accorded:
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2 It is understood that nothing in the Agreement shall be construed as preventing:
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3 The Agreement shall not apply to any company (nor to income derived from such company by a shareholder thereof), trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled directly or indirectly by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.
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5 For purposes of paragraph 3 of Article XXII of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Agreement may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 25 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.
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6 Nothing in the Agreement shall be construed as preventing a Contracting State from denying benefits under the Agreement where it can reasonably be concluded that to do otherwise would result in an abuse of the provisions of the Agreement or of the domestic laws of that State.
Article 30
Protocol to the Agreement
The attached Protocol forms an integral part of this Agreement.
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1 This Agreement shall enter into force on the date on which the Contracting States have notified each other that the national requirements for such entry into force have been fulfilled. The relevant date shall be the day on which the last notification is received. The provisions of the Agreement shall have effect:
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2 The Agreement between Canada and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Income and Certain other Taxes signed at Ottawa on July 17, 1981 shall cease to have effect in respect of taxes to which this Agreement applies in accordance with the provisions of paragraph 1 and shall terminate on the last date on which it has effect in accordance with the foregoing provisions.
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3 Where any greater relief from tax would have been afforded by any provision of the Agreement between Canada and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Income and Certain other Taxes signed at Ottawa on July 17, 1981 to a resident of either Contracting State, such provision shall continue to have effect up to and including the taxation year in which this Agreement enters into force.
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This Agreement shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year after the year in which the Agreement entered into force. In such event, the Agreement shall cease to have effect:
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IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Agreement.
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