DT8006 - DT: Germany, Federal Republic: double taxation agreement, Article 7: Interest and royalties

Article 7(6) was inserted by S171/874. The current Article 7 is as follows:

(1) Any interest or royalty, derived from sources within one of the territories by a resident of the other territory who is subject to tax in that other territory in respect thereof, shall be subjected to tax only in that other territory.

(2) In this Article -

(a) the term `interest` includes interest on bonds, securities, notes, debentures or on any other form of indebtedness;

(b) the term `royalty` means any royalty or other amount paid as consideration for the use of, or for the privilege of using, any copyright of literary, artistic or scientific work, patent, design, model, plan, secret process or formula, trade mark or other like property, but does not include any royalty or other amount paid in respect of the operation of a mine or quarry or of any other extraction of natural resources or a rent or royalty paid in respect of cinematograph films. There shall be treated as royalties all rents and similar payments received as consideration for the use of, or the privilege of using, industrial, commercial or scientific equipment, and for the supply of information concerning industrial, commercial or scientific experience.

(3) Where any interest or royalty exceeds a fair and reasonable consideration in respect of the indebtedness or rights for which it is paid, the provisions of this Article shall apply only to so much of the interest or royalty as represents such fair and reasonable consideration.

(4) Any payment received as consideration for the alienation of any property or rights mentioned in paragraph (2) of this Article, derived from sources within one of the territories by a resident of the other territory who is subject to tax in that other territory in respect thereof, shall be subjected to tax only in that other territory.

(5) Paragraphs (1) and (4) of this Article shall not apply where a resident of one of the territories carries on a trade or business in the other territory through a permanent establishment situated therein and such interest, royalty or other payment is attributable to that permanent establishment- in such event the interest, royalty or other payment may be subjected to tax in the territory where the permanent establishment is situated.

(6) Any provision in the law of either of the territories which relates only to interest paid to a non-resident company or only to royalties so paid shall not operate so as to require interest or royalties paid to a company which is a resident of the other territory to be left out of account as a deduction in computing the taxable profits of the company paying the interest or royalties, unless the debt-claim in respect of which the interest is paid, or the right or property giving rise to the royalties, as the case may be, was created or assigned mainly for the purpose of taking advantage of this paragraph and not for bona fide commercial reasons.