Article 10 (Dividends) — U.S. Income Tax Treaty

“Article 10

Dividends

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.

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.

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.

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;

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.

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 .

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.

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

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.

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.

A company that is a resident of a Contracting State and that has a permanent establish

ment 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.

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:

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