ARTICLE 33 — U.S. Income Tax Treaty

Termination

This Convention shall continue in effect indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State, through diplomatic channels, written notice of termination and, in such event, this Convention shall cease to have effect

a) in respect of taxes withheld at source as well as excise taxes imposed on insurance premiums for amounts paid or credited on or after 1 January of the calendar year following the year in which the notice of termination is given;

b) in respect of other taxes on income for taxes levied for taxable years or assessment periods beginning on or after 1 January of the calendar year following the year in which the notice of termination is given (but excluding any fiscal year commencing before such date); and

c) in respect of taxes on capital for taxes levied on items of capital existing on or after 1 January of the calendar year following the year in which the notice of termination is given.

Done in duplicate at Bonn this 29 ^th day of August 1989, in the English and German languages, both texts being equally authentic.

For the For the United States of America Federal Republic of Germany

(s) Vernon A. Walters (s) Dr. Hans Werner Lautenschlager (s) Theodor Waigel

PROTOCOL

At the signing today of 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, the undersigned have agreed upon the following provision, which shall form an integral part of the Convention:

With reference to the general effects of the Convention

a) Notwithstanding any provision of the Convention or this Protocol except subparagraph b), the United States may tax its residents (as determined under Article 4 (Residence)) and its citizens as if the Convention had not come into effect. For this purpose, the term “citizen” shall include a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of income tax, but only for a period of 10 years following such loss.

b) The provisions of subparagraph a) shall not affect the benefits conferred by the United States

aa) under paragraph 2 of Article 9 (Associated Enterprises), paragraph 6 of Article 13 (Gains), paragraphs 3 and 4 of Article 18 (Pensions, Annuities, Alimony, and Child Support) and paragraphs 1 c) and 2 of Article 19 (Government Service; Social Security), and under Articles 23 (Relief from Double Taxation), 24 (Nondiscrimination), and 25 (Mutual Agreement Procedure); and

bb) under paragraph 1 b) of Article 19 (Government Service; Social Security), 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. c) The Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded

aa) by the laws of either Contracting State; or bb) by any other agreement between the Contracting States. d) 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 of the German “Aussensteuergesetz”. Where such imposition of tax gives rise to a double taxation, the competent authorities shall consult for the elimination of such double taxation according to paragraph 3 of Article 25 (Mutual Agreement Procedure).

With reference to Paragraph 1 of Article 4 (Residence) 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.
With reference to Article 5 (Permanent Establishment) and Article 14 (Independent Personal

Services) 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 provision of Article 17 (Artistes and Athletes) shall not be deemed to have a permanent establishment or fixed base in that State if its presence does not exceed in the aggregate 183 days in the calendar year concerned.

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 or a fixed base during its existence is taxable or deductible in the Contracting State where such permanent establishment or fixed base is situated even if the payments are deferred until such permanent establishment or fixed base has ceased to exist. Nothing in the preceding sentence shall affect the application to such deferred payments of rules regarding the accrual of income and expenses according to the domestic law of a Contracting State.

With reference to Article 7 (Business Profits) and Article 13 (Gains) Gains from the alienation of immovable property that at any time formed part of the business property of a permanent establishment or fixed base 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 the property ceases to be part of the business property of the permanent establishment or fixed base (or such shorter period provided by the laws of either Contracting State).
With reference to paragraph 3 of Article 7 (Business Profits) The competent authorities may mutually agree to common procedures different from those under national law for the allocation to a permanent establishment of expenses mentioned in paragraph 3 of Article 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.
With reference to paragraph 3 of Article 10 (Dividends) For United States income tax purposes, the United States shareholder shall be treated as if it had received as a dividend a refund of German tax equal to 5.88 percent of the dividend actually paid, determined before the German withholding tax on such dividend. The sum of this refund and such actual dividend shall be deemed to have been subject to German withholding tax at the rate prescribed in paragraph 2 b) of Article 10.
With reference to paragraph 8 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 8 a) that is comparable to the amount that would be distributed as a dividend if such income were earned by a locally incorporated subsidiary.
With reference to Articles 10 (Dividends), 11 (Interest), and 12 (Royalties) A Contracting State shall deem the recipient of dividends, interest, or royalties who is a resident of the other Contracting State to be the beneficial owner for the purposes of Articles 10, 11, and 12 if the recipient is the person to which the income is attributable for tax purposes under the laws of the firstmentioned State.
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.
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.
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.
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.
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.
With reference to paragraph 3 of Article 18. (Pensions, Annuities, Alimony, and Child Support) 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.
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 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 first-mentioned 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.

With reference to paragraphs 1, 4, and 5 of Article 20 (Visiting Professors and Teachers;

Students and Trainees) If a resident of a Contracting State remains in the other Contracting State for a period of time exceeding that prescribed, that other State may tax the individual under its national law for the entire period of the visit, unless in a particular case the competent authorities of the Contracting States agree otherwise.

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 or a fixed base that the 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 paragraph 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).
With reference to paragraph 1 of Article 23 (Relief from Double Taxation) In cases where the Convention gives to the Federal Republic of Germany the right to tax income and such income is regarded as United States source income under United States law the United States shall grant the credit provided for in paragraph 1 of Article 23, subject to any law of the United States limiting the foreign tax credit in a way that prevents the crediting of a foreign tax against United States source income, and the credit provided for in paragraph 3 of Article 23. 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 Germany, as determined under 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 paid or accrued with respect to items of German source income.
With reference to Article 23 (Relief from Double Taxation) and Article 25 (Mutual Agreement

Procedure) The Federal Republic of Germany shall avoid double taxation by a tax credit as provided for in paragraph 2 b) of Article 23, and not by a tax exemption under paragraph 2 a) of Article 23,

a) if in the Contracting States income or capital is placed under differing provisions of the Convention or attributed to different persons (other than under Article 9 (Associated Enterprises)) and this conflict cannot be settled by a procedure pursuant to Article 25 and

aa) if as a result of such placement or attribution the relevant income or capital would be subject to double taxation; or

bb) if as a result of such placement or attribution the relevant income or capital would remain untaxed or be subject only to inappropriately reduced taxation in the United States and would (but for the application of this paragraph) remain exempt from tax in the Federal Republic of Germany; or b) if the Federal Republic of Germany has, after due consultation and subject to the limitations of its internal law, notified the United States through diplomatic channels of other items of income to which it intends to apply this paragraph in order to prevent the exemption of

income from taxation in both Contracting States or other arrangements for the improper use of the Convention.

In the case of a notification under subparagraph b), the United States may, subject to notification through diplomatic channels, characterize such income under the Convention consistently with the characterization of that income by the Federal Republic of Germany. A notification made under this paragraph shall have effect only from the first day of the calendar year following the year in which it was transmitted and any legal prerequisites under the domestic law of the notifying State for giving it effect have been fulfilled.

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.
With reference to Article 25 (Mutual Agreement Procedure) Nothing in this Article shall be construed to obligate a Contracting State to disregard a person's waiver of rights under this Article.
With reference to paragraph 5 of Article 25 (Mutual Agreement Procedure) The decision of the arbitration board in a particular case shall be binding on both Contracting States with respect to that case.
With reference to paragraph 5 of Article 25 (Mutual Agreement Procedure) and

Article 26 (Exchange of Information and Administrative Assistance) The Contracting States may release to the arbitration board such information as is necessary for carrying out the arbitration procedure, provided that the members of the arbitration board shall be subject to the limitations on disclosure described in Article 26.

With reference to Article 26 (Exchange of Information and Administrative Assistance) 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 (EG-Amtshilfegesetz) as amended from time to time without changing the general principles thereof.
With reference to Article 27 (Exempt Organizations) The competent authorities of the Contracting States shall develop procedures for implementing this Article.
With reference to paragraph 1 f) of Article 28 (Limitation on Benefits) The not-for-profit organizations described in paragraph 1 f) of Article 28 include, but are not limited to, pension funds, pension trusts, private foundations, trade unions, trade associations, and similar organizations. In all events, a pension fund, pension trust, or similar entity organized for purposes of providing retirement, disability, or other employment benefits that is organized under the laws of a

Contracting State shall be entitled to the benefits of the Convention if the organization sponsoring such fund, trust, or entity is entitled to the benefits of the Convention under Article 28.

Done in duplicate at Bonn this 29 ^th day of August, 1989, in the English and German languages, both texts being equally authentic.

For the United States of America For the Federal Republic of Germany

(s) Vernon A. Walters (s) Dr. Hans Werner Lautenschlager (s) Theodor Waigel

NOTES OF EXCHANGE 2

DER STAATSSEKRETAR DES AUSWARTIGEN AMTS

BONN, 29, August 1989

His Excellency Mr. Vernon Walters Ambassador of the United States of America Bonn

Excellency,

I have the honor to refer to the Convention signed today between the Federal Republic of Germany and the United States of America 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 to inform you on behalf of the Government of the Federal Republic of Germany of the following:

If the competent authorities of both Contracting States agree to submit a disagreement regarding the interpretation or application of this Convention to arbitration according to paragraph 5 of Article 25, the following procedures will apply:

The competent authorities may agree to invoke arbitration in a specific case only after fully exhausting the procedures available under paragraphs 1 to 4 of Article 25, and if the taxpayer(s) consent(s) to the arbitration and agree(s) in writing to be bound by the arbitration decision. The

competent authorities will not generally accede to arbitration with respect to matters concerning the tax policy or domestic tax law of either Contracting State.

The competent authorities shall establish an arbitration board for each specific case in the following manner:

(a) An arbitration board shall consist of not less than three members. Each competent authority shall appoint the same number of members, and these members shall agree on the appointment of the other member(s).

(b) The other member(s) of the arbitration board shall be from either Contracting State or from another OECD member country. The competent authorities may issue further instructions regarding the criteria for selecting the other member(s) of the arbitration board.

(c) Arbitration board members (and their staffs) upon their appointment must agree in writing to abide by and be subject to the applicable confidentiality and disclosure provisions of both Contracting States and the Convention. In case those provisions conflict, the most restrictive condition will apply.

The competent authorities may agree on and instruct the arbitration board regarding specific rules of procedure, such as appointment of a chairman, procedures for reaching a decision, establishment of time limits, etc. Otherwise, the arbitration board shall establish its own rules of procedure consistent with generally accepted principles of equity.
Taxpayers and/or their representatives shall be afforded the opportunity to present their views to the arbitration board.
The arbitration board shall decide each specific case on the basis of the Convention, giving due consideration to the domestic laws of the Contracting States and the principles of international law. The arbitration board will provide to the competent authorities an explanation of its decision. The decision of the arbitration board in a particular case shall be binding on both Contracting States and the taxpayer(s) with respect to that case. While the decision of the arbitration board shall not have precedential effect, it is expected that such decisions ordinarily will be taken into account in subsequent competent authority cases involving the same taxpayer(s), the same issue(s), and substantially similar facts, and may also be taken into account in other cases where appropriate.
Costs for the arbitration procedure will be borne in the following manner:

(a) Each Contracting State shall bear the cost of remuneration for the member(s) appointed by it, as well as for its representation in the proceedings before the arbitration board;

(b) the cost of remuneration for the other member(s) and all other costs of the arbitration board shall be shared equally between the Contracting States; and

However, if it deems appropriate in a specific case, in view of the nature of the case and the roles of the parties, the Competent Authority of a Contracting State may require the taxpayer(s) to agree to bear that Contracting State's share of the costs as a prerequisite for arbitration.

The competent authorities may agree to modify or supplement these procedures; however, they shall continue to be bound by the general principles established herein.

If this proposal meets with the approval of the Government of the United States of America, this Note and your reply thereto shall constitute the agreement of our two governments on these matters.

Accept, Excellency, the expression of my highest consideration.

(s) Lautenschlager

EMBASSY OF THE UNITED STATES OF AMERICA

Bonn, August 29, 1989

His Excellency Dr. Hans Werner Lautenschlager State Secretary of the Foreign Office Bonn

Excellency,

I have the honor to confirm receipt of your Note of today's date which roads as follows:

“I have the honor to refer to the Convention signed today between the Federal Republic of Germany and the United States of America 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 to inform you on behalf of the Government of the Federal Republic of Germany of the following:

The competent authorities may agree to invoke arbitration in a specific case only after fully exhausting the procedures available under paragraphs 1 to 4 of Article 25, and if the taxpayer(s) consent(s) to the arbitration and agree(s) in writing to be bound by the arbitration decision. The competent authorities will not generally accede to arbitration with respect to matters concerning the tax policy or domestic tax law of either Contracting State.
The competent authorities shall establish an arbitration board for each specific case in the following manner:

The competent authorities may agree on and instruct the arbitration board regarding specific rules of procedure, such as appointment of a chairman, procedures for reaching a decision, establishment of time limits, etc. Otherwise, the arbitration board shall establish its own rules of procedure consistent with generally accepted principles of equity.
Taxpayers and/or their representatives shall be afforded the opportunity to present their views to the arbitration board.
The arbitration board shall decide each specific case on the basis of the Convention, giving due consideration to the domestic laws of the Contracting States and the principles of international law. The arbitration board will provide to the competent authorities an explanation of its decision. The decision of the arbitration board in a particular case shall be binding on both Contracting States and the taxpayer(s) with respect to that case. While the decision of the arbitration board shall not have precedential effect, it is expected that such decisions ordinarily will be taken into account in subsequent competent authority cases involving the same taxpayer(s), the same issue(s), and substantially similar facts, and may also be taken into account in other cases where appropriate.
Costs for the arbitration procedure will be borne in the following manner:

(a) Each Contracting State shall bear the cost of remuneration for the member(s) appointed by it, as well as for its representation in the proceedings before the arbitration board;

(b) the cost of remuneration for the other member(s) and all other costs of the arbitration board shall be shared equally between the Contracting States; and

The competent authorities may agree to modify or supplement these procedures; however, they shall continue to be bound by the general principles established herein.

If this proposal meets with the approval of the Government of the United States of America, this Note and your reply thereto shall constitute the agreement of our two governments on these matters.”

I have the honor to inform you, that my Government agrees to the above.

Accept, Excellency, the expression of my highest consideration.

(s) V.A.W.