Article 1
Personal Scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2
Taxes Covered

1. This Agreement shall apply to taxes on income and on capital imposed on behalf of a Contracting State, of a Land or a political subdivision or local authority thereof, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.

3. The existing taxes to which the Agreement shall apply are in particular:

   1. in the Federal Republic of Germany:

      the Einkommensteuer (income tax),

      the Koerperschaftsteuer (corporation tax),

      the Vermoegensteuer (capital tax), and

      the Gewerbesteuer (trade tax),

      (hereinafter referred to as "German tax");

   2. in the State of Kuwait:

      the corporate income tax,

      the 5 % of the net profits of shareholding companies payable to the Kuwait Foundation of Advancement of Science (KFAS),

      the Zakat,

      (hereinafter referred to as "Kuwaiti tax").

4. The Agreement shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. At the end of each year, the competent authorities of the Contracting States shall - if necessary - notify each other of changes which have been made in their respective taxation laws.

Article 3
General Definitions

1. For the purposes of this Agreement, unless the context otherwise requires:

   1. the term "the Federal Republic of Germany" means the territory of the Federal Republic of Germany, as well as the area of the sea-bed, its sub-soil and the superjacent water column adjacent to the territorial sea, insofar as the Federal Republic of Germany exercises there, in conformity with international law and its national legislation, sovereign rights or jurisdiction to explore and exploit the natural resources;

   2. the term "the State of Kuwait" means the territory of the State of Kuwait including any area beyond the territorial sea which in accordance with international law has been or may hereafter be designated, under the laws of the State of Kuwait, as an area over which the State of Kuwait may exercise sovereign rights or jurisdiction;

   3. the terms "a Contracting State" and "the other Contracting State" mean the State of Kuwait or the Federal Republic of Germany as the context requires;

   4. the term "person" means an individual and a company;

   5. the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes;

   6. the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

   7. the term "national" means:

      1. in respect of the Federal Republic of Germany any German within the meaning of the Basic Law of the Federal Republic of Germany and any legal person, partnership and association deriving its status as such from the laws in force in the Federal Republic of Germany;

      2. in respect of the State of Kuwait any individual possessing the nationality of the State of Kuwait and any legal person, partnership and association deriving its status as such from the law in force in the State of Kuwait;

   8. the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

   9. the term "competent authority" means in the case of the Federal Republic of Germany the Federal Ministry of Finance and in the case of the State of Kuwait the Minister of Finance.

2. As regards the application of the Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Agreement applies.

Article 4
Resident

1. For the purposes of this Agreement, the term "resident of a Contracting State" means:

   1. in the case of the Federal Republic of Germany, a person who under the laws of the Federal Republic of Germany is subject to unlimited tax liability there;

   2. in the case of the State of Kuwait, an individual who has his domicile in the State of Kuwait and is a national of the State of Kuwait and a company which is incorporated in the State of Kuwait and has its place of effective management there.

2. For the purposes of paragraph 1 above

   1. the Federal Republic of Germany and its political subdivisions shall be deemed to be a resident of the Federal Republic of Germany;

   2. the State of Kuwait shall be deemed to be a resident of the State of Kuwait;

   3. government institutions shall be deemed, according to affiliation, to be a resident of the Federal Republic of Germany or of the State of Kuwait. Any institution shall be deemed to be a government institution which has been created by the government of one of the Contracting States or, in the case of the Federal Republic of Germany, of its political subdivisions, for the fulfillment of public functions and which is recognized as such by mutual agreement of the competent authorities of the Contracting States.

3. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

   1. he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

   2. if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

   3. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

   4. if he is a national of both States, the competent authorities of the Contracting States shall settle the question by mutual agreement.

Article 5
Permanent Establishment

1. For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term "permanent establishment" includes especially:

   1. a place of management;

   2. a branch;

   3. an office;

   4. a factory;

   5. a workshop; and

   6. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. A building site or construction or installation project constitutes a permanent establishment only if it lasts more than nine months.

4. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:

   1. the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

   2. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

   3. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

   4. the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

   5. the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

   6. the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 6 applies - is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it is dealing in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise he will not be considered an agent of an independent status within the meaning of this paragraph.

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6
Income from Immovable Property

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

2. The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7
Business Profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which 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. The foregoing provision is applicable irrespective of limitations provided by the internal laws, provided that the deducted expenses are in accordance with the international practice.

4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

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.

Article 8
Shipping and Air Transport

1. Profits derived from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits derived from the participation in a pool, a joint business or an international operating agency.

Article 9
Associated Enterprises

Where

1. an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

2. the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10
Dividends

1. Dividends paid by a company which 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 beneficial owner of the dividends is a resident of the other Contracting State the tax so charged shall not exceed:

   1. 5 per cent of the gross amount of the dividends if the beneficial owner (other than an individual or a partnership) holds directly at least 10 per cent of the capital of the company paying the dividends;

   2. 15 per cent of the gross amount of the dividends in all other cases.

   As long as a resident in the Federal Republic of Germany is entitled under German law to a tax credit (Anrechnung der Koerperschaftsteuer) in respect of dividends paid by a company that is a resident of the Federal Republic of Germany, the beneficial owner of the dividends subject to sub-paragraph b) shall be entitled to a further relief of tax of 5 per cent of the gross amount of the dividends.

3. The term "dividends" as used in this Article means:

   1. dividends on shares including income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, and

   2. other income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident, and for the purpose of taxation in the Federal Republic of Germany, income derived by a sleeping partner from his participation as such and distributions on certificates of an investment trust.

4. The provisions of paragraphs 1 and 2 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, or performs in that other State independent personal services from a fixed base situated therein and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11
Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner of the interest.

2. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

4. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a Land, a political subdivision or a local authority thereof or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

5. 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.

Article 12
Royalties

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed 10 per cent of the gross amount of such royalties.

3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right of use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. The term royalties does not include payments for the furnishing of services, including consultancy services.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a Land, a political subdivision or a local authority thereof or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. 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.

Article 13
Capital Gains

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State 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, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State.

3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

4. Gains from the alienation of any property other than that referred to in paragraphs 1 to 3, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14
Independent Personal Services

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

2. The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15
Dependent Personal Services

1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

   1. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and

   2. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

   3. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16
Directors' Fees

Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17
Artistes and Athletes

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiset, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply if the visit of entertainers or athletes to a Contracting State is supported wholly or substantially from public funds of the other Contracting State, a Land, a political subdivision or a local authority thereof.

Article 18
Pensions

Subject to the provisions of paragraph 1 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 19
Government Service

1. Remuneration including pensions paid by a Contracting State, a Land, a political subdivision or a local authority thereof to an individual in respect of services rendered to that State, Land, subdivision or authority shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State, if the individual is a resident of that State, a national of that State and not a national of the first-mentioned State.

2. The provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State, a Land, a political subdivision or a local authority thereof.

3. The provisions of paragraph 1 shall likewise apply in respect of remuneration paid, under a development assistance programme of a Contracting State, a Land, a political subdivision or a local authority thereof, out of funds exclusively supplied by that State, Land, political subdivision or local authority, to a specialist or volunteer seconded to the other Contracting State with the consent of that other State.

Article 20
Teachers, Students and Trainees

1. An individual who visits a Contracting State at the invitation of that State or of a University, college, school, museum or other cultural institution of that State or under an official programme of cultural exchange for a period not exceeding two years solely for the purpose of teaching, giving lectures or carrying out research at such institution and who is, or was immediately before that visit, a resident of the other Contracting State shall be exempt from tax in the first-mentioned State on his remuneration for such activity, provided that such remuneration is derived by him from outside that State.

2. An individual who is present in a Contracting State solely

   1. as a student at a university, college or school in that Contracting State;

   2. as a business apprentice (including in the case of the Federal Republic of Germany a Volontaer or a Praktikant);

   3. as the recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organization, or

   4. as a member of a technical cooperation programme entered into by the Government of that Contracting State;

   and who is, or was immediately before visiting that State, a resident of the other Contracting State, shall be exempt from tax in the first-mentioned Contracting State in respect of remittances from abroad for the purpose of his maintenance, education or training.

Article 21
Other Income

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

Article 22
Capital

1. Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

2. Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State 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, may be taxed in that other State.

3. Capital represented by ships and aircraft operated in international traffic and by movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

4. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

Article 23
Limitation on Benefits

1. A person that is a resident of the State of Kuwait and derives income from the Federal Republic of Germany shall be entitled in the Federal Republic of Germany to all the benefits of the Articles 8, 10 to 13 and paragraph 4 of Article 22 only if such person is

   1. the State of Kuwait;

   2. a government institution of the State of Kuwait as defined in sub-paragraph c) of paragraph 2 of Article 4;

   3. an individual;

   4. a company provided that such company - except the Gulf Investment Corporation (GIC) and the United Arab Shipping Company (UASC) - can prove that at least 51 per cent of the beneficial interest in it is owned, directly or indirectly, by the State of Kuwait and/or by a government institution of the State of Kuwait and/or an individual, who is a resident of the State of Kuwait and that company is controlled by the aforementioned residents.

2. A further prerequisite for relief from German taxes under paragraph 1 is that the company resident in the State of Kuwait proves that it was not a principal purpose of the company or of the conduct of its business or of the acquisition or maintenance by it of the shareholding or other property from which the income in question is derived to obtain any of such benefits to the advantage of a person who is not a resident of the State of Kuwait. Furthermore the company has to prove that more than 50 per cent of its gross income is not used, directly or indirectly, to meet liabilities (including liabilities for interest or royalties) to persons not entitled to benefits of this Agreement under sub-paragraphs a) to d).

3. Notwithstanding the provisions of paragraphs 1 and 2 the provisions of the German internal law concerning tax avoidance are applicable.

4. The fulfillment of the condition under paragraphs 1 and 2 has to be attested by a confirmation of the competent authority of the State of Kuwait.

5. Irrespective of paragraph 4 the competent authorities of both Contracting States shall to the extent provided under the provisions of Article 26 exchange such information as is necessary for carrying out the provisions of this Article and the application of their respective internal laws concerning tax avoidance. In case of disagreement between the competent authorities of the two Contracting States, the procedure under Article 25 shall be applied.

Article 24
Relief from Double Taxation

1. Tax shall be determined in the case of a resident of the Federal Republic of Germany as follows:

   1. Unless the provisions of sub-paragraph b) apply, there shall be excluded from the basis upon which German tax is imposed, any item of income arising in the State of Kuwait and any item of capital situated within the State of Kuwait, which, according to this Agreement, may be taxed in the State of Kuwait. The Federal Republic of Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital so excluded.

      In the case of income from dividends the foregoing provisions shall apply only to such dividends 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 State of Kuwait at least 10 % of the capital of which is owned directly by the German company.

      For the purpose of taxes on capital there shall also be excluded from the basis upon which German tax is imposed any shareholding, the dividends of which are excluded or, if paid, would be excluded, according to the immediately foregoing sentence, from the basis upon which German tax is imposed.

   2. Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German income and corporation tax payable in respect of the following items of income arising in the State of Kuwait, the tax paid under the laws of the State of Kuwait and in accordance with this Agreement on:

      1. dividends not dealt with in sub-paragraph a);

      2. royalties to which Article 12 applies;

      3. remuneration to which Article 16 applies;

      4. income to which Article 17 applies;

      5. income from immovable property to which Article 6 applies. This shall not apply if the immovable property from which such income arises is effectively connected with a permanent establishment referred to in Article 7 and situated in the State of Kuwait or with a fixed base referred to in Article 14 and situated in the State of Kuwait, unless the provisions of sub-paragraph (c) preclude the application of the provisions of sub-paragraph (a) to the profits of the permanent establishment.

   3. The provisions of sub-paragraph (b) above shall apply instead of the provision of sub-paragraph (a) above to items of income as defined in Articles 7 and 10 to profits from the alienation of the business property of a permanent establishment and to the assets from which such profits are derived if the resident of the Federal Republic of Germany does not prove that the gross income of the permanent establishment in the business year in which the profit has been realized or of the company resident in the State of Kuwait in the business year for which the dividends were paid was derived exclusively or almost exclusively from activities within the meaning of Section 8 paragraph 1 nos. 1 to 6 of the German Law on External Tax Relations (Aussensteuergesetz) or from participations within the meaning of Section 8 paragraph 2 of that Law; the same shall apply to immovable property used by a permanent establishment (paragraph 4 of Article 6) and to profits from the alienation of such immovable property (paragraph 1 of Article 13) and of the movable property forming part of the business property of the permanent establishment (paragraph 2 of Article 13).

   4. Notwithstanding the provisions of sub-paragraph (a) above double taxation shall be avoided by allowing a tax credit as laid down in sub-paragraph (b) above:

      1. if in the Contracting States items of income or capital are placed under differing provisions of the Agreement or attributed to different persons (except pursuant to Article 9) and this conflict cannot be settled by a procedure in accordance with paragraph 3 of Article 25 and if as a result of this difference in placement or attribution the relevant income or capital would remain untaxed or be taxed too low; or

      2. if after proper consultation and subject to the limitations of its domestic law the Federal Republic of Germany notifies the State of Kuwait through diplomatic channels of other income to which it intends to apply the provisions of sub-paragraph (b). The notification shall not take effect until the first day of the calendar year following the year in which the notification was made and all legal requirements under the domestic law of the Federal Republic of Germany for the notification to take effect have been fulfilled.

2. Double taxation in the State of Kuwait shall be avoided in accordance with the following provisions of this Article:

   Where a resident of the State of Kuwait derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in both the Federal Republic of Germany and the State of Kuwait, the State of Kuwait shall allow as a deduction from the tax on the income of that resident, an amount equal to the German tax on income paid and the German tax reduced according to the second sentence of paragraph 2 of Article 10; and as a deduction from the tax on the capital of that resident an amount equal to the German capital tax paid.

   Such deduction in either case shall not, however, exceed that part of the tax on income or on capital, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in the Federal Republic of Germany.

Article 25
Mutual Agreement Procedure

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory 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 which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavor 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.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 26
Exchange of Information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement. 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) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes and only in accordance with the restrictions imposed by the competent authority of the other Contracting State. They may disclose the information in public court proceedings or in judicial decisions provided that the competent authority of the other Contracting State raises no objection. They may transmit the information to other agencies only with the prior consent of the competent authority of the other Contracting State.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

   1. to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

   2. to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

   3. to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy (ordre public).

Article 27
Miscellaneous

1. The competent authorities of the Contracting States shall mutually agree on arrangements concerning the manner in which the limitations and exemptions contained in the foregoing Articles are to be implemented.

2. It is agreed that the Agreement shall not be interpreted as preventing the Federal Republic of Germany from taxing amounts which under part 4 of the German Aussensteuergesetz are included in the income of a resident of the Federal Republic of Germany.

Article 28
Diplomatic and Consular Privileges

1. Nothing in this Agreement shall affect the fiscal privileges of members of a diplomatic mission, a consular post or an international organization under the general rules of international law or under the provisions of special agreements.

2. Notwithstanding the provisions of Article 4 an individual who is a member of a diplomatic mission or a consular post 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:

   1. in accordance with international law he is not liable to tax in the receiving State in respect of income from sources outside that State,

   2. he is liable in the sending State to the same obligations in relation to tax on his world income as are residents of that State.

Article 29
Entry into Force

1. This Agreement shall be subject to ratification in accordance with the constitutional requirements of the two Contracting States and the instruments of ratification shall be exchanged at Berlin as soon as possible.

2. This Agreement shall enter into force upon the exchange of the instruments of ratification and shall have effect in both Contracting States:

   1. in the case of taxes withheld at source, in respect of amounts paid after December 31, 1997;

   2. in the case of other taxes, in respect of taxes levied for any periods beginning on or after January 1, 1998.

Article 30
Termination

This Agreement 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 the entry into force of the Agreement, give the other Contracting State, through diplomatic channels, written notice of termination and, in such event, the Agreement shall cease to be effective:

1. in the case of taxes withheld at source in respect of amounts paid on or after the first day of January of the calendar year next following that in which the notice of termination is given;

2. in the case of other taxes in respect of taxes levied for periods beginning on or after the first day of January of the calendar year next following that in which the notice of termination is given.

Done at Kuwait this 18th day of May 1999 corresponding to 3rd of Safar 1420 H, in duplicate in the German, Arabic and English languages, all texts being authentic. In case of divergent interpretations of the German and the Arabic texts, the English text shall prevail.

Protocol

The Federal Republic of Germany and the State of Kuwait have agreed at the signing at Kuwait this 18th day of May 1999, corresponding to 3rd of Safar 1420 H, of the Agreement for the avoidance of Double Taxation with respect to taxes on income and capital and for the fostering of economic relations, upon the following provisions which shall form an integral part of the said Agreement.

1. With reference to Article 4

   It is agreed upon that government institutions of the State of Kuwait within the meaning of paragraph 2 are the following corporate entities created under public law which are wholly owned and controlled by the State of Kuwait:

   • public corporations,

   • authorities,

   • government agencies,

   • foundations,

   • development funds.

   Subject to the provisions of sub-paragraph (c) of paragraph 2, further institutions can be recognized as government institutions.

2. With reference to Articles 7 and 9

   Only those profits may be attributed to a building site or construction or installation project in the Contracting State in which the building site or construction or installation project is located which result from the activity of the building site or construction or installation project itself. This means that in particular:

   1. profits which arise from a delivery of goods made, whether in connection with this activity or independently of it, by the principal permanent establishment or another permanent establishment of the enterprise or a third party shall not be attributed to the building site or construction or installation project;

   2. notwithstanding the provision of paragraph 3 of Article 12 profits arising from planning, project work, design or research as well as technical services which a resident of one Contracting State performs for the building site, construction or installation project located in the other Contracting State shall, so far as these activities are performed outside the other Contracting State, not be attributed to that building site, construction or installation project.

3. With reference to Article 9

   Article 9 is applicable irrespective of the provisions of the internal law, provided that acceptable substantial evidence is given and the determining of the profits is in accordance with international practice.

4. With reference to Article 10

   1. Paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. As long as the State of Kuwait does not levy the corporate income tax at the level of the company but in the hands of foreign shareholders, this taxation is to be regarded as company taxation.

   2. If the Federal Republic of Germany will in future in other agreements for the avoidance of double taxation in comparable situations limit the taxation at source of dividends at a rate lower than the rate provided for in the Agreement the Contracting States agreed to discuss the matter in an amicable manner.

5. With reference to Articles 10 and 11

   Notwithstanding the provisions of these Articles, dividends and interest may be taxed in the Contracting State in which they arise, and according to the law of that State, if they

   1. are derived from rights or debt-claims carrying a right to participate in profits (including income derived by a sleeping partner from his participation as such, from a "partiarisches Darlehen" and from "Gewinnobligationen" within the meaning of the tax law of the Federal Republic of Germany), and

   2. are deductible in the determination of profits of the debtor of such income.

6. With reference to Article 23

   1. In general

      The present personal scope of application of the Agreement will be reconsidered, if the Kuwait tax system or tax practice should be changed.

   2. Sub-paragraph (d) of paragraph 1

      The competent authorities of the Contracting States may by mutual agreement recognize other companies, including entities, that are established and have their place of effective management in the State of Kuwait, provided that all the capital of which is held by member states of the Gulf Cooperation Council.

7. With reference to Article 24

   Where a company being a resident of the Federal Republic of Germany distributes income derived from sources within the State of Kuwait paragraph 1 shall not preclude the compensatory imposition of corporation tax on such distributions in accordance with the provisions of German tax law.

8. With reference to Articles 23 and 26

   If in accordance with domestic law personal data are exchanged under this Agreement, the following additional provisions shall apply subject to the legal provisions in effect for each Contracting State:

   1. The recipient shall upon request inform the supplying agency about the use of the supplied data and the results achieved.

   2. The supplying agency shall be obliged to ensure that the data to be supplied are accurate and that they are necessary for and commensurate with the purpose for which they are supplied. Any bans on data supply prescribed under applicable domestic law shall be observed. If it emerges that inaccurate data, or data which should not have been supplied, have been supplied, the recipient shall be informed of this without delay. The recipient shall be obliged to correct or delete such data.

   3. Upon application the person concerned shall be informed of the supplied data relating to him and of the use to which such data are to be put. There shall be no obligation to furnish this information if on balance it appears that the public interest in withholding it outweighs the interest of the person concerned in receiving it. In all other respects, the right of the person concerned to be informed of the supplied data relating to him shall be governed by the domestic law of the Contracting State in whose sovereign territory the application for information is made.

   4. The receiving agency shall bear liability in accordance with its domestic law in relation to any person suffering unlawful damage as a result of supply under the exchange of data pursuant to this Agreement. In relation to the damaged person, the receiving agency may not plead to its discharge that the damage had been caused by the supplying agency.

   5. The personal data supplied shall be deleted as soon as they are no longer required for the purpose for which they were supplied.

   6. The supplying and receiving agencies shall be obliged to keep official records of the supply and receipt of personal data.

   7. The supplying and the receiving agencies shall be obliged to take effective measures to protect the personal data supplied against unauthorized access, unauthorized alteration and unauthorized disclosure.

Done at Kuwait this 18th day of May 1999 corresponding to 3rd of Safar 1420 H, in duplicate in the German, Arabic and English languages, all texts being authentic. In case of divergent interpretations of the German and the Arabic texts, the English text shall prevail.