Double Tax Treaty Brazil X Germany

Date of Conclusion: 27June 1975

Effective Date: 1 January 1976

 

AGREEMENT BETWEEN THE FEDERATIVE REPUBLIC OF BRAZIL AND
THE FEDERAL REPUBLIC OF GERMANY FOR THE AVOIDANCE
OF DOUBLE TAXATION WITH RESPECT TO TAXES
ON INCOME AND CAPITAL

 

The Federative Republic of Brazil and the Federal Republic of Germany

Desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and capital,

Have agreed as follows:

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. The taxes to which the Agreement shall apply are:

a) in the case of the Federal Republic of Germany:

the Einkommensteuer (income tax) including the Ergänzungsabgabe (surcharge) thereon; the Körperschaftsteuer (corporation tax) including the Ergänzungsabgabe (surcharge) thereon; the Vermögensteuer (capital tax), and the Gewerbesteuer (trade tax); (hereinafter referred to as “German tax”);

b) in the case of Brazil:

the federal income tax, excluding the tax on excess remittances and on activities of minor importance (hereinafter referred to as “Brazilian tax”).

2. The Agreement shall also apply to any identical or substantially similar taxes which are subsequently imposed in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify, if necessary, to each other any substantial changes which have been made in their respective taxation laws.

3. The provisions of this Agreement in respect of taxation of income or capital shall likewise apply to the German trade tax, computed on a basis other than income or capital.

Article 3
General Definitions

1. In this Agreement, unless the context otherwise requires:

a)the term “Brazil” means the Federative Republic of Brazil;

b) the terms “a Contracting State” and “the other Contracting State” mean the Federal Republic of Germany or Brazil, as the context requires, and, when used in a geographical sense, the territory in which the tax law of the State concerned is in force;

c) the term “person” means an individual and a company;

d) the term “company” means any body Corporate or any entity which is treated as a body Corporate for tax purposes;

e) the terms “resident of a Contracting State” and “resident of the other Contracting State” mean a person who is a resident of the Federal Republic of Germany or a person who is a resident of Brazil, as the context requires;

f) 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;

g) the term “national” means:

aa) in respect of the Federal Republic of Germany any German in the meaning of Article 116, paragraph 1, of the Basic Law for the Federal Republic of Germany and any legal person, partnership and association deriving its status as such from the law in force in the Federal Republic of Germany;

bb) in respect of Brazil, all individuals possessing the Brazilian nationality and all legal persons, partnerships and associations deriving their status as such from the law in force in Brazil;

h) the term “competent authority” means:

aa) in the Federal Republic of Germany: the Federal Minister of Finance

bb) in Brazil: the Minister of Finance, the Secretary of Federal Revenue or their authorized representative .

2. As regards the application of this Agreement by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of this Agreement.

Article 4
Fiscal domicile

1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then this case shall be determined in accordance with following rules:

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

b) if the Contracting 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 Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

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

d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

Article 5
Permanent establishment

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is holly or partly carried on.

2. The term “permanent establishment” includes especially:

a)      a place of management;

b)      a branch;

c)      an office;

d)      a factory:

e)      a workshop;

f)        a mine, quarry or other place of extraction of natural resources;

g)      a building site or construction or assembly project which exists for more than twelve months.

3. The term “permanent establishment” shall not be deemed to include:

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

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

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

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

e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character for the enterprise .

4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph 5 applies-shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise.

However, an insurance company of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State provided that, through a representative other than the persons to whom paragraph 5 below applies, it receives premium or insures risks in that other State.

5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.

6. 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.

7. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on the activity of providing the services within that other Contracting State of artistes or athletes referred to in Article 17.

Article 6
Income from Immovable property

1. Income from immovable property may be taxed in the Contracting State in which such property is situated.

2. a) Subject to the provisions of sub-paragraphs b) and c) the term “immovable property” shall be defined in accordance with the law of the Contracting State in which the property in question is situated;

b) the term shall, however, 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 immovable 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;

c) 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 income from immovable property of an enterprise and to income from immovable property used for the performance of professional 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. 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 the determination of 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.

4. 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.

5. 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 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.

Article 9
Associated enterprises

Where:

a) 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,

b) 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 law of that State, but the tax so charged shall not exceed 15 percent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

3. Notwithstanding the provisions of paragraph 2 German tax on dividends paid to a company being a resident of Brazil by a company being a resident of the Federal Republic of Germany, at least 25 percent of the capital of which is owned directly or indirectly by the former company itself, or by it together with other persons controlling it or being under common control with it, shall not exceed 25,75 percent of the gross amount of such dividends as long as the rate of German corporation tax on distributed profits is lower than that on undistributed profits and the difference between those two rates is 15 percentage points or more.

4. The provisions of paragraphs 1, 2 and 3 shall not apply if the recipient of the dividends, being a resident of a Contracting State, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 shall apply.

5. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or other rights not being debt-claims, participating in profits, as well as income from other Corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident.

6. Where a resident of the Federal Republic of Germany has a permanent establishment in Brazil, this permanent establishment may be subject to a tax withheld at source in accordance with Brazilian law. However, such a tax cannot exceed 15 percent of the gross amount of the profits of that permanent establishment determined after the payment of the Corporate tax related to such profits.

7. 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 to persons who are not residents of that other State, or subject the company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

8. The tax rate limitation foreseen in paragraphs 2 and 6 shall not apply to dividends or profits paid or remitted before the 1st of January 1978.

Article 11
Interest

1. Interest 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 interest may be taxed in the Contracting State in which it arises, and according to the laws of that State, but the tax so charged shall not exceed:

a) 10 percent of the gross amount of the interest if the recipient is a bank and the loan is granted for a period of at least 7 years in connection with the purchase of industrial equipment with the study, the purchase and installation of industrial or scientific units, as well as with the financing of public works;

b) 15 percent of the gross amount of the interest in all other cases.

3. Notwithstanding the provisions of paragraph 2 interest arising in a Contracting State and paid to the Government of the other Contracting State, a political subdivision thereof or any agency (including a financial institution) wholly owned by that Government, or political subdivision shall be exempt from tax in the first-mentioned Contracting State.

4. The term “interest” as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as other income assimilated to income from money lent by the taxation law of the Contracting State in which the income arises.

5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the interest, being a resident of a Contracting State, has in the other Contracting State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is effectively connected. In such a case, the provisions of Artlcle 7 shall apply.

6. The limitation established in paragraph 2 shall not apply to interest arising in a Contracting State and paid to a permanent establishment of an enterprise of the other Contracting State which is situated in a third State.

7. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated.

8. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, 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 recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law 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 be taxed in the Contracting State in which they arise, and according to the laws of that State, but the tax so charged shall not exceed:

a)      25 percent of the gross amount of royalties arising from the use or the rigth to use trade marks;

b)      15 percent in all other cases.

3. The term “royaties” 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 cinematograph films, films or tapes for television or radio broadcasting); any patent, trade marks, design or model, plan, secret formula or process, as well as for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

4. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority 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 in connection with which the obligation to pay the royalties was incurred and such royalties are borne by the permanent establishment then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated.

5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the royalties, being a resident of a Contracting State, has in the other Contracting State in which the royalties arise, a permanent establishment with which the right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article 7 shall apply.

6. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, 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 recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

7. The tax rate limitation foreseen in paragraph 2b shall not apply to royalties paid before the 1st of January 1977, when such royalties are paid to a resident of a Contracting State which holds directly or indirectly at least 50 percent of the voting capital of the company paying such royalties.

Article 13
Capital gains

1. Gains from the alienation of immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which the immovable property is situated.

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 professional services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in the other State. However, gains from the alienation of ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships an aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

3.Gains from the alienation of any property or right other than those mentioned in paragraphs 1 and 2 may be taxed in both Contracting States.

Article 14
Independent personal services

1. Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar nature shall be taxable only in that State, unless the payment of such activities and services is borne by a permanent establishment situated in the other Contracting State or a company resident therein. In such a case, the income may be taxed in that other State.

2. The term “professional services” includes, especially, independent scientific, technical, 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, 19, 20 and 21, 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:

a) 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

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

c) 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 in respect of an employment exercised aboard a ship or aircraft 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 or of any council of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17
Artistes and athletes

Notwithstanding any other provision of this Agreement, income derived by public entertainers, such as theatre, motion picture, radio or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are exercised.

Article 18
Governmental payments

1.    Remuneration including pensions, paid by, or out of funds created by, a Contracting State, a Land, a political subdivision or a local authority thereof to any individual in respect of an employment may be taxed only in that State. If, however, the employment is exercised in the other Contracting State by a national of that State not being a national of the first-mentioned State, the remuneration shall be taxable only in that other State.

2.    The provisions of Articles 15, 16 and 19 shall apply to remuneration or pensions in respect of services rendered in connection with any trade or business carried on by one of the Contracting States, 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 program of a Contracting State, a political subdivision or a local authority thereof, out of funds exclusively supplied by that State, political subdivision or local authorities thereof, to a specialist or volunteer seconded to the other Contracting State with the consent of that other State.

Article 19
Pensions and annuities

1. Subject to the provisions of paragraphs 1 and 3 of Article 18, pensions and other similar remuneration not exceeding an amount equivalent to DM 12.000 in a calendar year, and annuities paid to a resident of a Contracting State shall be taxable only in that State.

The amount of pension which exceeds the above-mentioned limit may also be taxed in the other Contracting State, if it is derived from that State.

2. Pensions, annuities and other recurrent or non-recurrent payments made to any individual by the Federal Republic of Germany or by a Land, political subdivision or local authority thereof as compensation for damage resulting from military action or political persecution shall be exempt from tax in Brazil.

3. As used in this Article:

a) the term “pensions and other similar remuneration” means periodic payments made after retirement in consideration of past employment or by way of compensation for injuries received in connection with past employment;

b) the term “annuity” means a stated sum payable periodically at stated times during life, or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth (other than services rendered).

Article 20
Teachers or researchers

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

Article 21
Students and business apprentices

1. An individual who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely;

a) as a student at a university, college or school in that first-mentioned Contracting State;

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

c) as the recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organisation, or,

d)as a member of a technical cooperation programme entered into by the government of the other Contracting State, shall be exempt from tax in that first-mentioned Contracting State in respect of remittances from abroad for the purposes of his maitenance, education or training.

1. An individual who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purposes of his education or training shall be exempt from tax in that first-mentioned Contracting State for a period not exceeding three consecutive fiscal years in respect of remuneration from employment in that State, provided that the remuneration does not exceed in the fiscal year an amount corresponding to DM 7.200.

Article 22
Income not expressly mentioned

Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of his Agreement, may be taxed in both Contracting States.

Article 23
Capital

1. Capital represented by immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which such property is situated.

2. Capital represented by movable property forming part of the business property of a permanent establishment of an enterprise, or by movable property pertaining to a fixed base used for the performance of professional services, may be taxed in the Contracting State in which the permanent establishment or fixed base is situated.

3. Ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and 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 24
Methods for the elimination of double taxation

1. In the case of a resident of the Federal Republic of Germany there shall be excluded from the basis, upon which German tax is imposed, the following items of income:

a.     income from immovable property forming part of business property of a permanent establishment situated in Brazil and gains from the alienation of such property;

b.    business profits and gains to which Article 7 and paragraph 2 of Article 23 apply;

c.     dividends referred to in Article 10, which are paid to a company being a resident of the Federal Republic of Germany by a company being a resident of Brazil if at least 25 percent of the capital of the Brazilian company is owned directly by the German company;

d.    remuneration to which Article 15 and paragraphs 1 and 3 of Article 18 apply;

e.     profits to which paragraph 6 of Article 10 applies.

The Federal Republic of Germany will, however, retain the right to take into account in the determination of its rate of tax the items of income so excluded.

The foregoing provisions shall likewise apply to all items of capital situated in Brazil, if the income derived therefrom is or would be excluded from the basis on which German tax is imposed.

2. Unless the provisions of paragraph 1 apply, there shall be allowed as a credit against German income and corporation tax including the surcharge thereon payable in respect of income arising in Brazil, the Brazilian tax paid under the laws of Brazil and in accordance with the Agreement. The credit shall not, however, exceed that part of the German tax, as computed before the credit is given, which is approprlate to such income.

3. For the purpose of credit referred to in paragraph 2 the Brazilian tax shall be deemed to be:

a) in the case of dividends as defined in paragraph 5 of Article 10, 25 percent of such dividends if they are paid to a resident of the Federal Republic of Germany holding at least 10 percent of the voting capital of the Brazilian company, and 20 percent in all other cases;

b) in the case of interest as defined in paragraph 4 of Article 11, 20 percent of such interest;

c) in the case of royalties as referred to in paragraph 2 b of Article 12, 25 percent of such royalties if they are paid to a resident of the Federal Republic of Germany holding directly or indirectly at least 50 percent of the voting capital of a Brazilian company provided that they are not deductible in the determination of the taxable income of the company paying the royalties, and 20 percent in all other cases.

4. a resident of Brazil derives income which, in accordance with the provisions of this Agreement may be taxed in the Federal Republic of Germany, Brazil shall allow as a deduction from the tax on the income of that person an amount equal to the income tax paid in the Federal Republic of Germany.

The deduction shall not, however, exceed that part of the income tax as computed before the deduction is given, which is appropriate to the income which may be taxed in the Federal Republic of Germany.

Article 25
Non-discrimination

1)The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.

2)The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, relieves and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned State are or may be subjected.

4. In this Article the term “taxation” means taxes of every kind and description.

Article 26
Mutual agreement procedure

1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Agreement, he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident.

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 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.

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.

Article 27
Exchange of Information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons, authorities or courts other than those concerned with the assessment or collection of the taxes which are the subject of this Agreement or the determination of appeals or the prosecution of offences in relation thereto.

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

a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;

b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

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

Article 28
Diplomatic and consular officials

Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.

Article 29
Land Berlin

This Agreement shall also apply to Land Berlin, provided that the Government or the Federal Republic of Germany has not made a contrary declaration to the Government of the Federative Republic of Brazil within three months from the date of entry into force of this Agreement.

Article 30
Entry into force

1. This Agreement shall be ratified and the instruments of ratification shall be exchanged at Brasilia as soon as possible.

2. This Agreement shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect for the first time:

a) in Brazil:

I -as respects taxes withheld at source to amounts paid or remitted on or after January 1st of the calendar year immediately following the year in which the Agreement enters into force;

II -as respects other taxes covered by this Agreement to taxable years beginning on or after January 1st of the calendar year immediately following the year in which the Agreement enters into force.

b) in the Federal Republic of Germany:

I – as respects taxes withheld at source to amounts paid or remitted on or after January 1st of the calendar year immediately following the year in which the Agreement enters into force;

II – as respects other taxes covered by this Agreement for the assessment period beginning on or after January 1st of the calendar year in which the Agreement enters into force.

Article 31
Termination

This Agreement shall remain in force indefinitely, but either Contracting State may, on or before 30th June in any calendar year beginning after the expiration of a period of three years from the date of the entry into force, give to the other Contracting State, through diplomatic channels, written notice of termination.

In such a case this Agreement shall apply for the last time:

a.       In Brazil:

I – as respects taxes withheld at source, to amounts paid or remitted before the expiration of the calendar year in which the notice of termination is given;

II – as respects other taxes covered by thís Agreement, to the taxable year beginning in the calendar year in which the notice of termination is given.

b.      In the Federal Republic of Germany:

I – as respects taxes withheld at source, to amounts paid or remitted before the expiration of the calendar year in which the notice of termination is given;

II – as respects other taxes covered by this Agreement for the assessment period following the year in which notice of termination is given.

Done at Bonn this 27th day of June 1975 in two originals, each in the Portuguese, German and English language, all three texts being authentic. In case of divergent interpretations of the Portuguese and German texts, the English text shall prevail.

 

PROTOCOL

 

At the moment of the signature of the Agreement for the avoidance of double taxation with respect to taxes on income and capital, between the Federative Republic of Brazil and the Federal Republic of Germany, the undersigned, being duly authorized thereto, have agreed upon the following provisions which constitute an integral part of the present Agreement.

1.    With reference to Article 10:

It is understood that the term “dividends” includes distributions on certifícates of an investment-trust as well as, in the case of the Federal Republic of Germany, income derived by a sleeping partner from his participation as such.

2.    With reference to Article 10:

The value of shares issued by a corporation of a Contracting State and received by a resident of the other Contracting State shall not be subject to tax as income in either Contracting State.

3. With reference to Article 11:

a.       Interest arising in Brazil and received by the Deutsche Bundesbank, the Kreditanstalt für Wiederaufbau or the Deutsche Gesellschaft für Wirtschaftliche Zusammenarbeit (Entwicklungsgesellschaft) mbH in connection with their functions of public nature shall be considered as paid to the Government of the Federal Republic of Germany.

The competent authorities of the Contracting States shall determine by mutual agreement any other governamental institution to which this provision shall apply.

b.      It is understood that the commissions paid by a resident of Brazil to a bank or a financial Institution in connection with services rendered by such bank or financial institution are considered to be interest and subject to the provisions of paragraphs 2 and 3 of Article 11.

4. With reference to Article 12:

It is understood that the provisions of paragraph 2 b of Article 12 shall likewise apply to income derived from the rendering of technical assistance and technical services.

5. With reference to Article 14:

It is understood that the provisions of Article 14 shall apply even if the activities are exercised by a company or a civil society.

6. With reference to Artlcle 25, paragraph 2:

II is understood that the provisions of paragraph 6 of Article 10 are not in conflict with the provisions of paragraph 2 of Article 25.

7. With reference to Article 25, paragraph 3:

The provisions of the Brazilian law which do not allow that royalties as defined in paragraph 3 of Article 12, paid by a company resident of Brazil to a resident of the Federal Republic of Germany which holds at least 50 percent of the voting capital of that company, be deductible at the moment of the determination of the taxable income of the company resident of Brazil, are not in conflict with the provisions of paragraph 3 of Article 25 of the present Agreement.

8. With reference to Article 24:

Only the provisions of paragraph 2 of Article 24, with the exclusion of paragraphs 1 and 3 of that Article, shall apply to the profits of, and to the capital represented by property forming part of the business property of a permanent establishment, to dividends paid by, and to the shareholding in a company, or to gains referred to in paragraphs 1 and 2 of Article 13 of the Agreement, unless the resident of the Federal Republic of Germany concerned proves that, at least 90 percent of the receipts of the permanent establishment or company are derived from producing or letting goods and merchandise (including cases where such goods or merchandise are sold or let to customers outside Brazil), giving technical advice or rendering engineering or commercial services, or doing banking or insurance business, within Brazil, or from interest or royalties arising in Brazil and connected with the above-mentioned activities, or from interest paid by the Government of Brazil or a political subdivision thereof or from interest and dividends paid by a company being a resident of Brazil if such company derives at least 90 per cent of its receipts from the above-mentioned activities.

9. The tax rate limitation provided for in paragraphs 2 and 6 of Article 10 does not apply to income to which, according to No 8 of the Protocol aforementioned, only the provisions of paragraph 2 of Article 24 shall be applied.

Done at Bonn this 27th day of June 1975, in two originals, each in the Portuguese, German and English languages, all three texts being authentic. In case of divergent interpretations of the Portuguese and German texts, the English text shall prevail.


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