4. (a) Notwithstanding point (a) of paragraph 3, double taxation shall be avoided by a credit referred to in point (b) of paragraph 3 where income or property would be subject to double taxation under various provisions of the Convention and that conflict cannot be settled by a procedure provided for in Article 25 (mutual agreement procedure). With regard to capital gains tax, the double taxation convention signed by Germany and the United States allows a German company holding real estate in the United States to be taxed in the United States. The same goes for US companies owning real estate in Germany. 3. Maintenance payments paid by a resident of a Contracting State and deductible in that State of arrest to a resident of the other Contracting State may be taxed only in that other State. The term “maintenance”, as used in this article, means periodic payments (on the basis of a written separation agreement or divorce order, separate maintenance or forced maintenance) that are taxable to the beneficiary under the law of the State in which he is established. The exclusion of foreign activity income allows expatriates to simply exclude from US taxation the approximately 100,000 $US of their employment income. Resorting to the exclusion of foreign business income is often preferable for expats who pay less German income tax than the U.S.
income tax they would do (so the U.S. tax credits they could claim against German taxes paid would not completely reduce their U.S. tax debt). It can also be applied to income generated both in the United States and abroad, as long as the income is professional income and the expat can prove that they live abroad. 2. The term `interest` used in this Article means income from claims of any kind, whether or not secured by a mortgage, and in particular income from government securities and income from bonds or bonds, including surcharges and haircuts related to such securities, bonds or bonds, as well as any other income related to such securities, obligations or obligations, as well as any other income arising from the tax law of the Contracting State, in which the income is received shall be treated as income from the funds lent in accordance with the tax laws of the State Party where the income is received. Default interest shall not be considered as interest within the meaning of this Agreement. However, the term “interest” does not cover the income referred to in Article 10 (dividends). As a result, however, American expats living in Germany must file two tax returns and are exposed to the risk of double taxation.
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