Subject-to-tax clause

The subject-to-tax clause (fallback clause) is, in addition to the switch-over clause and the activity clauses, an instrument of current German agreement practice (tax agreement). According to the agreements, the country of residence regularly exempts the income and assets for which the source country receives the right to tax, e.g. B. Permanent establishment income.
This applies regardless of whether this right to tax is actually exercised. Subject-to-tax clauses are intended to ensure that the exemption is made dependent on the actual taxation in the other contracting state. Agreement benefits are only granted in the source country if the country of residence actually taxes the income (subject-to-tax clause). Fallback clauses, on the other hand, work from the point of view of the country of residence.

Dieser stellt die ausländischen Einkünfte frei, wenn der Quellenstaat tatsächlich besteuert, z. B. Einkünfte aus nicht selbständiger Arbeit. Mit diesen Vorbehaltsklauseln soll eine virtuelle Double taxation und eine Under taxation vermieden werden.

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