Joint Declaration on Signing Protocol.. Convention US and Germany… Taxation Income, Cap Gains and Other, signed June 1, 2006

Joint Declaration

by the United States of America and the Federal Republic of Germany

on the Occasion

of the Signing on 1 June 2006

of the Protocol Amending the Convention

Between the United States of America andthe Federal Republic of Germany for

the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with

Respect to Taxes on Income and Capital and to Certain Other Taxes

Signed on 29
th
August 1989

The United States of America and the Federal Republic of Germany on the occasion of the
signing on 1 June 2006 of the Protocol Amending the Convention Between the United States
of America and the Federal Republic of Germany for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain
Other Taxes signed on 29
th
August 1989 (hereafter “Protocol of 1 June 2006”), and with
regard to Article 18 (Pensions, Annuities, Alimony, Child Support, and Social Security) of the
Convention as amended by the Protocol of 1 June 2006, in which it is agreed that pensions
and other similar remuneration paid in consideration of past employment as well as benefits
paid under the social security legislation of a Contracting State shall be taxable only in the
Contracting State of which the recipient of that pension or benefits on the basis of the social
security legislation is a resident,
Have reached the following understanding:
I.
1. The Federal Republic of Germany draws attention to the fact

a) that, effective as of 1 January 2005, legisla tion introduced on 5 July 2004 (Federal
Law Gazette part I page 1427) has fundamentally changed in the Federal Republic of
Germany the taxation of retirement income,
b) that these changes combine full taxation of retirement income with extended tax
exemption of contributions to pension plans.
2. The Federal Republic of Germany therefore expresses its conviction
a) that, as a result of these legislative changes, Article 18 of the Convention as amended
by the Protocol of 1 June 2006 should be further amended to such effect as to also
provide for the taxation of retirement income in the Contracting State in which the
income arises or in which the contributions to the pension plan were exempt from
taxation;
b) that taking into account the successive implementation in the Federal Republic of
Germany of the taxation of retirement income, as amended by legislation of 5 July
2004, any further amendment to Article 18 of the Convention of 29 August 1989 as
amended by the Protocol of 1 June 2006 should not enter into force before 1 January
2015.
II.
The Federal Republic of Germany and the United States of America therefore reaffirm their
intentions declared during negotiations on the Protocol of 1 June 2006 to enter into
consultations at the appropriate time, but not before 1 January 2013, with a view to further
amending Article 18 of the Convention as amended by the Protocol of 1 June 2006 to allow
for the taxation of retirement income in the Contracting State in which the income arises
based on the following principles:

1. Benefits paid under the social security legislation of a Contracting State may also be taxed
by that Contracting State; the tax may not however exceed 15 percent of the gross amount of
such payments;
2. Pensions and other similar remuneration paid in consideration of past employment may
also be taxed in the Contracting State in which the employment had been exercised for a
substantial period of time; the tax may not however exceed 15 percent of the gross amount of
such payments.
This Joint Declaration is signed in duplicate, in the Englishand German languages.
Berlin, 1 June 2006
FOR THE FOR THE
UNITED STATES OF AMERICA: FEDERAL REPUBLIC OF GERMANY: