(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) Such dividends may, however, also be taxed in the Contracting State of which the company paying the dividends is a resident, in accordance with the law of that State; however, if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

(3) By derogation from paragraph (2), in respect of dividends whose beneficial owner is a company which directly controls at least 10 per cent of the capital of the company paying the dividend,

• (a) The tax shall not be levied if the dividends are paid by a company resident in Sweden, and
• (b) The tax shall not exceed 5 per cent of the gross amount of the dividends if the dividends are paid by a joint stock company in the Federal Republic of Germany; the tax may, however, not be levied if the difference between the rates of the German corporation tax for distributed and undistributed profits is less than 5 percentage points.

(4) The term "dividends" means, for the purposes of this Article, income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other company shares, if the income therefrom under the law of the State of which the paying company is a resident is accorded equal tax treatment with income from shares. The term "dividends" also includes:

• (a) in the Federal Republic of Germany:
  • (i) the income of a silent partner from his participation as such, income from participating loans, participating bonds and similar profit-dependent emoluments, and also distributions on certificates of an investment fund;
  • (ii) in Sweden:
    • (A) distributions on share-fund (aktiefond) share certificates.
• (b) Other income which, under the law of the State of which the debtor is a resident, shall be subject to the same tax treatment as income from company shares.

(5) By derogation from paragraphs (1) to (3), income from rights or claims with profits participation (including in the Federal Republic of Germany income of a silent partner from his participation as such or from participating loans and participating bonds) may be taxed under the law of the State in which they arise, if they are deductible there in the determination of the debtor's profit.

(6) The provisions of paragraphs (1) to (3) shall not apply if the beneficial owner, 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 Contracting State independent personal services from a fixed base situated therein and the participation in respect of which dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, or as the case may be, shall apply.

(7) Where a company resident in one Contracting State derives profits or income from the other Contracting State, that other State may neither tax the dividends paid by the company, unless such dividends are paid to a person resident in that other State or the holding in respect of which the dividends are paid is effectively connected with the permanent establishment or fixed base situated in that other State, nor subject the company's 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 that other State.