Credit and deduction of foreign tax

(1) Where the distributed and deemed-distributed income includes income from a foreign state that was subject there to a tax creditable 1. under section 34c(1) of the Income Tax Act, 2. under section 26(1) of the Corporate Income Tax Act, or 3. under a double taxation agreement, against income tax or corporate income tax, then, for investors subject to unlimited tax liability, the foreign tax assessed and paid, reduced by any entitlement to a reduction that has arisen, is to be credited against the part of the income tax or corporate income tax attributable to that foreign income, increased by the proportionate foreign tax. Where a withholding tax is levied, in the state in which the foreign special investment fund is resident, on distributed or deemed-distributed income attributable to foreign special investment units, the first sentence applies accordingly to its crediting.
(2) To determine the part of the income tax or corporate income tax attributable to the foreign income under subsection (1), increased by the proportionate foreign tax, 1. for investors liable to income tax, the average tax rate resulting from the assessment of the taxable income, including the foreign income, under sections 32a, 32b, 34, 34a and 34b of the Income Tax Act, is to be applied to the foreign income, 2. for investors liable to corporate income tax, the German corporate income tax resulting from the assessment of the taxable income, including the foreign income, without applying sections 37 and 38 of the Corporate Income Tax Act, is to be apportioned; the apportionment is made according to the ratio of the foreign income to the sum of the income.
(3) The maximum amount of creditable foreign taxes from different states is to be calculated in aggregate for the distributed and deemed-distributed income from each individual special investment fund.
(4) Section 34c(1), third and fourth sentences and (2), (3) and (6) of the Income Tax Act apply accordingly. Section 34c(6), first sentence of the Income Tax Act does not preclude the crediting of foreign tax under section 34c(1) of the Income Tax Act for foreign special investment units.
(5) Foreign taxes attributable to distributed and deemed-distributed income that is exempt from tax under section 43(1) are not to be taken into account in the crediting or deduction under subsection (1).