Islamabad, September 26, 2023 – Pakistan and Germany have taken significant steps toward strengthening their economic ties by initiating renegotiations on the Agreement for the Elimination of Double Taxation.
The Federal Board of Revenue (FBR) of Pakistan led the efforts to revise the existing agreement, which aims to prevent double taxation and tax evasion while promoting economic cooperation between the two nations.
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Representatives from both Pakistan and Germany convened in Islamabad for the first round of negotiations held from September 18 to September 22, 2023. Following extensive discussions and mutual agreement on key aspects of the draft Agreement, the respective heads of the tax delegations initialed the first draft on September 22, 2023, marking a significant milestone in the renegotiation process.
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The original Agreement for the Avoidance of Double Taxation between Pakistan and Germany was signed in 1994 and is in need of updating to align with evolving international and domestic tax rules and regulations. The revision of this agreement seeks to ensure that residents of both countries are not subjected to double taxation on their income and, importantly, prevents opportunities for non-taxation or reduced taxation through abusive arrangements.
Once the revised Agreement is finalized, it is expected to have several positive impacts:
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Strengthened Safeguards: The revised agreement will enhance the safeguards against double taxation, providing greater certainty to taxpayers in both countries.
Promotion of Economic Cooperation: By eliminating barriers related to taxation, the agreement aims to promote economic cooperation and bolster existing bilateral economic relations.
Encouraging Investments: The revised agreement is expected to attract more investments in both Pakistan and Germany, as investors gain confidence in the clarity and fairness of the tax rules applicable to cross-border business transactions.
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Boosting Trade: Double taxation relief will facilitate trade activities between the two nations, further stimulating economic growth and commerce.
The renegotiation of the Agreement for the Elimination of Double Taxation underscores the commitment of both Pakistan and Germany to foster closer economic ties and create a favorable environment for businesses and taxpayers in both countries. This development is expected to have a positive impact on trade and economic cooperation while ensuring that taxation remains fair and predictable for all parties involved.
