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.
(more…)Tag: avoidance of double taxation treaty
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Pakistan and Iraq Sign Double Taxation Elimination Convention
Islamabad, August 10, 2023 – In a significant step toward strengthening economic cooperation and enhancing investment, Pakistan and Iraq have successfully signed a convention aimed at eliminating double taxation within their respective jurisdictions.
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Pakistan, Tajikistan amend convention for avoidance of double taxation
Pakistan and Tajikistan have signed to amend the existing convention for avoidance of double taxation, Federal Board of Revenue (FBR) on Monday.
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United States, Croatia sign income tax treaty
WASHINGTON: The United States and Croatia on Wednesday signed a comprehensive income tax treaty between the two countries, according to an official statement issued by US Department of the Treasury.
In a ceremony held at the US Department of State today, Under Secretary of State for Economic Growth, Energy and the Environment Jose W. Fernandez and Croatia’s Minister of Finance Dr. Marko Primorac signed the treaty.
The new tax treaty is the first of its kind between the United States and Croatia.
“I am honored to sign the US-Croatia income tax treaty with you today, Finance Minister Primorac,” said Under Secretary Fernandez. “We look forward to taking this monumental step towards further strengthening trade and commercial ties between the United States and Croatia.”
“The Treasury Department is pleased to conclude this new tax treaty with Croatia. It is the first comprehensive tax treaty that the United States has signed in over ten years and reflects our current tax treaty policies and is a milestone in the Treasury’s efforts to expand the U.S. tax treaty network. We appreciate the collaboration Croatia showed throughout the negotiations,” said Lily Batchelder, Assistant Secretary (Tax Policy).
The new tax treaty closely follows the US Model income tax treaty. Key aspects of the new treaty include:
Elimination of withholding taxes on cross-border payments of dividends paid to pension funds and on payments of interest;
Reductions in withholding taxes on cross-border payments of dividends other than those paid to a pension fund, as well as royalties;
Modern anti-abuse provisions intended to prevent instances of non-taxation of income as well as treaty shopping;
Robust dispute resolution mechanisms including mandatory binding arbitration; and
Standard provisions for the exchange of information to help the revenue authorities of both nations carry out their duties as tax administrators.
The new tax treaty will enter into force after the United States and Croatia have notified each other that they have completed their requisite domestic procedures, which in the case of the United States refers to the advice and consent to ratification by the US Senate.
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Pak-Afghan 2nd round talks on DTA concludes
ISLAMABAD: Pakistan and Afghanistan have concluded the second round of talks on double taxation agreement (DTA).
According to a statement issued on Saturday said that Afghanistan Revenue Department (ARD) and Federal Board of Revenue (FBR) concluded second round of negotiations on Double Taxation Agreement (DTA) between Pakistan and Afghanistan.
READ MORE: Power of the Board and Commissioner to call for records
The four-member delegation of Afghanistan Revenue Department (ARD) were on visit to Pakistan, which commenced from December 27, 2021.
The inaugural session was presided over by Qaiser Iqbal, Director General (International Taxes), FBR who welcomed the delegates and hoped that the proposed DTA between the two brotherly countries would go a long way in fostering economic relationships and would also contribute to the development of both the countries.
The negotiations were conducted in the most cordial and friendly atmosphere. Both the delegations discussed all the outstanding issues of the first round of negotiations held in Islamabad from 28th to 30th March, 2016. Both the sides presented and appreciated each other’s respective positions.
However, it was agreed that the un-resolved issues would be discussed and finalized in the third round of negotiations to be held in Kabul, Afghanistan on mutually agreed dates.
The Afghan delegation was led by Esmatullah Salimi, Revenue Audit Director, ARD and included Abdul Wali Noori, Technical Deputy Director-General, ARD, Nida Mohammad Seddiqi, Legal Services Director, ARD and Najeebullah Ahmadzai, Advisor to MoF, while the Pakistan delegation was headed by Qaiser Iqbal, Director General (International Taxes), FBR and included Barrister Nowsherwan Khan, Chief (International Taxes) and Ms. Hira Nazir, Secretary (Tax Treaties & Conventions), FBR.
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Agreements for avoidance of double taxation
Section 107 of Income Tax Ordinance, 2001 is related to agreements for the avoidance of double taxation and prevention of fiscal evasion.
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Section 107 of the Income Tax Ordinance, 2001:
107. Agreements for the avoidance of double taxation and prevention of fiscal evasion. —(1) The Federal Government may enter into a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement or similar agreement or mechanism for the avoidance of double taxation or assistance in the recovery of taxes or for the exchange of information for the prevention of fiscal evasion or avoidance of taxes including automatic and spontaneous exchange of information with respect to taxes on income imposed under this Ordinance or any other law for the time being in force and under the corresponding laws in force in that country and may, by notification in the official Gazette, make such provisions as may be necessary for implementing the said instruments.”; and
“(1A) Notwithstanding anything contained in any other law to the contrary, the Board shall have the powers to obtain and collect information when solicited by another country under a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement, a similar arrangement or mechanism.
(1B) Notwithstanding the provisions of the Freedom of Information Ordinance, 2002 (XCVI of 2002), subject to clause (a) of sub-section (3) of section 216 of this Ordinance any information received or supplied, and any concomitant communication or correspondence made, under a tax treaty, a tax information exchange agreement, a multilateral convention, a similar arrangement or mechanism, shall be confidential.
(2) Subject to section 109, where any agreement is made in accordance with sub-section (1), the agreement and the provisions made by notification for implementing the agreement shall, notwithstanding anything contained in any law for the time being in force, have effect in so far as they provide for at least one of the following –
(a) relief from the tax payable under this Ordinance;
(b) the determination of the Pakistan-source income of non-resident persons;
(c) where all the operations of a business are not carried on within Pakistan, the determination of the income attributable to operations carried on within and outside Pakistan, or the income chargeable to tax in Pakistan in the hands of non-resident persons, including their agents, branches, and permanent establishments in Pakistan;
(d) the determination of the income to be attributed to any resident person having a special relationship with a non-resident person; and
(e) the exchange of information for the prevention of fiscal evasion or avoidance of taxes on income chargeable under this Ordinance and under the corresponding laws in force in that other country.
(3) Notwithstanding anything in sub-sections (1) or (2), any agreement referred to in sub-section (1) may include provisions for the relief from tax for any period before the commencement of this Ordinance or before the making of the agreement.
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Pakistan, Hungary sign treaty for exchange of information
ISLAMABAD: Pakistan and Hungary have signed a treaty for exchange of information under newer version of protocol of avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, a statement issued by Federal Board of Revenue (FBR) said on Wednesday.
Hungarian Ambassador to Pakistan Istvan Szabo signed the Protocol on behalf of Government of Hungary, while Dr. Muhammad Ashfaq Ahmed, Member (Inland Revenue Operations)/Additional Secretary inked it on behalf of Pakistan.
The Article 27 of the Convention deals with Exchange of Information. Organization for Economic Cooperation and Development (OECD) approved changes in the Article on Exchange of Information in July 2012 to include provisions concerning cooperation between the tax administrations of the two Contracting States.
The present article embodies the rules under which information may be exchanged to the widest possible extent to include taxes other than the income tax.
Therefore, to incorporate the latest standard of administrative assistance in the extant Convention, Pakistan and Hungary decided to replace the Article on Exchange of Information with the new version through Protocol.
The new Article on exchange of information provides that the competent authorities of the Contracting States shall exchange such information that will not be restricted by Article 1 & 2 of the Convention and no state shall decline to provide information merely for the reason that such information is of no interest to it, or because the information is held by a bank, other financial institution or nominee or a person acting in an agency or fiduciary capacity.
According to the new version of the Article, the Contracting States shall exchange such information on request as is foreseeably relevant for carrying out of provisions of the convention or to the administration or enforcement of the domestic tax laws of the requesting state.
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FBR threatens terminating tax treaty with UAE
ISLAMABAD: Federal Board of Revenue (FBR) has threatened to terminate avoidance of double tax treaty with the United Arab Emirates (UAE) for not sharing information of Pakistanis having assets in that country.
In a statement on Monday, the FBR spokesman said that the tax authorities had once again asked UAE authorities to provide information of Pakistanis having iqama (residential permit) in the UAE.
The spokesman said that the FBR was conducting scrutiny of those Pakistanis who transferred money illegally to other destinations by evading tax money.
The spokesman said that those Pakistanis fraudulently shifted the money and concealed by taking advantage of iqama.
The FBR wrote another memorandum to the UAE authorities to provide details otherwise Pakistan would consider the other option to terminate the avoidance of double taxation treaty.
Pakistan and UAE signed a full scope tax treaty on February 7, 1993 and it was come into force on November 30, 1994. The treaty became effective in Pakistan from July 01, 1995 and in the UAE on January 01, 1995.
Under Article 27 of the Treaty both the states are bound to exchange information in case of fiscal fraud and tax evasion.
The Article 27 is as follow:
01. The competent authorities of the Contracting States shall exchange such information (including documents) as is necessary for carrying out the provisions of the Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention, in so far as the taxation thereunder is not contrary to the Convention, in particular for the prevention of fraud or evasion of such taxes.
Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State.
However, if the information is originally regarded as secret in the transmitting State, it shall be disclosed only to persons of authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention.
Such persons or authorities shall use the information only for such purposes but may, disclose the information in public court proceedings or in judicial decisions.
The competent authorities shall, through consultations, develop appropriate conditions, methods and techniques concerning the matters in respect of which such exchange of information shall be made, including where appropriate, exchange of information regarding tax avoidance.
2. The exchange of information or documents shall be either on a routine basis or on request with reference to particular cases or both.
The competent authorities of the Contracting States shall agree from time to time on the list of the information or documents which shall be furnished on a routine basis.
3. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
a) to carry out administrative measures at variance with the laws or administrative practice of that or of the other Contracting State;
b) to supply information or documents which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
c) to supply information or documents which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.