DT15022 – DT: Pakistan: double taxation agreement, Article 23: Elimination of double taxation

(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

1. Pakistan tax payable under the laws of Pakistan and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Pakistan (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Pakistan tax is computed;
2. in the case of a dividend paid by a company which is a resident of Pakistan to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Pakistan tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Pakistan tax payable by the company in respect of the profits out of which such dividend is paid.

(2) In Pakistan double taxation shall be eliminated as follows:

subject to the provisions of the laws of Pakistan regarding the allowance as a credit against Pakistan tax, the amount of United Kingdom tax payable under the laws of the United Kingdom and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of Pakistan, in respect of income from sources within the United Kingdom which has been subjected to a tax both in Pakistan and the United Kingdom shall be allowed as credit against the Pakistan tax payable in respect of such income but in an amount not exceeding that proportion of Pakistan tax which such income bears to the entire income chargeable to Pakistan tax.

(3) For the purpose of paragraph (1) of this Article, the term `Pakistan tax payable` shall be deemed to include any amount which would have been payable as Pakistan tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under any of the following provisions of Pakistan law:

1. Section 48 of the Income Tax Ordinance 1979 (XXXI of 1979) (as amended), Clauses 7, 8, 75, 76, 80(c) and (cc), 81, 95B, 96, 98, 99, 100, 101, 102, 119, 120, 121, 121A, 121B, 122, 122A, 123, 124, 125 and 125A of Part I and Clause 1 of Part II of the Second Schedule to that Ordinance; so far as they were in force on, and have not been modified since the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or
2. any other provision which may subsequently be made granting an exemption from or reduction of, tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

Provided that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from any source if the income arises in a period starting more than ten years after the exemption from, or reduction of, Pakistan tax was first granted in respect of that source.

(4) For the purposes of paragraphs (1) and (2) of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State.

(5) Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other State and the profits so included are profits which would have accrued to that enterprise of the other State if the conditions made between the enterprises had been those which would have been made between independent enterprises dealing at arm’s length, the amount included in the profits of both enterprises shall be treated for the purposes of this Article as income from a source in the other State of the enterprise of the first-mentioned State and relief shall be given accordingly under the provisions of paragraph (1) or paragraph (2) of this Article.

Document Resource

Related Posts:

• 5 Keys to Achieving Financial Independence
• Companies (Appointment of Trustees) Act, 1972
• Wealth Tax Act, 1963
• Agricultural taxation in Pakistan
• Income Tax of Pakistan
• The Pakistan Institute of International Affairs Introduces Official Website
• Powers of the President under Article 45
• Pakistan And Taliban- What Should The United States of America Do?
• PAKISTAN CONSTITUTION AND PROHIBITION OF TORTURE
• Senior citizens can avail 50pc tax rebate in payable income, says FBR
• The Punjab/Sind/N.W.F.P./Baluchistan Muslim Personal Law (Shariat) Application Act, 1962
• Trafficking: Issues and Framework of Laws
• Pakistan Citizenship Act, 1951
• Prime minister should not be weakened, says CJP
• Bankers’ Books Evidence Act, 1891