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United Arab Emirates
AGREEMENT BETWEEN THE ISLAMIC REPUBLIC OF PAKISTAN AND THE UNITED ARAB EMIRATES FOR THE
AVOIDANCE OF DOUBLE TAXATION
S.R.O. 1163 (I)/94 dated 30th November, 1994. - WHEREAS
the Government of the Islamic Republic of Pakistan and the United Arab Emirates have
executed a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income on the 7th day of February, 1993, attached
herewith as Annex;
NOW, THEREFORE, in exercise of the powers conferred by section 163 of the Income Tax
Ordinance, 1979 (XXXI of 1979), the Federal Government is pleased to direct that the
provisions of the said Convention shall enter into force on the 7th March, 1994, and shall
have effect in Pakistan in respect of any income derived on or after the first day of
July, 1994.
Annexure
CONVENTION BETWEEN THE ISLAMIC REPUBLIC OF PAKISTAN AND THE UNITED ARAB EMIRATES FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO
TAXES ON INCOME
The Government of the Islamic Republic of Pakistan and Government
of United Arab Emirates.
DESIRING to conclude a Convention for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income;
HAVE AGREED as follows:
ARTICLE 1
PERSONAL SCOPE
This Convention shall apply to persons who are residents of one or both of the Contracting States.
ARTICLE 2
TAXES COVERED
1. The taxes to which this Convention shall apply are;
(a) in Pakistan:
(i) the Income Tax;
(ii) the Super tax; and
(iii) the Surcharge.
(hereinafter referred to as "Pakistan 'tax")
(b) in the United Arab Emirates;
(i) Income Tax;
(ii) Corporation Tax;
(iii) Surcharge on services.
(hereinafter referred to as "United Arab Emirates
2. The Convention shall also apply to any identical or substantially similar taxes which
are imposed by either Contracting States after the date of signature of the present
Convention in addition to, or in place of, the taxes referred to in paragraph 1. The
competent authorities of the Contracting States shall notify each other of any substantial
changes which are made in their respective taxation laws.
ARTICLE 3
GENERAL DEFINITIONS
1. In this Convention unless the context otherwise requires:-
(a) the term "Pakistan" used in the geographical sense means Pakistan as defined
in the Constitution of the Islamic Republic of Pakistan and includes any area outside the
territorial waters of Pakistan which under the laws of Pakistan and international law is
an area within which Pakistan exercises sovereign rights and exclusive jurisdiction with
respect to the natural resources of the seabed, subsoil and superjacent waters;
(b) the term "United Arab Emirates" means the United Arab Emirates and, used in
geographical sense to the area in which the territory under its sovereignty as well as
territorial, airspace and submarine areas over which the United Arab Emirates exercises in
conformity with international law sovereign rights including mainlands and islands under
its jurisdiction;
(c) the terms "a Contracting State" and "the other Contracting State"
mean Pakistan or the United Arab Emirates as the context requires;
(d) the term "tax" means Pakistan tax or the United Arab Emirates tax, as the
context requires, but shall not include any amount which is payable in respect of any
default or omission in relation to the taxes to which the Convention applies or which
represents a penalty imposed relating to those taxes;
(e) the term "person" includes an individual, a company and any other entity
which is treated as a taxable unit under the taxation laws in force in the respective
Contracting States;
(f) the term "company" means any body corporate or any entity which is treated
as a company or body corporate under the taxation laws in force in the respective
Contracting States;
(g) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively, an enterprise carried on by a resident of
the other Contracting State;
(h) the term "competent authority" means;
(i) in Pakistan, the Central Board of Revenue or its authorised representative;
(ii) in the U.A.E. the Ministry of Finance and Industry or its authorized representative.
(i) the term "national" means any individual, possessing the nationality of a
Contracting State and any legal person, partnership or association deriving its status
from the laws in force in the Contracting State;
(j) the term "international traffic" means any transport by a ship or aircraft
operated by an enterprise of a contracting State except when the ship or aircraft is
operated solely between places in the other Contracting State.
2. As regards the application of this Convention by a Contracting State, any term not
defined herein shall, unless the context otherwise requires, have the meaning which it has
under the laws of that State concerning the taxes to which the Convention applies.
ARTICLE 4
RESIDENT
1. For the purposes of this Convention, the term "resident
of a Contracting State" means any person who, under the laws of that State, operates
an industrial or commercial establishment, or is liable to tax therein by reason of his
domicile, residence, place of management or any other criterion of a similar nature.
2. Where by reason of the provision of paragraph 1, an international is a resident of both
Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he has a permanent home
available to him, if he has a permanent home available to him in both States, he shall be
deemed to be a resident of the State with which his personal and economic relations are
closer (centre of vital interests).
(b) if the State in which he has his centre of vital interests cannot be determined, or if
he has not a permanent home available to him in either State, he shall be deemed to be a
resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States in neither of them, he shall be deemed to
be a resident of the State in which he is a national; if he is a national of both States
or neither of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the provisions of paragraph 1, a person other than an individual is
a resident of both Contracting States, then it shall be deemed to be a resident of the
State in which its place of effective management is situated.
ARTICLE 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Convention, the term "permanent
establishment,, means a fixed place of business through which the business of the
enterprise is wholly or partly carried on.
2. The term "permanent establishment" includes especially:-
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) warehouse;
(g) premises for receiving or soliciting orders;
(h) permanent sales exhibition;
(i) a mine, an oil or gas well, a quarry or any other place of extraction of natural
resources;
(j) farm or plantation;
(k) a building site or construction or assembly project, but only where such site or
project continues for a period or periods of more than six months in any twelve months
period.
3. Notwithstanding the preceding provisions of this article, the term "permanent
establishment" shall be deemed not to include:-
(a) the use of facilities solely for the purpose of storage or display of goods or
merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise, or for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of carrying on,
for the enterprise, any other activity of a preparatory or auxiliary character.
(f) the sale of goods or merchandise belonging to the enterprise displayed in the frame of
an occasional and temporary fair or exhibition after the closing of the said fair or
exhibition; provided that the enterprises concerned fulfill all the legal requirements and
formalities for disposal of their property in either Contracting States.
4. Notwithstanding the provisions of paragraphs I and 2, where a person-other than an
agent of independent status to whom paragraph 5 applies - is acting on behalf of an
enterprise and has, and habitually exercises, in a Contracting State an authority to
conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a
permanent establishment in that State in respect of any activity which that person
undertakes for the enterprise, unless the activities of such person are limited to the
purchase of goods or merchandise for the enterprise.
5. An enterprise of a Contracting State shall not be deemed to have a permanent
establishment in the other Contracting State merely because it carries on business in that
other State through a broker, general commission agent or any other agent of an
independent status provided that such persons are acting in the ordinary course of their
business. However, when the activities of such an agent are devoted wholly or almost
wholly on behalf of that enterprise, he will not be considered an agent of an independent
status within the meaning of this paragraph.
6. The fact that a company which is a resident of a Contracting State controls or is
controlled by a company which is a resident of the other Contracting State, or which
carries on business in that other Contracting State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a permanent
establishment of the other.
ARTICLE 6
INCOME FROM IMMOVABLE PROPERTY
1. Income derived by a resident of a Contracting State from
immovable property (including income from agriculture or forestry) situated in the other
Contracting State may be taxed in that other state.
2. The term "immovable property" shall have a meaning which it has under the
laws of the Contracting State in which the property in question is situated. The term
shall in any case include property accessory to immovable property, livestock and
equipment used in agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property and rights to variable or
fixed payments as consideration for the working of, or the right to work; mineral
deposits, sources and other natural resources. Ships, boats, and aircraft shall not be
regarded as immovable property.
3. The provisions of paragraph 1 shall also apply to income derived from the direct use,
letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable
property of an enterprise and to income from immovable property used for the performance
of independent personal services.
ARTICLE 7
BUSINESS PROFITS
1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the enterprise
carries on business as aforesaid, the profits of the enterprise may be taxed in the other
State but only so much of them as is attributable directly or indirectly to that permanent
establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State
carries on business in the other Contracting State through a permanent establishment
situated therein, there shall in each Contracting State be attributed to that permanent
establishment the profit which it might be expected to make if it were a distinct and
separate enterprise engaged in the same or similar activities under the same or similar
conditions and dealing wholly independently with' the enterprise of which it is a
permanent establishment.
3. In the determination of the profits of a permanent establishment, there shall be
allowed as deduction expenses which are incurred for the purpose of the permanent
establishment, including only those executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated or
elsewhere, which are allowed under the provisions of the domestic law of the Contracting
State in which the permanent establishment is situated.
4. In so far as it has been customary in a Contracting State to determine the profits to
be attributed to a permanent establishment on the basis of an apportionment of the total
profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that
Contracting State from determining the profits to be taxed by such an apportionment as may
be customary, the method of apportionment adopted shall, however, be such that the result
shall be in accordance with the principles contained in this article.
5. No profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of the preceding paragraph, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.
7. Where profits include items of income which are dealt with separately in other articles
of this Convention, then the provisions of those articles shall not be affected by the
provisions of this article.
ARTICLE 8
AIR AND SHIPPING TRANSPORT
1. Profits derived by a resident of a Contracting State from the
operation of aircraft in international traffic shall be taxable only in that State.
2. Profits derived by a resident of a Contracting State from the operation of ships in
international traffic from sources in the other Contracting State shall be taxable only in
that other State.
3. The provisions of paragraph I and 2 shall also apply to profits from participation in a
pool, a joint business or an international operating agency.
4. The term "operation of aircraft" shall mean business of transportation by air
of passengers, mail, livestock or goods carried on by the owners of lessees or charterers
of aircraft, including the sale of tickets for such transportation on behalf of other
enterprises, the incidental lease of aircraft and any other activity directly connected
with such transportation.
5. The term "operation of ships" shall mean business of transportation by sea of
passengers, mail, livestock or goods transported by ship owned or by any title managed by
an enterprise of a Contracting State including the sale of passage, tickets and similar
documents for such transportation. It will also include a charter or rental of ships,
containers and related equipment and alienation thereof.
ARTICLE 9
ASSOCIATED ENTERPRISES
1. Where-
(a) an enterprise of a Contracting State participates directly or indirectly in the
management, control or capital of an enterprise of the other Contracting State; or
(b) the same persons participate directly or indirectly in the management, control or
capital of an enterprise of a Contracting State and an enterprise of the other Contracting
State,
and in either case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those conditions, have
accrued to one of the enterprises, but by reason of those conditions, have not so accrued,
may be included in the profits of the enterprise and taxed accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that State, and
taxes accordingly, profits on which an enterprise of the other Contracting State has been
charged to tax in that other state and the profits so included are profits which would
have accrued to the enterprises of the first-mentioned state if the conditions made
between the two enterprises had been those which would have been made between independent
enterprises, then that other State shall make an appropriate adjustment to the amount of
the tax charged on those profits. In determining such adjustment, due regard shall be paid
to the other provisions of this Convention and the competent authorities of the
Contracting States shall if necessary consult each other.
ARTICLE 10
DIVIDENDS
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
Contracting State.
2. However, such dividends may also be taxed in the Contracting State of which the company
paying the dividend is a resident and according to the laws of that State, but if the
recipient is the beneficial owner of the dividends, the tax so charged shall not exceed:
(a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company
which owns at least 20 per cent of the shares of the company paying the dividends.
(b) 15 per cent of the gross amount of the dividends in all other cases. This paragraph
shall not affect the taxation of the company in respect or the profits out of which the
dividends are paid.
3. The term "dividends" as used in this article means income from shares or
other rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as income from
shares by the laws of the State of which the company making the distribution is a
resident.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
dividends, 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 other State independent
personal services from a fixed base situated therein, and the holding in respect of which
the dividends are paid is effectively connected with such permanent establishment or fixed
base. In such case, the provisions of article 7 or article 15, as the case may be, shall
apply.
5. Where a company which is a resident of a Contracting State derives profits or income
from the other Contracting State, that other state may not impose any tax on the dividends
paid by the company except in so far as such dividends are paid to a resident of that
other state or in so far as the holding in respect of which the dividends are paid is
effectively connected with a permanent establishment or a fixed base situated in that
other State, nor subject the company's undistributed profits, to a tax on the company's
undistributed profits, even if the dividends paid or the undistributed profits consist
wholly or partly of profits or income arising in such other State.
ARTICLE 11
INTEREST
1. Interest arising in a Contracting State and paid to a resident
of the other Contracting State may be taxed in that other Contracting State.
2. However, such interest may be taxed in the Contracting State in which it arises and
according to the laws of that state, but if the recipient is the beneficial owner of the
interest the tax so charged shall not exceed 10 per cent of the gross amount of the
interest.
3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State
shall be exempt from tax in that State provided it is derived and beneficially owned by:
(i) the Government, a political sub-division or a local authority of the other Contracting
State; or
(ii) the Central Bank of the other Contracting State.
4. The term "interest" as used in this article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a right to
participate in the debtor's profits, and m particular, income from government securities
and income from bonds or debentures, including the premium and prizes attaching to such
securities, bonds, or debentures, penalty charges for late payment shall not be regarded
as interest for the purpose of this article.
5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
interest, being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent establishment situated
therein, or performs in that other sate independent personal services from a fixed base
situated therein, and the debt-claim in respect of which the interest is paid is
effectively connected with such permanent establishment or fixed base. In such case the
provisions of article 7 or article 14, as the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is that
Contracting State itself, a political sub-division, a local authority, the Central Bank,
government owned financial institution or a resident of that State. Where, however, the
person paying the interest, whether he is a resident of a Contracting State or not, has in
a Contracting State a permanent establishment or a fixed base in connection with which the
indebtedness on which the interest is paid was incurred, and such interest is borne by
such permanent establishment or fixed base then such interest shall be deemed to arise in
the Contracting State in which the permanent establishment or fixed base is situated.
7. Where, by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the interest, having regard
to the debt-claim for which it is paid, exceeds the amount which would have been agreed
upon by the payer and the beneficial owner in the absence of such relationship, the
provisions of this article shall apply to the last-mentioned amount. In such case, the
excess part of the payments shall remain taxable according to the laws of each Contracting
State, due regard being given to the other provisions of this Convention.
ARTICLE 12
ROYALTIES
1. Royalties arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. However, such royalties may also be taxed in the Contracting State in which they arise
and according to the laws of that State, but if the recipient is the beneficial owner of
the royalties then the tax so charged shall not exceed 12 per cent of the gross amount of
such royalties.
3. The term "royalties" as used in this article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright of
literary, artistic or scientific work, including cinematography films, or films or tapes
used for radio or television broadcasting, any patent, trade mark, design or model, plan,
secret formula or process, or for the use of, or the right to use, industrial, commercial
or scientific equipment, or information concerning industrial, commercial or scientific
experience, but does not include payment in respect of the operation of mines or quarries
or exploitation of natural resources.
4. The provisions of paragraph 1 and 2 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting State carries on business in the other
Contracting State in which the royalties arise through a permanent establishment situated
therein or performs in that other State independent personal services from a fixed base
situated therein, and the right of property in respect of which the royalties are paid is
effectively connected with such permanent establishment or fixed base in such case the
provisions of article 7 or article 14 as the case may be shall apply.
5. Royalties shall be deemed to arise in a Contracting State when the payer is that State
itself, a political sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties, whether he is a resident of a Contracting State
or not, has in a Contracting State a permanent establishment or a fixed base in connection
with which the liability to pay the royalties was incurred, and such royalties are borne
by such permanent establishment, or a fixed base then such royalties shall be deemed to
arise in the State in which the permanent establishment or fixed base is situated.
6. Where, by reason of special relationship between the payer and the beneficial owner or
between both of them and some other person, the amount of royalties, having regard to the
use, right or information for which they are paid, exceeds the amount which would have
been agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this article shall apply only to the last-mentioned
amount. In such case, the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being given to the other provisions of this
Convention.
ARTICLE 13
TECHNICAL FEES
1. Technical fees arising in a Contracting State which are
derived by a resident of the other Contracting State may be taxed in that other State.
2. However, such technical fees may also be taxed in the Contracting State in which they
arise, and according to the laws of that State, but where the beneficial owner of such
technical fees is a resident of the other Contracting State the tax so charged shall not
exceed 12 per cent of the gross amount of the technical fees.
3. The term "technical fees" as used in this article means payments of any kind
to any person, other than to an employee of the person making the payments in
consideration for any services of a technical, managerial or consultancy nature.
4. The provisions of paragraphs i and 2 of this article shall not apply if the beneficial
owner of the technical fees, being resident of a Contracting State, carries on business in
the other Contracting State in which the technical fees arise, through a permanent
establishment situated therein, or performs in that other State independent personal
services from a fixed base situated therein and the technical fees are effectively
connected with such permanent establishment or fixed base. In such case, the provisions of
article 7 or article 15, as the case may be, shall apply.
5. Technical fees shall be deemed to arise in a Contracting State when the payer is that
State itself, a political sub-division, a local authority or a resident of that State.
Where, however, the person paying the technical fees, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment or a fixed
base in connection with which the obligation to pay technical fees was incurred, and such
technical fees are borne by that permanent establishment or fixed base, then such
technical fees shall be deemed to arise in the State in which the permanent establishment
or fixed base is situated.
6. Where, by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the technical fees paid
exceeds, for whatever reason, the amount which would have been agreed upon by the payer
and the beneficial owner in the absence of such relationship, the provisions of this
article shall apply to the last-mentioned amount. In such case, the excess part of the
payments shall remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this
Convention.
ARTICLE 14
CAPITAL GAINS
1. Gains derived by a resident of a Contracting State from the
alienation of immovable property, referred to in article 6, and situated in the other
Contracting State may be taxed in that other State.
2. Gains from the alienation of movable property forming part of the business property of
a permanent establishment which an enterprise of a Contracting State has in the other
Contracting State or of movable property pertaining to fixed base available to a resident
of a Contracting State in the other Contracting State for the purposes of performing
independent personal services, including such gains from the alienation of such a
permanent establishment (alone or together with the whole enterprise) or of such fixed
base, may be taxed in that other state.
3. Gains from the alienation of ships or aircraft operated in international traffic or
movable property pertaining to the operation of such ships or aircraft shall be taxable
only in the Contracting State of which the alienator is a resident.
4. Gains from the alienation of any property other than that mentioned in paragraphs 1, 2
and 3 shall be taxable only in the Contracting State of which the alienator is a resident.
ARTICLE 15
INDEPENDENT PERSONAL SERVICES
1. Income derived by a resident of a Contracting State in respect
of professional services or other independent activities of a similar character shall be
taxable only in that State, except in the following circumstances when such income may
also be taxed in the other Contracting State:
(a) if he has fixed base regularly available to him in the other Contracting State for the
purpose of performing his activities in that case, only so much of the income as is
attributable to that fixed base may be taxed in that other Contracting State; or
(b) if his stay in the other Contracting State is for a period or periods amounting to or
exceeding in the aggregate 183 days in the relevant "income year" or "year
of income", as the case may be; in that case, only so much of the income as is
derived from his activities performed in that other State may be taxed in that other
State.
(c) if the remuneration for his activities in the other Contracting State is paid by a
resident of that Contracting State or is borne by a permanent establishment or a fixed
base situated in that Contracting State; in that case only so much of the remuneration as
derived therefrom may be taxed in that other Contracting State.
2. The term "professional services" includes independent scientific, literary
and artistic educational or teaching activities, as well as the independent activities of
physicians, surgeons, dentists, engineers, architects, and accountants.
ARTICLE 16
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of articles 16, 17, 18, 19, 20 and
21, salaries, wages and other similar remuneration derived by a resident of a Contracting
State in respect of an employment shall be taxable only in that State unless the
employment is exercised in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a
Contracting State in respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State if:
(a) the recipient is present in the other State for a period or periods not exceeding in
the aggregate 183 days in the relevant "income year" or "year of
income", as the case may be; and
(b) the remuneration is paid by, or on behalf of, an employer, who is not a resident of
the other State, and
(c) the remuneration is not borne by a permanent establishment or a fixed base which the
employer has in the other State.
3. Notwithstanding the preceding provisions of this article, remuneration derived in
respect of an employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State shall be taxable only in that State.
ARTICLE 17
DIRECTORS' FEES
1. Directors' fees and similar payments derived by a resident of
a Contracting State in his capacity as a member of the Board of Directors of a company
which is a resident of the other Contracting State may be taxed in that other State.
2. Salaries, wages and other similar remuneration derived by a resident of a Contracting
State in 'his capacity in a top level managerial position of a company which is a resident
of the other Contracting State may be taxed in that other Contracting State.
ARTICLE 18
ENTERTAINERS AND ATHLETES
1. Notwithstanding the provisions of articles 15 and 16 income derived by a resident of a
Contracting State as an entertainer such as a theatre, motion picture, radio or television
artist or a musician or as an athlete, from his personal activities as such exercised in
the other Contracting State may be taxed in that other State.
2. Where income in respect of personal activities exercised by an entertainer or an
athlete in his capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of articles 7, 15 and 16,
be taxed in the Contracting State in which the activities of the entertainer or athlete
are exercised.
3. Notwithstanding the provisions of paragraph 1, income derived by an entertainer or an
athlete who is a resident of a Contracting State from his personal activities as such
exercised in the other Contracting State, shall be taxable only in the first-mentioned
Contracting State, if the activities in the other Contracting State are supported wholly
or substantially from the public funds of the first-mentioned Contracting State, including
any of its political sub-divisions or local authorities.
ARTICLE 19
GOVERNMENT SERVICE
1. (a) Remuneration, other than a pension, paid by a Contracting
State or a political sub-division or a local authority thereof to an individual in respect
of services rendered to that State or sub-division or authority shall be taxable only in
that State.
(b) However, such remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of that State
who:
(i) is a national of that State; or
(ii) did not become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension paid by, or out of funds created by a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However, such pension shall be taxable only in the other Contracting State if the
individual is a resident of, and a national of that other State.
3. The provisions of articles 16, 17 and 18 shall apply to remuneration and pensions in
respect of services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 20
PENSIONS AND ANNUITIES
1. Any pension, other than a pension referred to in article 18 or
annuity derived by a resident of a Contracting State from sources within the other
Contracting State may be taxed only in the first-mentioned Contracting State.
2. the term "pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of performance of
service.
3. The term "annuity" means a stated sum payable periodically at stated times
during life or during a specified or ascertainable period of time, under an obligation to
make the payments in return for adequate and full consideration in money or money's worth.
ARTICLE 21
STUDENTS AND APPRENTICES
1. A student or business apprentice who is or was a resident of
one of the Contracting States immediately before visiting the other Contracting State and
who is present in that other State solely for the purpose of his education or training,
shall be exempted from tax in that other State on:
(a) payments made to him by persons residing outside that other State for the purposes of
his maintenance, education or training; and
(b) remuneration from employment in that other State, provided that such employment is
directly related to his studies or is undertaken for the purpose of his maintenance.
2. The benefits of sub-paragraph (b) of paragraph i shall extend only for such period of
time as may be reasonable or academically or customarily required to complete the
education or training undertaken, but in no event shall any individual have the benefits
of this article for more than three consecutive years from the date of his first arrival
in that other Contracting State.
ARTICLE 22
PROFESSORS AND TEACHERS
1. A professor or teacher who is or was resident of one of the
Contracting States immediately before visiting the other Contracting State for the purpose
of teaching or engaging in research, or both, at a university, college, school or other
approved institution in that other Contracting State shall be exempt from tax in that
other State on any remuneration for such teaching or research for a period not exceeding
five years from the date of his arrival in that other State.
2. This article shall not apply to income from research if such research is undertaken
primarily for the private benefit of a specific person or persons.
3. For the purpose of this article and article 20, an individual shall be deemed to be a
resident of a Contracting State if he is resident in that Contracting State in the
"income year", in which he visits the other Contracting State or in the
immediately preceding income year."
4. For the purpose of paragraph 1, "approved institution" means an institution
which has been approved in this regard by the competent authority of the concerned
Contracting State.
ARTICLE 23
OTHER INCOME
1. Subject to the provisions of paragraph 2, items of income of a
resident of a Contracting State, wherever arising, which are not expressly dealt with in
the forgoing articles of this Convention, shall be taxable only in that Contracting State.
2. The provisions of paragraph i shall not apply to income, other than income from
immovable property as defined in paragraph 2 of article 6, if the recipient of such
income, being a resident of a Contracting State, carries on business in the other
Contracting State through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein, and the
right or property in respect which the income is paid is effectively connected with such
permanent establishment or fixed base. In such case the provisions of article 7 or article
15 as the case may be, shall apply.
3. Notwithstanding the provisions of paragraphs I and 2, items of income of a resident of
a Contracting State not dealt with in the forgoing articles of this Convention and arising
in the other Contracting State may be taxed in that other State.
ARTICLE 24
METHOD FOR ELIMINATION OF DOUBLE TAXATION
1. The laws in force in either of the Contracting State will
continue to govern the taxation of income in the respective Contracting State except where
provisions to the contrary are made in this Convention.
2. In the case of Pakistan double taxation shall be eliminated as follows:
subject to the provisions of the laws of Pakistan regarding the allowances as a credit
against Pakistan tax the amount of the United Arab Emirates tax payable under the laws of
the United Arab Emirates 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 Arab Emirates which has been subjected to tax both in Pakistan and
United Arab Emirates shall be allowed as a credit against the Pakistan tax payable in
respect of such income but m an amount not exceeding that proportion of Pakistan tax which
such income bears to the entire income chargeable to Pakistan tax.
3. in the case of United Arab Emirates the elimination of double taxation will be done
according to the legislation of United Arab Emirates taking into account the general
principles of avoidance of double taxation.
4. income which, in accordance with the provisions of this Convention, is not to be
subjected to tax in a Contracting State, may be taken into account for calculating the
rate of tax to be imposed in that Contracting State.
ARTICLE 25
NON-DISCRIMINATION
1. The nationals of a Contracting State shall not be subjected in
the other Contracting State to any taxation or any requirement connected therewith which
is other or more burdensome than the taxation and connected requirements to which
nationals of that other state in the same circumstances are or may be subjected.
2. The taxation on a permanent establishment which an enterprise of a Contracting State
has in the other Contracting State shall not be less favourably levied in that other State
than the taxation levied an enterprises of that other State carrying on the same
activities in the same circumstances.
3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other Contracting
State, shall not be subjected in the first-mentioned Contracting State to any taxation or
any requirements connected therewith which is other or more burdensome than the taxation
and connected requirements to which other similar enterprises of that first-mentioned
State are or may be subjected in the same circumstances.
4. Nothing contained in the preceding paragraphs of this article shall be construed:-
(i) as obliging either of the Contracting State, to grant to persons not residents in its
territory those personal allowances and reliefs for tax purposes which are by law
available only to persons who are so residents;
(ii) as affecting any provisions of the law of Pakistan regarding the imposition of tax on
a non-resident person; or
(iii) as affecting any provisions of the law of Pakistan regarding the grant of rebate of
tax to companies fulfilling specific requirements regarding the declaration and payment of
dividends.
5 In this article, the term "taxation" means taxes which are the subject of this
Convention.
ARTICLE 26
MUTUAL AGREEMENT PROCEDURE
1. Where a resident of a Contracting State considers that the
actions of one or both of the Contracting States result or will result for him in taxation
not in accordance with this Convention, he may, notwithstanding the remedies provided by
the national laws of those States, present his case to the competent authority of the
Contracting State of which he is a resident. This case must be presented within three
years of the date of receipt of notice of the action which gives rise to taxation not in
accordance with the Convention.
2. The competent authority shall endeavour, if the objection appears to it to be justified
and if it is not itself able to arrive at an appropriate solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State, with a view
to the avoidance of taxation not in accordance with the Convention. Any agreement reached
shall be implemented notwithstanding any time limits in the national laws of the
Contracting State.
3. The competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of the Convention. They may also consult together for the elimination of
double taxation in cases not provided for in be Convention.
4. The competent authorities of the Contracting States may communicate with each other
directly for the purpose of reaching an agreement in the sense of the preceding
paragraphs, when it seems advisable in order to reach agreement to have an oral exchange
of opinions, such exchange may take place through a commission consisting of
representatives of the competent authorities of the Contracting States.
ARTICLE 27
EXCHANGE OF INFORMATION
1. 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 or 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 I 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.
ARTICLE 28
DIPLOMATIC AND CONSULAR ACTIVITIES
Nothing in this Convention shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.
ARTICLE 29
ENTRY INTO FORCE
Each of the Contracting States shall notify to the other the
completion of the procedures required by its law for the bringing into force of this
Convention. The Convention shall enter into force on the date of the later of these
notifications and shall thereupon have effect:
(a) In Pakistan:
(i) in respect of taxes withheld at the source on amounts paid on or after the 1st day of
July in the calendar year next following that in which the Convention enters into force;
and
(ii) in respect of other taxes for the year of assessment beginning on or after the 1st
day of July in the calendar year next following that in which the Convention enters into
force and subsequent year.
(b) in United Arab Emirates:
(i) in respect of taxes withheld at the source on amount paid on or after the 1st day of
January in the calendar year next following that in which the Convention enters into
force; and
(ii) in respect of other taxes for the year of assessment beginning on or after the 1st
day of January in the calendar year next following that in which the Convention enters
into force and subsequent years.
ARTICLE 30
TERMINATION
This Convention shall remain in force indefinitely but either of
the Contracting States may, on or before thirtieth day of June in any calendar year
beginning after the expiration of a period of five years from the date of its entry into
force, give the other Contracting State through diplomatic channels, written notice of
termination and, in such event, this Convention shall cease to have effect:
(a) in Pakistan in respect of income arising in any year of assessment beginning on or
after the 1st day of July next following the calendar year in which the notice is given;
(b) in United Arab Emirates in respect of income arising in any year of assessment
beginning on or after the 1st day of January next following the calendar year in which the
notice is given;
IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed the present
Convention.
DONE in duplicate at Islamabad this 7th day of February one. thousand nine hundred and
ninety three in the English language.
For the Government of the Islamic Republic of Pakistan |
For the government of United Arab Emirates |
(Sartaj Aziz) |
(Ahmed Humaid
Al-Tayer) |
JUNEJO M. IQBAL,
Additional Secretary.
[C. No. 2(1) IT.2/88.]
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