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ARTICLE 12
ROYALTIES

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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 beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 20 per cent of the gross amount of the royalties as defined in paragraph 4(a) and 15 per cent of the gross amount of royalties as defined in paragraph 4 (b).

3. Notwithstanding the provisions of paragraph 2, copyright royalties and other like payments as defined in paragraph 4(c) arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State.

4. The term "royalties" as used in this Article means:

(a) payments of any kind received as a consideration for the use of, or the right to use, 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 specific equipment and includes payments of any kind in respect of motion picture films and films or tapes from radio broadcasting or television;

(b) payments received as a consideration for technical know-how or information concerning industrial, commercial or scientific experience;

(c) copyright royalties and the other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work other than motion picture films and films or tapes for radio broadcasting or television.

5. The provisions of paragraphs 1, 2 and 3 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 or property in respect of which the royalties are paid is effectively connected with such permanent establishment of fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. 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 the royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the 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 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 may be taxed in the Contracting State in which the royalties arise according to the law of that State.

ARTICLE 13
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 a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or 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 in which the profits from the operation of the ships or aircraft are taxable according to the provisions of Article 8.

4. Gains from the alienation of any property or rights referred to in paragraph 4 of Article 12 shall be taxable only in the Contracting State of which the alienator is a resident.

5. Gains from the alienation of any property other than that referred to in the preceding paragraphs may be taxed in both Contracting States.

ARTICLE 14
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. However, in the following circumstances such income may be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other Contracting State for the purposes 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 he is present in the other Contracting State for a period or periods amounting to or exceeding in the aggregate 183 days in the fiscal year concerned; or

(c) if the remuneration for his services in the other Contracting State derived from a resident of that Contracting State exceeds Rs. 50,000 or its equivalent in Belgian currency in the fiscal year concerned, notwithstanding that his stay in that State is for a period or periods amounting to less than 183 days during the fiscal year concerned.

2. The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15
DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 16, 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 fiscal year concerned, 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 may be taxed in the Contracting State in which the profits from the operation of such ship or aircraft are taxable according to the provisions of Article 8.

^*The correct word is "aboard" which is wrongly appeared as "abroad" in the Official Gazette.

ARTICLE 16
DIRECTORS' FEES

1. Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or a similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

2. The provisions of paragraph 1 shall likewise apply to payments received by an official of a company in a top level managerial position who in fact carries out functions which are of a similar nature as those performed by a person as referred to in that paragraph 1.

ARTICLE 17
ARTISTES AND ATHLETES

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, including a boxer or a wrestler, 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, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

ARTICLE 18
PENSIONS AND ANNUITIES

1. Subject to the provisions of paragraph 2 of Article 19, any pension and any annuity derived from sources within a Contracting State by an individual who is a resident of the other Contracting State shall be exempt from tax in the first-mentioned State.

2. The term "pension", as used in this Article, means periodic payments made in consideration for services rendered or by way of compensation for injuries received.

3. The term "annuity", as used in this Article, 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 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 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 State.

The provisions of Articles 15 16 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 2O
PROFESSORS

The remuneration derived by a professor or teacher who is a resident of a Contracting State and is temporarily present in the other Contracting State for the purpose of teaching, during a period not exceeding two years, in a university, college, school or other educational institution in that other Contracting State, shall be exempt from tax in that other State.

ARTICLE 21
STUDENTS

An individual who is a resident of a Contracting State at the beginning of a visit to the other Contracting State and is temporarily present in that other State solely:

(a) as a student at a recognised university, college or school in such other State,

(b) as a business apprentice, or

(c) as the recipient of a grant, allowance or award for the primary purpose of study or research from any religious, charitable, scientific or educational organisation, shall be exempt from tax in such other State:

(i) on all remittances from abroad for the purposes of his maintenance, education or training, and

(ii) with respect to any amount, representing remuneration for an employment in that other State, provided the remuneration for such employment in a taxable year does not exceed 120,000 Belgian francs or the equivalent thereof in Pakistan currency.

An individual who is a resident of a Contracting State immediately before making a visit to the other Contracting State and is temporarily present in that other Contracting State as an employee of, or under contract with, the Government or an enterprise of the first-mentioned Contracting State solely for the purpose of requiring technical, professional or business experience for a period not exceeding two years from the date of his first arrival in that other Contracting State in connection with that visit shall be exempt from tax in that other Contracting State on:

(i) all remittances from abroad for the purposes of his maintenance, education or training, and

(ii) any remuneration not exceeding 150,000 Belgian francs or the equivalent in Pakistan currency during any taxable year in respect of services rendered in that other Contracting State if such services are in connection with his studies or training or incidental thereto.

An individual who is a resident of a Contracting State at the beginning of a visit to the other Contracting State and is temporarily present in that other State under arrangements with the Government of such other State or any agency or instrumentality thereof solely for the purpose of training, study or orientation shall be exempt from tax in such other State:

(i) on remuneration received from sources within the Contracting State of which he is a resident, and

(ii) on remuneration received from sources within the other Contracting State, provided such remuneration does not exceed 120,000 Belgian francs during any table year or the equivalent thereof in Pakistan currency.

ARTICLE 22
OTHER INCOME

Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that 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 of 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 14, as the case may be, shall apply.

CHAPTER IV
ELIMINATION OF DOUBLE TAXATION

ARTICLE 23

1. Subject to the provisions of the Pakistan Income-tax Act the Belgian tax payable whether directly or by deduction, by a resident of Pakistan, in respect of income from sources within Belgium shall be allowed as a credit against Pakistan tax payable in respect of that income.

2. In the case of Belgium, double taxation shall be avoided as follows:

(a) Where a resident of Belgium derives income which may be taxed in Pakistan in accordance with the provisions of the Convention, whether or not it is taxed, and which is not subject to the provisions of sub-paragraphs (b), (c) and (d) below, Belgium shall exempt such income from tax but may, in calculating the amount of tax on the remaining income of that resident, apply the rate of the tax which would have been applicable if such income had not been exempted.

(b) Where a resident of Belgium derives:

- dividends dealt with in paragraph 1 or 2 of Article 10 and not covered by sub-paragraph (d) below,

- interest dealt with in paragraph 2 or 7 of Article 11,

- royalties dealt with in paragraph 2 or 7 of Article 12,

- Belgium shall allow an appropriate credit against Belgian tax relating to such income. This credit shall be the fixed proportion for which provision is made under Belgian law.

Notwithstanding the provisions of its law, Belgium shall also allow the credit provided for in this sub-paragraph in respect of tax which may be charged in Pakistan on dividends, interest and royalties by virtue of the Convention and the law of Pakistan, but which is temporarily remitted or reduced under special provisions designed to promote the economic development of Pakistan.

(c) Where a resident of Belgium derives income to which the provisions of paragraph 5 of Article 13 apply and which has been taxed in Pakistan, the amount of Belgian tax relating to such income shall not exceed the amount which would be charged according to Belgian law if such income were taxed as earned income derived from sources outside Belgium and subject to foreign tax.

(d) Where a company which is a resident of Belgium owns shares in a company with share capital which is a resident of Pakistan, the dividends which are paid to it by the latter company and which may be taxed in Pakistan in accordance with paragraph 1 or 2 of Article 10, shall be exempt from the corporate income-tax in Belgium to the extent that exemption would have been accorded if the two companies had been residents of Belgium.

(e) Notwithstanding sub-paragraph (a) above, Belgian tax may be charged on income liable to Pakistan tax to the extent that such income has not been charged in Pakistan because of the set off of losses also deducted, in respect of any accounting period, from income taxable in Belgium.

CHAPTER V
SPECIAL PROVISIONS

ARTICLE 24
NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in file 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. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

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 on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reduction for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 7 of Article 12, apply, interest, royalties and other disbursements paid by an^* enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

4. Enterprise 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 State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

5. Nothing contained in this Article shall be construed

(a) as affecting the provisions of the Pakistan law providing for a higher allowance or rebate of super-tax to those companies which make the prescribed arrangements for the declaration and payment of dividends and the deduction of super-tax from dividends paid by them

(b) as preventing Belgium:

(i) from taxing the total amount of the profits attributable to a permanent establishment in Belgium of a company which is a resident of Pakistan or of an association having its place of effective management in Pakistan at the rate of tax provided by the Belgium law, but this rate may not exceed the maximum rate applicable to the whole or a portion of the profits of companies which are residents of Belgium;

(ii) from imposing the prepayment on dividends attributable to a permanent establishment or a fixed base maintained in Belgium by a company which is a resident of Pakistan or by an association which has its place of effective management in Pakistan and is taxable as a body corporate in Belgium.

6. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

^*The correct word "an" has appeared as "a" in the Official Gazette


ARTICLE 25
MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory 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 which is not in accordance with the Convention

3. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the 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 or for the purpose of giving effect to the provisions of the Convention.

ARTICLE 26
EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting State shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention in so far as the taxation thereunder is in accordance with the Convention and in particular for the prevention of fraud and evasion of such taxes. The exchange of information is no restricted by Article 1. 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 and shall be disclosed only to persons or authorities (including Comets and administrative bodies.) involved in the assessment or collection of, or the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public Court proceedings or in judicial decisions.

2. 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 and administrative practice of that or of the other Contracting State;

(b) to supply information which is 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 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 (order public).

ARTICLE 27
MISCELLANEOUS

1. 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.

2. The provisions of this Convention shall not be construed as restricting in any manner and exemption, deduction, credit of other allowance now or hereafter accorded by the laws of a Contracting State in the determination of the tax imposed by such State, or by any other Convention between the Contracting States.

3. As regards a company which is a resident, of Belgium, the provisions of this convention shall not limit its taxation in accordance with the Belgian law in the event of the repurchase of its own shares or in event of the distribution of its assets.

ARTICLE 28
TERRITORIAL EXTENSION

1. This Convention may be extended, either in its entirety or with any necessary modifications, to any territory for whose international relations, either State is responsible, which imposes taxes substantially similar in character to those to which the Convention applies. Any such extension shall take effect from such date and subject to such modifications and conditions, including conditions as to termination, as may be specified and agreed between the Contracting States in notes to be exchanged through diplomatic channels or in any other manner in accordance with their constitutional procedures.

2. Unless otherwise agreed by both Contracting States, the termination of the Convention by one of them under Article 30 shall also terminate, in the manner provided for in that Article, the application of the Convention to any territory to which it has been extended under this Article.

CHAPTER VI
FINAL PROVISIONS

ARTICLE 29
ENTRY INTO FORCE

This Convention shall be ratified and the instruments of ratification shall be exchanged at as soon as possible.

1. The Convention shall enter into force on the fifteenth day following the date of which the instruments of ratification are exchanged and its provisions shall have effect for the first time:

(a) In Pakistan in respect of all taxes payable on income arising in any previous year ending on or after the first day of July of the calendar year in which the instruments of ratification are exchanged;
(b) in Belgium:

(i) in respect of all taxes payable at source on income arising on or after the first day of July of the calendar year in which the instruments of ratification are exchanged, and

(ii)in respect of all taxes, other than taxes payable at source, on income of taxable periods ending on or after the first day of July of that year.

ARTICLE 30
TERMINATION

This Convention shall continue in effect indefinitely, but either of the Contracting States may, on or before the thirtieth day of June in any calendar year after the fifth year from the year of ratification, give to the other Contracting State written notice of termination and in such event, the Convention shall cease to have effect:

(a) in Pakistan, in respect of all taxes payable on income arising in any previous year ending on or after the first day of July of the calendar year in which such written notice of termination is given, and

(b) in Belgium:

(i) in respect of all taxes payable at source on income arising on or after the first day of July of the calendar year in which such written notice of termination is given, and

(ii) in respect of all taxes, other than taxes payable at source, on income of taxable period ending on or after the first day of July of that year.

IN WITNESS WHEREOF the undersigned, duly empowered to this end, have appended their signatures to this Convention.

DONE at Brussels on the 17th day of March, 1980, in two originals, in the English language.

AHADULLAH AKMAL,
Additional Secretary.

[C. No. 2 (8)TI/60.]

Published in the Gazette of Pakistan, Extraordinary, Part II, dated 28th February, 1984

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