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ARTICLE XIII
GAINS FROM THE ALIENATION OF PROPERTY
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1. Gains from the alienation of immovable property, as defined in paragraph 2 of Article VI, may be taxed in the Contracting State in which such property is situated.

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 professional services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base may be taxed in the other State. However, gains from the alienation of ships and aircraft operated by an enterprise of a Contracting State in international traffic and movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that Contracting State.

3. Gains from the alienation of shares of a company, or of an interest in a partnership or a trust, the property of which consists principally of immovable property as defined in paragraph 2 of Article VI, may be taxed in the Contracting State in which such immovable property is situated.

4. Gains from the alienation of shares forming part of a substantial interest in the share capital of a company which is a resident of a Contracting State may exist when the alienation, alone or together with associated persons, owns directly or indirectly 25 per cent or more of the shares of any class of the share capital of a company.

5. Gains from the alienation of any property, other than those mentioned in paragraphs 1, 2, 3 and 4 shall be taxable only in the Contracting State of which the alienator is a resident.

6. The provisions of paragraph 5 shall not affect the right of either of the Contracting State to levy, according to its domestic law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

ARTICLE
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 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 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 residents of that Contracting State exceeds Rs. 25,000 or its equivalent in Canadian currency in the fiscal year, notwithstanding that his stay in that State is for a period or periods amounting to less than 183 days during the fiscal year.

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

ARTICLE XV
DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles XVI, XVIII and XIX, 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. in respect of an employment exercised aboard [*] a ship or aircraft in international traffic by an enterprise of a Contracting State, shall be taxable only in that State.

ARTICLE XVI
DIRECTORS' FEES

Directors' fees and 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.

ARTICLE XVII
ARTISTES AND ATHLETES

1. Notwithstanding the provisions of Articles XIV and XV income derived by entertainers, such as theatre, motion picture, radio or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are performed.

2. The provisions of paragraph I shall not apply to income derived from activities performed in a Contracting State by entertainers and athletes if the visit to that Contracting State is supported by public funds of the other Contracting State, including any political sub-division, local authority or statutory body thereof, nor to income derived by entertainers and athletes in respect of such activities performed for a nonprofit organization no part of the income of which was payable to, or was otherwise available for the personal benefit of any proprietor, member or shareholder thereof.

3. Notwithstanding the provisions of Article VII, where the activities mentioned in paragraph I of this Article are provided in a Contracting State by an enterprise of the other Contracting State the profits derived from providing these activities by such an enterprise may be taxed in the first-mentioned Contracting State unless the enterprise is supported from the public funds of the other Contracting State, including any political sub-division, local authority or statutory body thereof, in connection with the provision of such activities, or unless the enterprise is a nonprofit organization referred to in paragraph 2.

ARTICLE XVIII
PENSIONS AND ANNUITIES

1. Pensions and annuities arising in a Contracting State shall be taxable only in that State.

2. Pensions and annuities 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.

ARTICLE XIX
GOVERNMENT SERVICE

(a) Remuneration, other than a pension, paid by a Contracting State of a political sub-division or a local authority thereof to any individual in respect of services rendered to that State or sub-division or local authority thereof shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the Contracting State of which the recipient is a resident if the services are rendered in that State and the recipient did not become a resident of that State solely for the purpose of performing the services.

2. The provisions of paragraph 1 shall not apply to remuneration in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political sub-division or a local authority thereof.

ARTICLE XX
STUDENTS

A student, apprentice or business trainee who is, or was immediately before visiting one of the Contracting States, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training shall not be taxed in that first-mentioned State in respect of remittances received by him from abroad for the purpose of his maintenance, education or training.

ARTICLE XXI
INCOME NOT EXPRESSLY MENTIONED

1. Subject to the provisions of paragraphs 2 and 3 of this Article, items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention shall be taxable only in that Contracting State.

2. However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises, and according to the law of that State.

3. Notwithstanding the provisions of paragraph 2, in the case of alimony or other similar payments and in the case of income from an estate or trust derived from sources in Canada by a resident of Pakistan who is subject to tax in respect thereof, the tax charged in Canada shall not exceed 15 per cent of the gross amount of the payments or the income, as the case may be.

CHAPTER IV
METHODS FOR ELIMINATION OF DOUBLE TAXATION

ARTICLE XXII

1. In the case of Canada, double taxation shall be avoided as follows:

(a) Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada or [*] tax paid in a territory outside Canada and to any subsequent modifications of those provisions (which shall not affect the general principle hereoff, and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Pakistan in accordance with this Convention on profits, income or gains arising in Pakistan shall be deducted from any Canadian tax payable in respect of such profits, income or gains.

(b) Subject to the existing provisions of the law of Canada regarding the determination of the exempt surplus of a foreign affiliate and to any subsequent modifications of those provisions (which shall not affect the general principle hereof) for time purpose of computing Canadian tax a company resident in Canada shall t)e allowed to deduct in computing its taxable income any dividend received by it out of the exempt surplus of a foreign affiliate resident in Pakistan.

2. For the purposes of paragraph 1 (a), tax payable in Pakistan by a resident of Canada:

(a) in respect of profits attributable to a trade or business carried on by it in Pakistan, or

(b) in respect of dividends, interest or royalties received by it from a company which is a resident of Pakistan,

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, that is to say:
Notification S.R.O. 17(R), dated 1st July, 1960;
Notification S.R.O. 625(I)/72, dated 12th August, 1972;
Notification S.R.O. 861(I)/74, dated 29th August, 1974;

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; and except to the extent that any of the said provisions has the effect of exempting or relieving a source of income for a period in excess of ten years:

- any other subsequent enactment or statutory rule of Pakistan adopted in pursuance of its economic development granting an exemption or reduction of tax with respect to any item of income mentioned in subparagraphs (a) and (b) above and which is specified and agreed in letters exchanged between the competent authorities of the Contracting States, 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 any deduction from Canadian tax granted in accordance with the provisions of this paragraph in respect of dividends, interest or royalties shall not exceed an amount equal to 15 per cent of the gross amount thereof.

3. Subject to the provisions of the Pakistan Income Tax Act regarding the allowance as a credit against Pakistan tax or [*] tax payable in a country outside Pakistan, tax payable in Canada. whether directly or by deduction, by a person resident in Pakistan, in respect of income from sources within Canada (including income accruing or arising in Canada but deemed under the provisions of the law of Pakistan to accrue or arise in Pakistan) shall be allowed as credit against any Pakistan tax payable in respect of that income.

4. For the purposes of this Article, profits, income or gains of a resident of one of the Contracting States which are taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

CHAPTER V
SPECIAL PROVISIONS

ARTICLE XXIII
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. Stateless persons resident in one 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 State in the same circumstances are or may be subjected.

3. The taxation of ^[*] 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.

4. Nothing in this Article shall be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs, rebates and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

5. 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 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, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

6. Nothing in this Article shall be construed -

(a) as preventing Canada from imposing on the earnings of a company attributable to a permanent establishment in Canada, its Additional Tax on Corporation other than Canadian Corporations provided that the rate of such tax shall not exceed 15 per cent;

(b) as affecting any provision in the law of Pakistan which grants rebates of tax to companies which are residents of Pakistan and fulfil specific requirements regarding the declaration and payment of dividends.

7. In this Article, the term "taxation" means taxes which are the subject of this Convention.

ARTICLE XXIV
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, without prejudice to the remedies provided by the national laws of those States, address to the competent authority of the Contracting State of which he is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Convention.

2. The competent authority referred to in paragraph 1 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.

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 and may also consult together with respect to the allocation of profits to a resident of a Contracting State and its permanent establishment situated in the other Contracting State, or to the allocation of income between a resident of a Contracting State and any associated person provided for in Article IX.

ARTICLE XXV
EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall upon request exchange such information as is necessary for the carrying out of this Convention and of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is in accordance with this Convention and in particular for the prevention of fraud and evasion of such taxes. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons or authorities other than those concerned with the assessment, collection or enforcement of the taxes which are the subject of this Convention.

2. In no case shall the provisions of paragraph 1 be construed so as to impose in one of the Contracting States the obligation:

(a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;

(b) to supply particulars 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 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 XXVI
DIPLOMATIC AND CONSULAR OFFICIALS

1. Nothing in this Convention shall affect the fiscal privileges of members of diplomatic or consular missions under the general rules of international law or under the provisions of special agreements.

2. Notwithstanding Article IV of this Convention, an individual who is a member of a diplomatic., consular or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of this Convention to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total world income as are residents of that sending State.

3. This Convention shall not apply to International Organizations, to organs or officials thereof and to persons who are members of a diplomatic, consular or permanent mission of a third State, being present in a Contracting State and who are not liable in that State to the same obligations in relation to tax on their total world income as are residents of that State.

ARTICLE XXVII
TERRITORIAL EXTENSION

1. This Convention may be extended, either in its entirety or with any necessary modifications to any State or territory for whose international relations either of the Contracting States is responsible and 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 denunciation of the Convention by one of them under Article XXX shall terminate, in the manner provided for in that Article, the application of the Convention to any State or territory to which it has been extended under this Article.

ARTICLE XXVIII
MISCELLANEOUS RULES

1. The provisions of this Convention shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, rebate or other allowance now or hereafter accorded:

(a) by the laws of one of the Contracting States in the determination of the tax imposed by that Contracting State, or

(b) by any other agreement between the Contracting States.

2. Nothing in this Convention shall be construed as preventing Canada from imposing its tax on amounts included in the income of a resident of Canada according to section 91 of the Canadian Income Tax Act.

3. The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying this Convention.

CHAPTER VI
FINAL PROVISIONS

ARTICLE XXIX
ENTRY INTO FORCE

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

The Convention shall enter into force upon the exchange of the instruments of ratification and its provisions shall have effect:

(a) in Pakistan:

in respect of Pakistan tax for the "previous years" (as defined by the tax laws of Pakistan) beginning on or after the first day of January in the calendar year in which the exchange of instruments of ratification takes place; and

(b) in Canada:

(i) in respect of tax withheld at the source on amounts paid to nonresidents on or after the first day of January in the calendar year in which the exchange of instruments of ratification takes place: and

(ii) in respect of other Canadian tax for taxation years beginning on or after the first day of January in the calendar year in which the exchange of instruments of ratification takes place.

ARTICLE XXX
TERMINATION

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 in any calendar after the year 1978, give notice of termination to the other Contracting State and in such event the Convention shall cease to have effect:

(a) in Pakistan:

in respect of Pakistan tax for the "previous years" (as defined by the tax laws of Pakistan) beginning on or after the first day of January in the calendar year next following that in which the notice is given; and

(b) in Canada:

(i) in respect of tax withheld at the source on amounts paid to nonresidents on or after the first day of January in the calendar year next following that in which the notice is given; and

(ii) in respect of other Canadian tax for taxation years beginning on or after the first day of January in the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Ottawa, this 24th day of February, 1976, in the English and French languages, each version being equally authentic.

EN FOI DE QUOI les soussignes, dument, authorises acet effet, ont signe la presente Convention.

FAITE en double exemplaire a Ottawa, ce 24ume jour de fevrier 1976, en language franchise et anglaise, chaquer version faisant egalment foi,

PROTOCOL

At the signing of the Convention between the Islamic Republic of Pakistan and Canada for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income the undersigned have agreed on the following provisions which shall be an integral part of the Convention:

1. With reference to paragraph 3 of Article VII, it is understood that no deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or by way interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices; by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

2. With reference to paragraph 7(b) of Article XI, it is agreed that the terms "approved loans" and "foreign currency accounts" means respectively loans covered by Notifications S.R.O. 17(R) dated 1st July, 1960 and S.R.O. 625(I)/72 dated 12th August, 1972 and accounts, covered by Notification S.R.O. 861(I)/74 dated 29th August, 1974. The said terms also mean loans or accounts covered by any substantially similar provision or statutory rule subsequently enacted by Pakistan in addition to, or in place of, the Notifications mentioned above.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate Ottawa, this 24th day of February, 1976, in the English and French languages, each version being equally authentic.

EN FOI DE QUOI les soussignes, dument authorises a cet effet, ont signe le presente Protocole.

FAITE en double exemplaire a Ottawa, ce 24ume jour de fevrier 1976, en langues francaise et anglaise, chaquer version faisant egalement foi.

AFTAB AHMAD,
Additional Secretary.

C. No. 2(17)TL/60

Published in the Gazette of Pakistan, Extraordinary, Pages 109-118 (II), dated 16-01-1978.

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