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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.

ARTICLE 19
PENSIONS, SOCIAL SECURITY PAYMENTS, ANNUITIES AND ALIMONY

1. Pensions, annuities and social security payments arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

2. Alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State.

3. Pensions, annuities and social security payments 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 or a permanent establishment or fixed base situated therein.

ARTICLE 20
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 Contracting 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. The provisions of Articles 16 and 17 shall apply to remuneration 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 21
STUDENTS

An individual from one of the territories who is temporarily present in the other territory solely;

(a) as a student at a university, college or school in such other territory;

(b) as a business apprentice, or

(c) as a recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organisation.

shall not be taxed in the other territory in respect of remittances from abroad for the purpose of his maintenance, education or training, in respect of a scholarship (including a grant, allowance or award) and in respect of any amount representing remuneration for services rendered in that other territory, provided such services are in connection with his studies or training or are necessary for the purpose of his maintenance.

ARTICLE 22
OFFSHORE ACTIVITIES

(1) The provisions of this Article have effect notwithstanding any other provision of this Convention.

(2) A person who is a resident of a Contracting State and carries on activities offshore in the other Contracting State in connection with the exploration or exploitation of the sea-bed and sub-soil and their natural resources situated in that other State shall, subject to paragraphs 3 and 4 of this Article, be deemed in relation to those activities to be carrying on business in that other State through a permanent establishment or fixed base situated therein.

(3) The provision of paragraph 2 shall not apply where the activities are carried on for a period not exceeding 30 days in the aggregate in any twelve months period. However, for the purposes of this paragraph:

(a) activities carried on by an enterprise associated with another enterprise shall be regarded as carried on by the enterprise with which it is associated if the activities in question are substantially the same as those carried on by the last-mentioned enterprise;

(b) two enterprises shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third person or persons.

(4) Profits derived by a resident of a Contracting State from the transportation of supplies or personnel to a location, or between locations, where activities in connection with the exploration or exploitation of the sea-bed and sub-soil and their natural resources are being carried on in a Contracting State, or from the operation of tugboats and other vessels auxiliary to such activities, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

(5) (a) Subject to sub-paragraph (b) of this paragraph, salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment connected with the exploration or exploitation of the sea-bed and sub-soil and their natural resources situated in the other Contracting State may, to the extent that the duties are performed offshore in that other State, be taxed in that owner State provided that the employment offshore is carried on for a period exceeding 30 days in the aggregate in any twelve month period.

(b) Salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment exercised aboard a ship or aircraft engaged in the transportation of Supplies or personnel to a location, or between locations, where activities connected with the exploration or exploitation of the sea-bed and sub-soil and their natural resources are being carried on in a Contracting State, or in respect of an employment exercised aboard tugboats or other vessels operated auxiliary to such activities, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

ARTICLE 23
OTHER INCOME

1. 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 1 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 15, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Contracting State may, also be taxed in that other State.

ARTICLE 24
METHODS FOR ELIMINATION OF DOUBLE TAXATION

Double taxation shall be avoided as follows:

1. In Pakistan: Subject to the provisions of the laws of Pakistan regarding the allowances as a credit against Pakistan tax the amount of the Danish tax payable under the laws of Denmark 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 Denmark which has been subjected to tax both in Pakistan and Denmark shall be allowed as a credit against the Pakistan tax payable in respect of such income but in an amount not exceeding that proportion of Pakistan tax which such income bears to the entire income chargeable to Pakistan tax.

2. In Denmark: (a) Subject to the provisions of the sub-paragraph (c), where a resident of Denmark derives income which, in accordance with the provisions of this Convention, may be taxed in Pakistan, Denmark shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Pakistan:

(b) Such deduction shall not however, exceed the part of the income tax as computed before the deduction is given which is attributable to the income which may be taxed in Pakistan:

(c) Where a resident of Denmark derives income which, in accordance with the provisions of this Convention shall be taxable only in Pakistan, Denmark may include this income in the tax base, but shall allow as a deduction from the income tax that part of the income tax which is attributable to the income derived from Pakistan.

3. (a) For the purposes of paragraph 2, tax payable in Pakistan by a resident of Denmark with respect to income covered by Articles 10 and 11 the term "tax in Pakistan" shall be deemed to include any amount which would have been payable as Pakistan tax under the laws of Pakistan and in accordance with this Convention for any year but for an exemption from, or reduction of, tax granted for that year under the provisions of clauses (75) to (82) of Part I of the Second Schedule of the Income Tax Ordinance, 1979. Similarly, for the purposes of the deduction rendered to in (a) of paragraph 2 above with respect to income covered by Articles 12 and 13, the term "tax paid in Pakistan" shall be deemed to include any amount which would have been payable as Pakistan tax under the laws of Pakistan or in accordance with this Convention for any year but for or exemption from, or reduction of, tax granted for that year under a tax incentive scheme.

(b) For the purposes of paragraph 2, "tax paid in Pakistan" by a resident of Denmark with respect to income covered by Article 7 shall be deemed to include any amount which would have been payable as Pakistan tax under the laws of Pakistan and in accordance with this Convention for any year but for an exemption from, or reduction of, tax granted for that year under the provisions of sections 105A and 106 of the Income Tax Ordinance, 1979 or under clauses (96), (98), (99), (100), (101), (102) and (126) of Part I of the Second Schedule to the said Ordinance.

This paragraph shall apply to any substantially similar provisions which may replace or be added to the aforesaid provisions of Pakistan law subject to the notification and approval of the competent authorities of the Contracting States. The provisions of this paragraph shall apply for the first ten years for which the Convention is effective, but the competent authorities of the Contracting States may consult each other to determine whether this period shall be extended.

ARTICLE 25
NON-DISCRIMINATION

1. 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. 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 term "nationals" means:

(a) all individuals possessing the nationality of a Contracting State;

(b) all legal persons, partnerships and associations deriving their status as such from the laws in force in a Contracting State.

3. Stateless persons who are residents of a Contracting State shall not be subjected in either 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 the State concerned in the same circumstances are or may be subjected.

4. 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 Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil states or family responsibilities which it grants to its own residents.

5. Except where the provisions of paragraph I of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, or paragraph 6 of Article 13 apply interest, royalties, fees for technical services and other disbursement 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.

6. 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 are or may be subjected.

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

ARTICLE 26
MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the action 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 25, 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 competent authority of the other Contracting State, with a view to avoidance of taxation which is 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. They may also consult together for the elimination of double taxation in cases not provided for in 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. 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 Sates.

ARTICLE 27
EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States 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 not contrary to the convention, in particular for the prevention of fraud or evasion of such taxes. The exchange of information is not 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. However, if the information is originally regarded as secret in the transmitting State, it shall be disclosed only to persons of authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention. Such persons or authorities shall use the information only for such purposes but may, disclose the information in public court proceedings or in judicial decisions. The competent authorities shall, through consultations, develop appropriate conditions, methods and techniques concerning the matters in respect of which such exchanges of information shall be made, including where appropriate exchange of information regarding tax avoidance.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws 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 28
DIPLOMATIC AGENTS AND CONSULAR OFFICERS

Nothing in this Convention shall effect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

ARTICLE 29
TERRITORIAL EXTENSION

1. This Convention may be extended, either in its entirety or with any necessary modifications to any part of the territory of the Contracting States which is specifically excluded from the application of the Convention or to any State or territory for whose international relations Denmark or Pakistan 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 31 shall also terminate, in the manner provided for in that Article, the application of the Convent/on to any part of the territory of the Contracting States or to any State or territory to which it has been extended under this Article.

ARTICLE 30
ENTRY INTO FORCE

1. This Convention shall enter into force on the latter of the dates on which the respective Governments have notified each other in writing that the formalities constitutionally required in their respective States have been complied with, and its provisions shall have effect:

(a) in respect of taxes withheld at the source on amounts paid or remitted to non-residents on or after the first day of January in the calendar year next following that in which the Convention enters into force; and

(b) in respect of other taxes for the assessment year beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force and subsequent years.

2. The Convention between the Government of Pakistan and the Government of Denmark signed on 4th September, 1961 for the avoidance of double taxation and prevention of fiscal evasion with respect of taxes on income, shall terminate upon the entry into force of this Convention and cease to have effect as respect taxes on income to which the present Convention applies in accordance with the provision of paragraph 1 of this Article.

ARTICLE 31
TERMINATION

This Convention shall remain in force indefinitely, but either of the Contracting States may, on or before 30th June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State, through the diplomatic channels written notice of termination.

In such event, the Convention shall cease to have effect:

(a) in respect of taxes withheld at the source, on amounts paid or remitted to non-residents on or after the first day of January next following the notice of termination; and

(b) in respect of other taxes on income derived during the year relevant to the year of assessment beginning on or after first day of January next following the notice of termination.

IN WITNESS WHEREOF, the undersigned, being duly authorised thereto, have signed the present Convention.

DONE at Copenhagen, this 22nd day of October, 1987, in duplicate in the English language.

PROTOCOL

To the Convention between the Kingdom of Denmark and the Islamic Republic of Pakistan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

At the signing of the Convention concluded today between Government of the Kingdom of Denmark and the Government of the Islamic Republic of Pakistan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following additional provisions which shall form an integral part of the said Convention.

It is understood:

(a) That the onshore activities of drilling rigs shall constitute a permanent establishment in terms of Article 5 if the activities are carried on for a period of six months in any twelve months period.

(b) That with reference to (e) of paragraph 4 of Article 5, a fixed place of business may be deemed not to constitute a permanent establishment if it contributes to the productivity of the enterprise; but the services it performs are so remote from the actual realisation of profits that it is difficult to allocate any profits to the said fixed place of business. Such services may include a place of business.

- solely for the purpose of publicity or advertising for the enterprise.

- solely for the purpose of scientific research.

In any case the fixed place of business shall constitute a permanent establishment if the activity performed at the said fixed place of business in itself forms an essential and significant part of the activity of the enterprise as a whole.

(c) That with reference to paragraph 3 of Article 8, the competent authorities of the Contracting States may consult each other for determining whether this period shall be extended and at what rate.

(d) That with reference to (c) of paragraph 3 of Article 11, interest received by an institution financed principally by the Government of the National Bank of Denmark is in any case exempt from tax in Pakistan if no tax is leviable on the interest in Denmark.

(e) That with reference to paragraph 4 of Article 14, the word "principally" used in the paragraph denotes that at least 50 per cent of the property of the company consists of immovable property.

(f) That paragraph 2 of Article 17 shall have meaning stated in the United Nations Model Double Taxation Convention between Developed and Developing Countries. The term "top-level managerial position" refers to a limited group of positions that involve primary responsibility for the general direction of the affairs of the company, apart from the activities of the directors. The term would cover a person acting as both a director and a top-level manager.

(g) That the term "annuity" in Article 19 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.

(h) That with reference to Article 25, where a Contracting State applies different tax rates for resident and non-resident persons or applies different rules for the computation of income of resident and non-resident persons or imposes an obligation regarding the withholding of tax from payments to non-resident persons, it would not be construed as discrimination in the context of the Article.

(i) That all information concerning individuals or legal persons supplied under Article 27 is secret under the law of the Contracting States and shall be treated as such.

IN WITNESS WHEREOF, the undersigned, being duly authorised thereto, have signed this Protocol.

DONE at Copenhagen, this 22nd day of October, 1987, in duplicate in the English language.

AHADULLAYH AKMAL
Additional Secretary

Published in the Gazette of Pakistan, Extraordinary, Pages 1929-1952(II), dated 26-12-1987.

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