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PROTOCOL SUPPLEMENTING THE CONVENTION BETWEEN PAKISTAN AND JAPAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME.

S.R.O. 993(K)/61, dated the 17th October, 1961. - Whereas the annexed Protocol supplementing the Convention between the Pakistan and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income has been ratified and the instruments of ratification exchanged as required by Article IV thereof;

Now, THEREFORE, in exercise of the powers conferred by section 49AA of the Income Tax Act, 1922 (XI of 1922), the Central Government is pleased to direct that the said protocol shall be given effect to in Pakistan.

Annexure

PROTOCOL SUPPLEMENTING THE CONVENTION BETWEEN
PAKISTAN AND JAPAN
FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION
OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME.

The Government of Pakistan and the Government of Japan,

Desiring to conclude a Protocol supplementing the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income signed at Tokyo on the 17th February, 1959,

Have accordingly appointed their respective representatives for this purpose, who have agreed as follows :-

ARTICLE I

After Article VII, the following new Article shall be inserted:

ARTICLE VII-A

(1) Inscribed on -

(a) bonds or debentures issued by one of the Contracting States, including local Governments thereof, or by a corporation or other entity of one of the Contracting States, or

(b) deposits made in one of the contracting States, or

(c) loans (including loans in the form of deferred payments) in connection with trade, business or other transactions carried on in one of the Contracting States,

shall be treated as income from sources within that Contracting State and shall be taxable by that Contracting State.

(2) The rate of tax imposed by one of the Contracting States on any interest derived from sources within that Contracting State by a resident or corporation of the other contracting State shall not exceed 30 per cent unless such interest arises in connection with a trade or business carried on by that resident or corporation through a permanent establishment situated in the former Contracting State.

(3) Notwithstanding the provisions of paragraphs (1) and (2) of the present Article,

(a) interest on bonds issued by one of the Contracting States, including local Governments thereof, payable to a resident or corporation of the other contracting State shall be exempt from the tax of the former contracting State, or

(b) interest payable to a resident of Japan or a Japanese corporation on debentures issued by, or on loans (including loans in the form of deferred payments) made to, a Pakistan enterprise engaged in an industrial undertaking falling under any of the classes mentioned in clauses (a) to (f) inclusive of paragraph (7) of Article VI shall be exempt from Pakistan tax, or

(c) interest payable to a resident of Pakistan or a Pakistan company on debentures issued by, or on loans (including loans in the form of deferred payments) made to, a Japanese enterprise shall be exempt from Japanese tax,

unless such interest arises from sources within one of the contracting States in connection with a trade or business carried on by a resident of corporation of the other contracting State through a permanent establishment situated in the former contracting State.

(4) The term "interest" means interest on bonds, securities, notes, debentures or any other form of indebtedness including mortgages or bonds secured by real property".

ARTICLE II

Article XIII shall be deleted and replaced by the following Article:

ARTICLE XIII

(1) Income derived from real property situated in one of the contracting States by a resident or corporation of the other contracting State shall be treated as income derived from sources within the former contracting State and shall be taxable by that contracting State.

(2) The term "income derived from real property" mans income of whatever nature derived from real property (including royalties in respect of the operation of mines, quarries or other natural resources)".

ARTICLE III

After paragraph (2) of Article XIV, the following new paragraph shall be inserted:

"(3) For the purposes of the credit referred to in paragraph (2) of this Article, there shall be deemed to have been paid the amount of Pakistan tax exempted under the provisions of paragraph (3) of Article VIIA."

ARTICLE IV

(1) The present protocol shall be ratified and the instruments of ratification shall be exchanged at Karachi as soon as possible.

(2) The present Protocol shall enter into force on the date of exchange of instruments of ratification and shall be applicable to interest referred to in Article VIIA as supplemented by the present Protocol, on bonds or debentures issued, deposits or loans made, or any other form of indebtedness incurred, and to income referred to in Article XIII as supplemented by the present Protocol, derived from real property -

(a) In Pakistan, during 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.

(b) In Japan, during the taxable years beginning on or after the first day of January in the calendar year in which the exchange of instruments of ratification takes place.

(3) The present Protocol shall continue in force as long as the said Convention of the 17th February, 1959 remains effective.

IN WITNESS WHEREOF the representatives of the two Governments, duly authorised for the purpose, have signed the present Protocol.

DONE at Tokyo in duplicate in the English language on the twenty-eighth day of June, one thousand nine hundred and sixty.

MUHAMMAD HUSSAIN,
for Joint Secretary.

C. No. 25(3)-ITP/59

Published in the Gazette of Pakistan, Extraordinary, Pages 410(1), dated 27-10-1961.

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