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Romania
FINANCE DIVISION
Islamabad, the 15th February, 1981
INCOME TAX
S.R.O. 128(1)/81. - Whereas the annexed Convention between
the Government of the Islamic Republic of Pakistan and the Socialist Republic of Romania
for the avoidance of double taxation and the prevention of fiscal evasion with respect to
taxes on income has been made;
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 be given effect in Pakistan from 1st day of
January, 1980.
Annexure
CONVENTION BETWEEN THE SOCIALIST REPUBLIC OF ROMANIA AND THE ISLAMIC REPUBLIC OF
PAKISTAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH
RESPECT TO TAXES ON INCOME.
The Government of the Socialist Republic of Romania and the Government of Islamic Republic of Pakistan desiring to conclude a convention for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income on the basis of national sovereignty and equality in rights and with a view to promote and strengthen the economic relations between the two countries, 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. This Convention shall apply to taxes on income imposed on
behalf of each Contracting State, irrespective of the manner in which they are levied.
2. There shall be regarded as taxes on income all taxes imposed on total income or on
elements of income including taxes on gains from the alienation of movable or immovable
property.
3. The existing taxes to which the Convention shall apply are:
(a) In the case of Romania:
(i) tax on incomes derived by individuals and corporate bodies;
(ii) tax on the profits of joint companies constituted with the participation of some
Romanian economic organisations and some foreign Partners;
(iii) tax on income realised from agricultural activities (hereinafter referred to as
"Romanian tax").
(b) In the case of Pakistan ·
- the income-tax,
- the super-tax and
- surchage (hereinafter referred to as "Pakistan tax").
4. The Convention shall apply also to any identical or substantially similar taxes which
are imposed after the date of signature of this Convention in addition to, or in place of;
the existing taxes by either Contracting State. At the end of each year, the competent
authorities of the Contracting States shall notify to each other any substantial changes
which have been made in their respective taxation laws,
5. In the case of substantial changes in the system of taxation of either Contracting
State, the Contracting States may consult each other with a view to adapting this
Convention to such changes.
ARTICLE 3
DEFINITIONS
1. In this Convention, unless the context otherwise requires:
(a) the terms "a Contracting State" and "the other Contracting State"
mean Romania or Pakistan as the context requires;
(b) the term "Romania", used in a geographical sense means the territory of the
Socialist Republic of Romania, and any area outside the territorial waters of Romania over
which Romania may exercise, in accordance with the international law and with its own law,
sovereign rights with respect to the sea-bed and sub-soil and their natural resources;
(c) the term "Pakistan" used in a geographical sense means Pakistan as defined
in the Constitution of the Islamic Republic of Pakistan and also includes any area outside
the territorial waters of Pakistan which under the international law and the laws of
Pakistan is an area within which the rights of Pakistan with respect to the sea-bed and
sub-soil and their natural resources may be exercised;
(d) the term "competent authority"' means:
1. in Romania - The Ministry of Finance,
2. in Pakistan - The Central Board of Revenue,
(e) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively an enterprise carried on by a resident of
a Contracting State and an enterprise carried on by a resident of the other Contracting
State;
(f) the term "company" means any body corporate including a joint company which
is incorporated under Romanian law or any entity which is treated as a body corporate for
tax purposes;
(g) the term "person" includes an individual, a company, a partnership, and any
other entity treated as taxable unit;
(h) the term "national" means:
(i) any individual possessing the citizenship of a Contracting State;
(ii) any legal person, partnership and association deriving its status as such from the
law in force in a Contracting State;
(i) the term "international traffic" means any transport by a ship, aircraft,
road vehicle operated by an enterprise of a Contracting State, except when such transport
is made solely between places in the other Contracting State;
(j) the term "political sub-division" means a political sub-division in
Pakistan;
(k) the term "territorial administrative sub-division" means a territorial
administrative sub-division in Romania.
2. As regards the application of the Convention by a Contracting State any term not
otherwise defined shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the taxes which are the subject
of the Convention.
ARTICLE 4
FISCAL DOMICILE
1. For the purposes of this Convention, the term "resident
of a Contracting State" means any person who, under the law of that State, is liable
to taxations therein by reason of his domicile, residence place of management or any other
criterion of a similar nature.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both
Contracting States. his status shall be determined in accordance with the following
rules:-
(a) He shall be deemed to be a resident of the Contracting State in which he has a
permanent home available to him. If he has a permanent home available to him in both
Contracting States, he shall be deemed to be a resident of the Contracting State with
which his personal and economic relations are closest (hereinafter referred to as the
"centre of vital interests".
(b) If the Contracting 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 Contracting State,
he shall be deemed to be a resident of the Contracting State in which he has an habitual
abode.
(c) If he has an habitual abode in both Contracting States or in neither of them, he shall
be deemed to be a resident of the Contracting State of which he is a national.
(d) If he is a national of both Contracting States or of 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 company is a resident of both
Contracting States, then its status shall be determined in accordance with the following
rules:-
(a) It shall be deemed to be a resident of the Contracting State of which it is a
national.
(b) If it is a national of neither of the Contracting States, it shall be deemed (to be a
resident of the Contracting State in which its place of effective) management is situated.
4. Where by reason of the provisions of paragraph i a person other than an individual or a
company is a resident of both Contracting States, the competent authorities of the
Contracting States shall by mutual agreement endeavour to settle the question and to
determine the mode of application of the Convention to such person.
ARTICLE 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Convention, the term "permanent
establishment" means a fixed place of business in which the business of the
enterprise is wholly or partly carried on.
2. The term "permanent establishment" shall include especially:-
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, quarry or other place of extraction of natural resources;
(g) a permanent sales exhibition;
(h) a building site or construction or assembly project where such site or project
continues for a period of more than 12 months.
3. The term "permanent establishment" shall not be deemed to include:-
(a) the use of facilities solely for the purpose of storage display or delivery pursuant
to a foreign sale contract, 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, display or delivery;
(c) the maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise, or for collecting information, for the enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of advertising,
for the supply of information, for scientific research or for similar activities which
have a preparatory or auxiliary character, for the enterprise;
(e) the maintenance of goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;
(f) the selling of goods or merchandise belonging to the enterprise in the frame of an
occasional temporary fair or exhibition in the process of closing down of such fair or
exhibition.
4. The term "permanent establishment" shall be deemed to include a person acting
in one of the Contracting States for or on behalf of enterprise of the other Contracting
State if:-
(i) he has and habitually exercises in the first-mentioned Contracting State a general
authority to negotiate and enter into contracts for or on behalf of the enterprise unless
his activities are solely for the purpose of purchasing goods or merchandise for the
enterprise.
(ii) he habitually secures orders in the first-mentioned Contracting State, wholly or
almost wholly, for the enterprise itself.
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, where such persons are acting in the ordinary course of their
business.
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 State (whether through a permanent establishment or
otherwise), shall not of itself constitute for either company a permanent establishment of
the other.
ARTICLE 6
INCOME FROM IMMOVABLE PROPERTY
1. Income from immovable property may be taxed only in the
Contracting State in which such property is situated.
2. The term "immovable property" shall be defined in accordance with the law of
the Contracting State in which the property in question is situated. The term shall in any
case include property accessory to immovable property, rights to which the provisions of
general law respecting landed property apply, usufruct of immovable property and rights to
variable of 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 I shall apply to income derived from the direct use,
letting, or use in any other form of immovable property.
4. The provisions of paragraphs I 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 professional 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 it carries on
business in that other Contracting State through a permanent establishment situated
therein, the profits of the enterprise may be taxed in the other State but only so much of
them as is attributable 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 profits which it might be expected to make if it where 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 deductions expenses which are incurred for the purpose of the permanent
establishment including executive and general administrative expenses so incurred, whether
in the State in which the permanent establishment is situated or elsewhere.
However, no such deductions 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 or
any other similar payments in return for the use of payment or other rights or technical
know-how, or by way of commission for management. or except in the case of a banking
enterprise, by way of interest on money lent to the permanent establishment.
4. Insofar 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 embodied 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 purpose of the preceding paragraphs, 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
INTERNATIONAL TRANSPORT
1. Profits derived by an enterprise of a Contracting State from
the operation of ships, aircraft, or road vehicles in international traffic shall be
taxable only in that State.
2. Notwithstanding the provisions of paragraph I of this Article or Article 7, profits
derived from the operation of ships, aircraft or road vehicles used solely between places
in a Contracting State may be taxed in that State.
3. The provisions of paragraphs 1 and 2 shall also apply to profits referred to in those
paragraphs derived by an enterprise of a Contracting State from its participation in a
pool, a joint business or in an international operating agency.
ARTICLE 9
ASSOCIATED ENTERPRISES
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 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 that enterprise and taxed accordingly.
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
State.
2. However, such dividends may be taxed in the Contracting State of which the company
paying the dividends is a resident, and according to the law of that State, but if the
recipient company is the beneficial owner of the dividends the tax so charged shall be:
(a) 5% of the gross amount of the dividends, if the recipient company holds directly at
least 20% of the capital of the company paying the dividends and the latter company is
engaged in an industrial undertaking.
(b) 10% of the gross amount of the dividends in all other cases.
3. (a) The term dividends as used in this Article means income from shares,
"jouissance" shares or "jouissance" rights, mining shares, founder's
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 taxation law of the State in which the company making the distribution
is a resident. In this meaning are assimilated to dividends the profits distributed by the
joint companies to the capital subscribers.
(b) The term "industrial undertaking" as used in this Article means an
undertaking engaged in -
(i) the manufactured goods or materials or the subjection of goods or materials to any
process which results in substantially changing their original conditions:
(ii) ship-building;
(iii) electricity, hydraulic power, gas and water supply;
(iv) mining including working of an oil-well or other source of any mineral deposit; and
(v) any other undertaking, which may be declared by the competent authority to be an
industrial undertaking for the purposes of this Article.
4. The provisions of paragraphs i and 2 shall not apply if the recipient 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 resident, through a permanent
establishment situated therein or performs in that other State professional services from
a fixed base situated therein and the dividends paid are effectively connected with such
permanent establishment or fixed base. In such a 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 to persons who are not residents of the other State, or subject the
company's undistributed profits to a tax on undistributed profits, even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income arising in
such other State
6. The provisions of this Article shall not affect the taxation of the Company in respect
of the profits out of which the dividends are paid.
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 State.
2. However, such interest may be taxed in the Contracting State in which it arises, and
according to the law of that State, but if the recipient is the beneficial owner of the
interest, the tax so charged shall be 10 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, the interest arising in a Contracting
State from a loan advanced by the other Contracting State, its political sub-division or
territorial administrative - sub-division or financial institution to any resident of the
first-mentioned Contracting State shall be exempt in that first State where such loan and
the terms of its payment are approved by the Government of that first State.
4. The term "interest" as used in this Article means income from Government
securities, bonds or debentures, whether or not secured by mortgage and whether or not
carrying a right to participate in profits and debt claims of every kind as well as all
other income assimilated to income from money lent by the taxation law of the State in
which the income arises, including premium and prizes attaching to such securities, bonds
or debentures.
5. The provisions of paragraph i or 2 shall not apply if the recipient of the interest,
being a resident of a Contracting State has in the other Contracting State in which the
interest arises a permanent establishment or perform in that other State professional
services from a fixed base situated therein and the debt-claim is effectively connected
with such permanent establishment or fixed base. In such a case, the provisions of Article
7 or Article 15, as the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is that State
itself, a political sub-division or a territorial administrative sub-division, a local
authority 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 in connection with which the indebtedness on which the interest is
paid was incurred, and such interest is borne by such permanent establishment, then such
interest shall be deemed to arise in the Contracting State in which the permanent
establishment is situated.
7. Where owing to a special relationship between the payer and the recipient or between
both of them and some other person, the amount of the interest paid, 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 recipient in the absence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In that case, the excess part of
the payments shall remain taxable according to the law of each Contracting State, due
regard being had to the other provisions of this Convention.
ARTICLE 12
COMMISSION
1. Commission 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 commission may be taxed in the Contracting State in which it arises and
according to the law of that State, but the tax so charged shall be 10 per cent of the
amount of the commission.
3. The term "commission" as used in this Article means a payment made to a
broker, a general commission agent or to any other person assimilated to such a broker or
agent by the taxation law of the Contracting State in which such payment arises.
4. The provisions of paragraphs I and 2 shall not apply if the recipient of the Commission
being a resident of a Contracting State has in the other Contracting State in which the-
Commission arise a permanent establishment - or performs in that - other State
professional services from a fixed base situated therein and the earning of Commission is
effectively connected with such permanent establishment or fixed base. In such a case
provisions of Article 7 or Article 15, as the case may be, shall apply.
5. Commission shall be deemed to arise in a Contracting State when the payer is that State
itself, a political sub-division, an administrative territorial sub-division, or a local
authority or a resident of that State. Where, however the person paying the commission,
whether he is a resident of a contracting State or not, has in a Contracting State a
permanent establishment in connection with which the liability to pay the commission was
incurred, and such commission is borne by such permanent establishment, then such
commission shall be deemed to arise in the Contracting State in which the permanent
establishment is situated.
ARTICLE 13
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 be taxed in the Contracting State in which they arise, and
according to the law of that State but if the recipient is the beneficial owner of the
royalties, the tax so charged shall be 12.5 per cent of gross amount of royalties as
defined in paragraph 3.
3. The term "royalties" as used in this Article means payments of any kind
received as consideration for the use of, or the right to use, any copyright of literary,
artistic or scientific work (including cinematograph films, and films or tapes for radio
or television broadcasting), any patent, trade mark, design or model, plant, secret
formula or process, or for the use of, or the right to use, industrial, commercial or
scientific equipment or for information concerning, industrial, commercial or scientific
experience.
4. The provisions of paragraphs i and 2, shall not apply if the recipient of the
royalties, being a resident of a Contracting State, has in the other Contracting State in
which the royalties arise, a permanent establishment or performs in that other State
professional services from a fixed base situated therein. In such a case, the provisions
of Article 7 or Article 15, 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 or a territorial administrative 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 in connection with which the liability to pay the royalties was
incurred, and such royalties are borate by such permanent establishment, then such
royalties shall be deemed to arise in the Contracting State in which the permanent
establishment is situated.
6. Where, owing to a special relationship between the payer and the recipient or between
both of them and some other person, the amount of the royalties paid, 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 recipient in the absence of such relationship, the
provisions of this Article shall apply only to the last-mentioned amount. In that case,
the excess part of the payments shall remain taxable according to the law of each
Contracting State, due regard being had to the other provisions of this Convention.
ARTICLE 14
CAPITAL GAINS
1. Gains from the alienation of movable property, as defined in
paragraph 2 of Article 6, may be taxed only in the Contracting State in which such
property is situated.
2. Gains from the alienation of a 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 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 such a fixed base, may be
taxed in the other State. However, gains from the alienation of ships and aircraft, as
specified in paragraph I of Article 8 of a Contracting State 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 any property other than those mentioned in paragraphs 1
and 2 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. 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 the other Contracting State; or
(b) if his stay in the other Contracting State is for a period or periods exceeding in the
aggregate 183 days in the taxable year; or
(c) if the remuneration for his services in the other Contracting State derived from
residents of that Contracting State exceeds an amount in Pakistani rupees or in Romanian
lei equal to 4,000 US $ in the taxable year, notwithstanding that his stay in that State
is for a period or periods amounting to less than 183 days during the taxable year.
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 16
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 17, 19 and 20 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 exercised in the other
Contracting State, 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 of the enterprise of a Contracting State
as specified in paragraph I of Article 8, shall be taxable only in that State.
* The word "aboard" has wrongly appeared as "abroad" in the
Official Gazette.
ARTICLE 17
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, shall be taxable only in that other State.
ARTICLE 18
ARTISTS AND ATHLETES
1. Notwithstanding the provisions of Articles 15 and 16, income
derived by entertainers, such as theatre, motion picture, radio or television artists and
musicians, and by athletes, from their personal activities as such shall be taxable only
in the Contracting State in which these activities are exercised.
2. Notwithstanding the provisions of Article 7, where the activities mentioned in
paragraph 1 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.
3. Income derived from such activities performed within the framework of cultural
agreements concluded between the Contracting States, shall be exempted from taxes in the
Contracting State in which these activities are exercised.
ARTICLE 19
PENSIONS
1. Pensions, annuities and other similar remuneration arising in
a Contracting State shall be taxable only in that State.
2. Pensions, annuities and other similar remuneration shall be deemed to arise in a
Contracting State when the payer is that State itself, a political sub-division, a
territorial administrative sub-division, a local authority or a resident of that State.
3. The term "pensions, annuities and other similar remuneration", as used in
this Articles means periodic payments made after retirement in consideration of past
employment or by way of compensation for injuries received in. connection with past
employment.
ARTICLE 20
GOVERNMENTAL FUNCTIONS
1. (a) Remuneration, other than pensions, paid by a Contracting
State or a political sub-division or a territorial administrative sub-division or a local
authority thereof to any individual in respect of services rendered to that State of a
political sub-division or a territorial administrative subdivision or local authority
thereof in the discharge of governmental functions 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 recipient is a resident of that other
Contracting State, where -
(i) he is not a citizen of the Contracting State referred to in paragraph l (a); and
(ii) he did not become a resident of the other Contracting 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 territorial administrative sub-division or a local
authority thereof.
ARTICLE 21
TEACHERS AND STUDENTS
A resident of one of the Contracting States who is temporarily
present in the other Contracting State solely -
(a) as a student at a recognized University, College, or School in the other Contracting
State,
(b) as an apprentice to acquire technical, professional or business experience from a
person other than his employer or an organization referred to in (c) below,
(c) as the recipient of a grant, allowance or award for the primary purpose of study or
research from any organization of the former State, or
(d) as a trainee under arrangements with the Government of the other Contracting State or
any agency or instrumentality thereof for the purpose of training, study or orientation,
shall not be taxed in the other Contracting State in respect of remittances from abroad
for the purpose of his maintenance, education or training or in respect of a scholarship
grant. The other State shall not charge tax on his remuneration for services rendered in
that other State provided that such services are in connection with his studies or
practical training or are necessary for the purpose of his maintenance.
ARTICLE 22
INCOME NOT EXPRESSLY MENTIONED
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.
ARTICLE 23
ELIMINATION OF DOUBLE TAXATION
1. Where any tax as paid on any income in Pakistan by a resident
of Romania, such tax shall be deducted from the tax payable in Romania according to the
provisions of Romanian tax laws.
2. Subject to the provisions of the Pakistan Income-tax Act regarding the allowance as a
credit against Pakistan tax of tax payable in a country outside Pakistan, tax paid in
Romania, by person resident in Pakistan, on any income shall be allowed as a credit
against any Pakistan tax payable in respect of that income.
3. 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.
4. Notwithstanding the provisions of the preceding paragraphs of this Article if for any
year exemption from tax is granted on any income either wholly or partly by one of the
Contracting States, credit for the tax so exempted shall be allowed by the other
Contracting State against the tax on such income payable in that other State.
ARTICLE 24
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 on enterprises of that other State carrying on the same
activities.
3. Enterprises of a Contracting State, the capital of which is wholly or partly onward 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 requirement 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 my be subjected.
4. Nothing in this Article shall be construed:
(a) 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;
(b) as affecting any provision in law of Pakistan which grants rebates of tax to companies
which fulfill 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 25
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 law of those States, present his case to the competent authority of the
Contracting State of which he is a resident or, if this case comes under paragraph 1 of
Article 24 to that of the Contracting State of which he is a national. This case must be
presented within two years from the first notification of the action giving 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 which is not in accordance with the Convention. Any agreement
reached shall be implemented notwithstanding any time limits in the national laws of the
Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubt 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 if 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 9.
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 26
EXCHANGE OF INFORMATION
1. The competent authorities of the Contracting States shall
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 his Convention and in particular
for the prevention of fraud and evasion of such taxes. The competent authorities shall
through consultations, develop appropriate conditions, methods and techniques concerning
the matters respecting which such exchange shall be made, as well as exchange of
information regarding avoidance of tax where appropriate. Any information so exchanged
shall be treated as secret and shall not be disclosed to an), 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 on 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;
(d) to supply information, the disclosure of which would be contrary to its sovereignty,
security or public policy.
ARTICLE 27
DIPLOMATIC AND CONSULAR OFFICIALS
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 28
MISCELLANEOUS RULES
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.
ARTICLE 29
ENTRY INTO FORCE
1. This Convention shall be ratified and the instruments of
ratification shall be exchanged at Bucharest/Islamabad as soon as possible.
2. The Convention shall enter into force upon the exchange or instruments of ratification
and its provisions shall have effect:
(a) In Romania:
in respect of Romania on any income arising in Romania on or after the first day of
January in the calendar year in which the exchange of instruments of ratification takes
place.
(b) In Pakistan:
in respect of Pakistan or any income arising in Pakistan in the "previous year"
(as defined by the tax law 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:
Provided that in the case of profits referred to in Article 8, the application of this
Convention from an earlier date may be settled through the provisions of Article 25.
ARTICLE 30
TERMINATION
This Convention shall remain in force indefinitely 'but either of
the Contracting States may, on or before the 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 to the other Contracting State, through diplomatic channels, written notice of
termination and, in such event, the Convention shall cease to be effective:
(a) in Romania:
in respect of Romanian tax on the income arising in Romania on or after the first day of
January of the year next following the date on which notice of termination is given;
(b) in Pakistan:
in respect of Pakistan tax on the income arising in Pakistan for the "previous
years" (as defined by the tax law of Pakistan) beginning on or after the first day of
January in the calendar year next following the date on which notice of termination is
given.
ABDUL WAHEED,
Joint Secretary
[C. No. 2(1)IT2/76.]
Published in the Gazette of Pakistan, Extraordinary, Pages 281-297(II), dated
17-02-1981.
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