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Sweden
AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION WITH
RESPECT TO TAXES ON INCOME BETWEEN
PAKISTAN AND THE ROYAL GOVERNMENT OF SWEDEN.
S.R.O. 127, dated the 18th March, 1957. - Whereas the
annexed Agreement for the Avoidance of Double Taxation and the Prevention for Fiscal
Evasion with respect to Taxes on income between the Government of Pakistan and the Royal
Government of Sweden has been ratified and the instruments of ratification exchanged, as
required by Article XXII of the said Agreement,
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 provisions of the
said Agreement shall be given effect to in Pakistan.
Annexure
AGREEMENT BETWEEN THE GOVERNMENT OF PAKISTAN AND
THE ROYAL GOVERNMENT OF SWEDEN FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF
FISCAL EVASION WITH RESPECT TO TAXES ON INCOME.
The Government of Pakistan and the Royal Government of Sweden,
Desiring to conclude an agreement for the avoidance of double taxation and the prevention
of fiscal evasion, have agreed as follows:
ARTICLE I
(1) The taxes which are the subject of the Agreement are;
(a) In Pakistan:
(i) the income tax;
(ii) the super-tax; and
(iii) the business profits tax (hereinafter referred to as "Pakistan tax").
(b) In Sweden:
(i) The State income-tax, including coupon tax;
(ii) the tax on companies reducing share-capital (utskiftings-skatten);
(iii) the tax on companies undistributed profits (ersattnnggs-skatten);
(iv) the tax on public entertainers (bevillningsavgifterna for sarskilda formaner och
rattigheter);
(v) the communal income-tax (kommunal inkomstskatt); and
(vi) the State capital tax for the purposes of Articles XIX and XXI to XXIII inclusive
(hereinafter referred to as "Swedish tax").
(2) The present Agreement shall also apply to any other taxes of a substantially similar
character imposed by either Contracting Government subsequently to the date of signature
of the present Agreement or by the Government or any territory to which the present
Agreement is extended under Article XXI.
ARTICLE II
(1) In the present Agreement, unless the context otherwise
requires:
(a) The term "Pakistan" means the Provinces of Pakistan and the Federal Capital;
(b) The terms "one of the territories" and "the other territory" mean
Sweden or Pakistan, as the context requires;
(c) The term "tax" means Swedish tax or Pakistan tax, as the context requires;
(d) The term "person" includes any body of persons, corporate or not corporate;
(e) The term "company" means any body corporate or not corporate, assessed as a
company under the relevant laws of either Contracting Government and, as far as Sweden is
concerned, an economic society (ekonomisk forening);
(f) The terms "resident of Sweden" and "resident of Pakistan" mean
respectively any person who is resident in Sweden for the purposes of Swedish tax and not
resident in Pakistan for the purposes of Pakistan tax and any person who is resident in
Pakistan for the purposes of Pakistan tax and not resident in Sweden for the purposes of
Swedish tax; a company shall be regarded as resident in Pakistan if its business is
managed and controlled in Pakistan and as resident in Sweden if it is incorporated under
the laws of Sweden and its business is not managed and controlled in Pakistan, or if it is
not so incorporated but its business is managed and controlled in Sweden and not in
Pakistan;
(g) The terms "resident of one of the territories" and "resident of the
other territory" mean a person who is resident of Sweden or a person who is a
resident of Pakistan, as the context requires;
(h) The terms "Swedish enterprise" and "Pakistan enterprise" mean
respectively an industrial or commercial enterprise or undertaking in Sweden carried on by
a resident of in Sweden and an industrial or commercial enterprise or undertaking in
Pakistan carried on by a resident of Pakistan; and the terms "enterprise of one of
the territories" and "enterprise of the other territory" mean a Swedish
enterprise or a Pakistan enterprise, as the context requires;
(i) The term "industrial or commercial profits" does not include rents or
royalties in respect of motion picture films or income in the form of dividends, interest,
rents or royalties, or a fee or other remuneration derived from the management, control or
supervision of the trade, business or other activity of an enterprise or concern, or
remuneration for labour or personal services, or income from the operation of ships or
aircraft;
Subject to the provisions of this Agreement such items of income shall be taxed separately
or together with industrial and commercial profits in accordance with the laws of the
Contracting Governments;
(j) The term "permanent establishment" when used with respect to an enterprise
of one of the territories, means a branch, management, office, factory or other fixed
place of business, a mine, quarry or any other place of natural resources, subject to
exploitation, but does not include an agency unless the agent has, and habitually
exercises, a general authority to negotiate and conclude contracts on behalf of the
enterprise or has a stock of merchandise from which he regularly fills orders on its
behalf. In this connection -
(i) An enterprise of one of the territories shall not be deemed to have a permanent
establishment in the other territory merely because it carries on business dealings in
that other territory through a bona fide broker or general commission agent acting in the
ordinary course of his business as such;
(ii) The fact that a company which is a resident of one of the territories has a
subsidiary company which is a resident of the other territory or which carries on a trade
or business in that other territory (whether through a permanent establishment or
otherwise) shall not itself constitute that subsidiary company a permanent establishment
of its parent company;
(k) The term "competent authorities" means, in the case of Sweden, the Minister
of Finance or his authorised representative and, in the case of Pakistan, the Central
Board of Revenue or their authorised representative and in the case any territory to which
the present Agreement is extended under Article XXI, the competent authority for the
administration in such territory of the taxes to which the present Agreement applies.
(2) In the application of the provisions of the present Agreement by one of the
Contracting Governments, any term not otherwise defined shall, unless the context
otherwise requires, have the meaning which it has under the laws of the Contracting
Government relating to the taxes which are the subject of the present Agreement.
ARTICLE III
(1) The industrial or commercial profits of a Swedish enterprise
shall not be subject to Pakistan tax unless the enterprise is engaged in trade or business
in Pakistan through a permanent establishment situated therein. If it is so engaged, tax
may be imposed on those profits by Pakistan, but only on so much of them as is
attributable to that permanent establishment.
Provided that nothing in this paragraph shall affect any provisions of the law of Pakistan
regarding the taxation of profits deemed to accrue through the purchase of goods or
merchandise in Pakistan in cases where the purchase has been made otherwise than from an
independent exporter in the normal course of international trade.
(2) The industrial or commercial profits of a Pakistan enterprise shall not be subject to
Swedish tax unless the enterprise is engaged, in trade or business in Sweden through a
permanent establishment situated therein. If it is so engaged, tax may be imposed on those
profits by Sweden, but only on so much of them as is attributable to that permanent
establishment.
(3) Where an enterprise of one of the territories is engaged, in trade or business in the
other territory through a permanent establishment situated therein, there shall be
attributed to such permanent establishment the industrial or commercial profits which it
might be expected to derive in that other territory if it were an independent enterprise
engaged in the same or similar activities under the same or similar conditions and dealing
at arm's length with the enterprise of which it is a permanent establishment and the
profits so attributed shall be deemed to be income of that permanent establishment and
shall be taxed accordingly.
ARTICLE IV
Where-
(a) an enterprise of one of the territories participates directly or indirectly in the
management, control or capital of an enterprise of the other territory, or
(b) the same persons participate directly or indirectly in the management, control or
capital of an enterprise of one of the territories and an enterprise of the other
territory,
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, 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 V
(1) Notwithstanding the provisions of Articles III and IV,
profits which a resident of Sweden derives from operating aircraft shall be exempt from
Pakistan tax, unless the aircraft is operated wholly or mainly between places within
Pakistan.
(2) Notwithstanding the provisions of Articles III and IV, profits which a resident of
Pakistan derives from operating aircraft shall be exempt from Swedish tax, unless the
aircraft is operated wholly or mainly between places within Sweden.
ARTICLE VI
(1) The rate of Swedish coupon tax on dividends paid to a
resident of Pakistan shall not exceed 15 per cent.
(2) When a company which is resident of Sweden derives dividends from sources within
Pakistan, the dividends thus derived shall be exempt from Swedish tax.
(3) The rate of Pakistan super-tax on dividends paid to a company which is a resident of
Sweden and has no permanent establishment in Pakistan, by a company resident in Pakistan
shall be reduced by 1 anna in the rupee (6.25 per cent)
Provided that the first-mentioned company is -
(a) a public company as defined in paragraph (5) to this Article, and
(b) owns shares in the company, resident in Pakistan carrying not less than one-third of
that company's voting power.
(4) The provisions of section 23-A of the Pakistan Income-tax Act, 1922 (XI of 1922)
(relating to the distribution of company profits) shall not apply to the income of a
company engaged in any industry and in which shares carrying not less than one- third of
the voting power are owned by a company which is resident of Sweden and which constitute a
public company as defined in paragraph (5) of this Article, provided the profits of the
first-mentioned company are retained for the purpose of its industrial development and
expansion in Pakistan.
(5) In paragraphs (3) and (4) of this Article, the term "public company" means,
in relation to any year of assessment-
(a) a company which does not by its articles restrict the right to transfer its shares,
which does not prohibit the issue of its shares or debentures to the public or the sale of
its shares on a stock exchange and of which shares carrying more than 50 per cent of the
voting power were not at any time during the previous year held by less than six persons;
or
(b) a company all of whose shares were held at the end of the previous year by one or more
public companies as defined in clause (a) of this paragraph.
(6) Where a company, which is a resident of one of the territories, derives profits or
income from sources within the other territory, there shall not be imposed in that other
territory any form of taxation on dividends paid by the company to persons not resident in
that other territory, or any form of taxation chargeable in connection with or in lieu of
the taxation of dividends or any tax in the nature of an undistributed profits tax on
undistributed profits of the company whether or not those dividends or undistributed
profits represent, in .whole or in part, profits or income so derived.
ARTICLE VII
(1) Any royalty derived from sources within one of the
territories by a resident of the other territory, who is not engaged in trade or business
in the first-mentioned territory through a permanent establishment situated therein, shall
be exempt from tax in that first-mentioned territory.
(2) In this Article, the term "royalty" means any royalty or other amount paid
as consideration for the use of, or for the privilege of using, any copyright, patent,
design, secret process or formula, trade mark or other like property, but does not include
any royalty or other amount paid in respect of the operation of a mine or quarry or of any
other extraction of natural resources, or rents or royalties in respect of motion picture
films.
(3) Where any royalty exceeds a fair and reasonable consideration in respect of the rights
for which it is paid, the exemption provided for by the present Article shall apply only
to so much of the royalty as represents such fair and reasonable consideration.
(4) Any capital sum derived from sources within one of the territories from the sale of
patent rights by a resident of the other territory, who is not engaged in trade or
business in the first-mentioned territory through a permanent establishment situated
therein, shall be exempt from tax in that first-mentioned territory.
ARTICLE VIII
(1) Interest on bonds, securities, notes, debentures or any other
form of indebtedness derived from sources within one of the territories by a resident of
the other territory shall be subject to tax only in the first-mentioned territory.
(2) Notwithstanding the provisions of paragraph (1) of this Article, the Sveriges Riksdank
shall be exempt from Pakistan tax with respect to interest from sources within Pakistan.
(3) Notwithstanding the provisions of paragraph (1) of this Article, the State Bank of
Pakistan shall be exempt from Swedish tax with respect to interest from sources within
Sweden.
ARTICLE IX
Income of whatever nature derived from real property within the territory of Pakistan by a resident of Sweden who is subject to any tax in Pakistan in respect thereof shall be exempt from tax in Sweden.
ARTICLE X
(1) Where under the provisions of this Agreement a resident of
Pakistan is exempt or entitled to relief from Swedish tax, similar exemption or relief
shall 'be applied to the undivided estate of a deceased person in so far as one or more of
the beneficiaries is a resident of Pakistan.
(2) Swedish tax on the undivided estate of a deceased person shall, in so far as the
income accrues to a beneficiary who is a resident in Pakistan, be allowed as a credit
under Article XVI.
ARTICLE XI
(1) Subject to the provisions of Articles XII to XV inclusive,
remuneration or profits for personal (including professional) services performed in one of
the territories by an individual resident in the other territory shall be taxable only in
that territory in which the services are performed.
(2) Labour Of personal (including professional) services wholly or mainly performed in
ships or aircraft operated by a resident of one of the territories (other than ships or
aircraft operated wholly or mainly between places in the other territory) shall, for the
purposes of this Article, be deemed to be performed in that first -mentioned territory.
ARTICLE XII
(1) Remuneration, including pensions and annuities, paid by or on
behalf of the Government of
Sweden to any individual for services rendered to that Government in the discharge of
governmental functions shall be exempt from tax in Pakistan if the individual is a
national of Sweden not ordinarily resident in Pakistan or, where the' remuneration is not
a pension or annuity, is ordinarily resident in Pakistan solely for the purposes of
rendering those services.
(2) Remuneration, including pensions and annuities, paid by or on behalf of the Government
of Pakistan to any individual for services rendered to that Government in the discharge of
government functions shall be exempt from tax in Sweden of the individual is a national of
Pakistan not resident in Sweden or, where the remuneration is not a pension or annuity, is
resident in Sweden solely for the purpose of rendering those services.
(3) The provisions of paragraphs (1) and (2) of this Article shall also apply to payments
made by or on behalf of the Government of a Province in Pakistan or by or on behalf of a
local authority in Sweden or in Pakistan.
(4) The provisions of this Article shall, however, not apply to payments in respect of
services rendered in connection with any trade or business carried on by either of the
Contracting Governments, by the Government of a Province in Pakistan or by any local
authority for purposes of profit.
ARTICLE XIII
(1) An individual who is a resident of Sweden shall be exempt
from Pakistan tax on profits or remuneration in respect of personal (including
professional) services Performed within Pakistan in any year of assessment, if-
(a) he is present within Pakistan for a period or periods not exceeding in the aggregate
183 days during that year, and
(b) the services are Performed for or on behalf of a resident of Sweden and the
compensation in respect thereof is borne by that resident.
(2) An individual who is a resident of Pakistan shall be exempt from Swedish tax on
profits or remuneration in respect of personal (including professional) services Performed
within Sweden in any year of assessment, if-
(a) he is present within Sweden for a period or periods not exceeding in the aggregate 183
days during that year, and
(b) the services are Performed for or on behalf of a resident of Pakistan and the
compensation in respect thereof is borne by that resident.
(3) The provisions of this Article shall not apply to the profits or remuneration of
public entertainers, such as theatre, motion picture, television or radio artists,
musicians and athletes.
ARTICLE XIV
(1) Any pension or annuity [other than a pension or annuity
referred to in paragraphs (1), (2) and (3) of Article XII] derived from sources within one
of the territories by an individual who is resident of the other territory shall be exempt
from tax in the first-mentioned territory.
(2) In this Article the term "annuity" 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.
(3) This Article shall apply to a pension or annuity payable from a private superannuation
fund approved or recognized under the laws of either Contracting Government.
ARTICLE XV
(1) A student or business apprentice who is resident in one of
the territories at the beginning of a visit to the other territory for the purposes of
receiving education or training in that other territory, shall be exempt from tax in that
other territory in respect of remittances from abroad for the purposes of his maintenance,
education and training.
(2) An individual who is resident in one of the territories at the beginning of a visit to
the other territory and who is present in that other territory solely as a student at a
university, college or other establishment for education in that other territory, shall be
exempt from tax in that other territory for a period not exceeding three consecutive years
of assessment in respect of remuneration from employment in such other territory, provided
that -
(a) the remuneration constitutes earnings necessary for his maintenance and education, and
(b) the said remuneration does not exceed 4,000 Swedish crowns in the year of assessment
or the equivalent thereof in the currency of Pakistan, as the case may be.
ARTICLE XVI
(1) Subject to such provisions as may be made in Pakistan,
Swedish tax payable in accordance with this Agreement or otherwise under the laws of
Sweden, whether directly or by deduction, by a person resident in Pakistan in respect of
income from sources within Sweden (including income accruing or arising in Sweden but
deemed, under the provisions of the laws of Pakistan, to accrue or arise in Pakistan)
shall be allowed as a credit against any Pakistan tax payable in respect of that income.
(2) Income from sources within Pakistan which in accordance with this Agreement is subject
to tax in Pakistan either directly or by deduction, shall be exempt from Swedish tax.
Income from sources within Pakistan not specifically mentioned in this Agreement but
subject to tax in Pakistan under the laws of Pakistan either directly or by deduction,
shall likewise be exempt from Swedish tax:
Provided that where such income is derived through the operation of ships, Swedish tax may
be charged on the income but the Pakistan tax payable on that income shall be allowed as a
credit against any Swedish tax charged on income accrued to or received by the person
concerned during the year in which such Pakistan tax is paid.
(3) The graduated rate of Swedish tax to be imposed on residents of Sweden may be
calculated as though income exempted under this Agreement were included in the amount of
the total income.
ARTICLE XVII
(1) The competent authorities of the Contracting Governments
shall exchange such information (being information which is available under their
respective taxation laws in the normal course of administration) as is necessary for
carrying out the provisions of the present Agreement or for the prevention of fraud for
the administration of statutory provisions in relation to the taxes which are the subject
of the present Agreement. Any information so exchanged shall be treated as secret and
shall not be disclosed to any persons other than those concerned with the assessment and
collection of the taxes, which are the subject of the present Agreement. No information as
aforesaid shall be exchanged which would disclose any trade, business, industrial or
professional secret or trade process.
(2) The competent authorities of the Contracting Governments may consult together, as may
be necessary, for the purpose of carrying out the provisions of the present Agreement.
ARTICLE XVIII
(1) The nationals of one of the territories shall not, while
resident in the other territory, be subjected in such other territory, to taxes or any
requirements connected therewith which are either* higher or more burdensome
than the taxes and connected requirements to which the nationals of such other territory
resident therein are or may be subjected.
(2) The term "nationals", as used in this Article, includes all legal persons,
partnerships and associations deriving their status as such from the laws in force in the
respective territory.
ARTICLE XIX
A person (including a company, being a resident of one of the
territories, shall not be subject to any tax on capital in the other territory which is
either* higher or more burdensome than the tax on capital to which a person (including
company) being a resident of that other territory is or may be subjected.
* The word "either" has wrongly appeared as "other" in the
Official Gazette.
ARTICLE XX
Nothing contained in this Agreement shall be construed -
(i) as obliging either of the Contracting Governments to grant to persons not resident in
its territory those personal allowances and reliefs for tax purposes which are by law
available only to persons who are so resident;
(ii) as affecting any provisions. of the law of Pakistan regarding the imposition of tax
on a non-resident person; or
(iii) as affecting any provisions of the law of Pakistan regarding the grant of rebate of
tax to companies fulfilling specified requirements regarding the declaration and payment
of dividends.
ARTICLE XXI
(1) The present Agreement may be extended, either in its entirety
or with modifications, to any territory for whose international relations Pakistan is
responsible, and which imposes taxes substantially similar in character to those which are
the subject of the present Agreement, and 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 Governments in notes
to be exchanged for this purpose.
(2) The termination in respect of Pakistan or Sweden of the present Agreement under
Article XXIII shall, unless otherwise expressly agreed by both Contracting Governments,
terminate the application of the present Agreement to any territory to which the Agreement
has been extended under this Article.
ARTICLE XXII
(1) The present Agreement shall be ratified by the Contracting
Governments. Ratification by His Majesty the King of Sweden shall be subject to the
consent of the Riksdag.
(2) The instruments of ratification shall be exchanged at Karachi as soon as possible.
(3) Upon exchange of the instruments of ratification, the present Agreement shall have
effect-
(a) In Sweden:
As respects the State income-tax and the communal income-tax on income which is assessed
in or after the calendar year beginning on 1st January, 1958, being income for which
preliminary tax is payable during the period 1st March, 1957 to 28th February, 1958 or any
succeeding period;
as respects coupon tax on dividends payable on or after 1st January, 1957;
as respects the tax on public entertainers which is levied on or after 1st January, 1957;
as respects the State capital tax which is assessed in or after the calendar year
beginning on 1st January, 1958; and
as respects the other Swedish taxes which are levied on or after 1st January, 1958.
(b) In Pakistan:
As respects income-tax and super-tax, for any year of assessment beginning on or after the
1st day of April, 1958; and
as respects business profits tax, in respect of the following profits -
(i) profits by reference to which income-tax is, or but for the present Agreement would be
chargeable for any year of assessment beginning on or after the 1st day of April, 1958;
and
(ii) other profits being profits by reference to which income-tax is not chargeable but
which arise in any chargeable accounting period beginning on or after the 1st day of
April, 1958, or are attributable to so much of any chargeable accounting period falling
partly before and partly after that date as falls after that date.
ARTICLE XXIII
The present Agreement shall continue in effect indefinitely but
either of the Contracting Governments may, on or before the 30th day of June in any
calendar year not earlier than the year 1961, give to the other Contracting Government
written notice of termination and, in such event, the present Agreement shall cease to be
effective -
(a) In Sweden:
As respects the State income-tax and the communal income-tax on income for which
preliminary tax is payable after the last day of February in the calendar year next
following that in which the notice is given;
as respects coupon tax on dividends payable on or after 1st January in the calendar year
next following that in which the notice is given;
as respects the tax on public entertainers which is levied on or after 1st January in the
calendar year next following that in which the notice is given;
as respects the State capital tax assessed in or after the second calendar year following
that in which the notice is given; and
as respects the other Swedish taxes which are levied in or after the second calendar year
following that in which the notice is given..
(b) In Pakistan:
As respects income-tax and super-tax, for any year of assessment beginning on or after the
1st day of April in the second calendar year following that in which the notice is given,
and
as respects business profits tax, in respect of the following profits -
(i) profits by reference to which income-tax is chargeable for any year of assessment
beginning on or after the 1st day of April in the second calendar year following that in
which the notice is given, and
(ii) other profits being profits by reference to which income-tax is not chargeable but
which arise in any chargeable accounting period beginning on or after the 1st day of April
in the next following calendar year or are attributable to so much of any chargeable
accounting period falling partly before and partly after the date as falls after that
date.
IN WITNESS WHEREOF, the undersigned, duly authorized thereto, have signed the present
Agreement and have affixed thereto their seals.
DONE at Stockholm in duplicate in the English language on the twenty-fifth day of August,
1958.
| For the Royal Government of Sweden OSTEN UNDEN Foreign Minister of Sweden |
For the Government of Pakistan A. HAILALY Ambassador of Pakistan |
C. NO. 25(14)-ITP/52
Published in the Gazette of Pakistan, Extraordinary, dated 18-03-1959.
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