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AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN PAKISTAN AND SWEDEN

Agreement dated 30th December 1959 amended
MINISTRY OF FINANCE

S.R.O. 675(K)/64, dated the 24th August, 1964. - Whereas the annexed Protocol between the Republic of Pakistan and the Swiss Confederation modifying and supplementing the Convention for the Avoidance of Double Taxation with respect to taxes on income of December 30, 1959 has been ratified and the instruments of ratification exchanged;

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 all the provisions of the said Protocol shall be given effect to in Pakistan:-

Annexure

PROTOCOL SUPPLEMENTING THE CONVENTION BETWEEN
PAKISTAN AND SWISS CONFEDERATION FOR THE AVOIDANCE OF
DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

The Government of Pakistan and the Swiss Federal Council, desiring to modify and supplement the Convention for the Avoidance of Double Taxation with respect to Taxes on Income, signed at Berne on December 30, 1959 (hereinafter referred to as the Convention), have agreed as follows.·

ARTICLE I

(1) Sub-paragraph (a) of Paragraph (1) of Article II of the Convention shall be deleted and replaced by the following sub-paragraph:

"The term 'Pakistan' means the Provinces of Pakistan".

(2) Paragraph (1) of Article VI of the Convention shall be deleted and replaced by the following paragraph:

"(a) Where a Swiss Company owns shares carrying not less than one-third of the voting power of a Pakistan Company, the rate of Pakistan tax payable in respect of the dividends declared on or after the 1st January, 1961, and paid by such Pakistan Company to such Swiss Company shall not exceed:-

(i) 10 per cent when such dividends are derived from the income of an industrial undertaking in Pakistan; and

(ii) 20 per cent in the case of dividends derived from other income.

(b) The provisions of Article 59 of the Swiss Federal Defence Tax Act as in force on the 1st January, 1959, shall apply to the Swiss Company mentioned in sub-paragraph (a) of this paragraph."

(3) Paragraph (2) of Article VIII of the Convention shall be deleted and replaced by the following paragraph:

"In this Article, term 'income from real property' means income of whatever nature derived from real property, including gains derived from the sale or exchange of such property, and it also includes royalties in respect of the operation of mines, quarries or other natural resources as well as interest from mortgages or bonds secured on real property other than the interest mentioned in Article VI-A."

(4) Sub-paragraph (b) of paragraph (1) of Article XII of the Convention shall be deleted and replaced by the following sub-paragraph:

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

(5) Paragraph (2) of Article XII of the Convention shall be deleted and replaced by the following paragraph:

"An individual from one of the territories, who is temporarily present in the other territory for a period not exceeding twelve months in all as an employee of, or under contract with an enterprise of the first-mentioned territory or a religious,, charitable, scientific or educational organisation of such territory, solely to acquire technical, professional or business experience from a person other than such enterprise or organisation, shall be exempt from tax by such other territory on compensation for such period in an amount not in excess of 12,000 Swiss Francs, or the equivalent thereof in Pakistan currency at the official rate of exchange (including remuneration from such person in the first-mentioned territory)."

(6) Paragraph (2) of Article XIII of the Convention shall be deleted and replaced by the following paragraph:

"In determining its taxes specified in Article I of the present Convention, Switzerland shall exclude in the case of its residents from the basis upon which such taxes are imposed such items of income (other than dividends and the interest referred to in Article VI-A of this Convention) as are dealt with in the present Convention derived from sources within Pakistan which according to the present Convention are not exempt from Pakistan tax. Switzerland, however, reserves the right to take into account in the determination of the rate of its taxes the items of income excluded as provided in this paragraph."

ARTICLE II

After Article VI of the Convention the following new Article shall be inserted:

"ARTICLE VI-A

(1) The rate of Pakistan tax on interest paid by a resident of Pakistan to a Swiss Company or partnership in respect of indebtedness incurred on or after the 1st January, 1961, shall not exceed 30 per cent.

(2) Notwithstanding the provisions of paragraph (1) of this Article, interest paid by a resident of Pakistan to a Swiss Company or Partnership on approved loans (including loans in the form of deferred payments) shall be exempt from Pakistan tax payable thereon; and the amount of Swiss tax relating to such interest (calculated according to the ratio existing between the gross amount of such interest and the recipient's total gross income) shall not exceed 10 per cent of the gross amount of such interest.

(3) The rate of Swiss tax on interest paid by a resident of Switzerland to a Pakistan Company in respect of indebtedness incurred on or after the 1st January, 1961 shall not exceed 15 per cent.

(4) Paragraphs (1) to (3) of this Article shall not apply where a Swiss Company or partnership or a Pakistan Company, as the case may be, receiving the interest has a permanent establishment in the other territory and such interest is, under the laws of such other territory and in accordance with Article III of the present Convention, attributable to that permanent establishment.

(5) In this Article -

(a) the term 'interest' includes income from bonds, securities, notes, debentures or any other form of indebtedness whether or not secured by mortgages;

(b) the term ‘approved loan' means a loan made to an industrial undertaking in Pakistan and approved by the Government of Pakistan and the term 'industrial undertaking' means an undertaking falling under any of the classes mentioned in paragraph (6) of Article VI of the Convention.

ARTICLE III

(1) This protocol shall be ratified and the Instruments of Ratification shall be exchanged at Karachi as soon as possible.

(2) This protocol shall enter into force upon the exchange of the Instruments of Ratification.

ARTICLE IV

Upon the entry into force of this protocol in accordance with Article III, the Provisions of the Protocol shall have effect:

(a) in Pakistan:
for any year of assessment beginning on or after the 1st January, 1961;

(b) in Switzerland:
for any taxable year beginning on or after the 1st January, 1961

ARTICLE V

This protocol shall remain in force as long as the Convention is effective.

IN WITNESS THEREOF the undersigned, being authorised thereto by their respective Governments, have signed this Protocol and have affixed thereto their seals.

DONE in duplicate at Berne, the 15th day of June, 1962, in the English and German languages, both texts being equally authoritative.

MUHAMMAD HUSAIN,
for Joint Secretary.

Published in the Gazette of Pakistan, Extraordinary, Pages 365-66(1), dated 11-09-1964.

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