ISLAMABAD: Pakistan and Switzerland on Tuesday signed the revised ‘Agreement on Avoidance of Double Taxation’ with respect to taxes on income.
The agreement was signed by the Ambassador of Switzerland Marc George and Chairman Federal Board of Revenue Dr. Muhammad Irshad. Finance Minister Ishaq Dar and Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan was also present on the occasion.
The revised agreement will open new vistas for cooperation, especially in the areas of exchange of information for tax purposes. It contains improvements with regard to the taxation of service fees and capital gains resulting from the sale of qualifying participants.
These rules will promote economic exchange in bilateral relations. The agreement also contains an arbitration clause which should guarantee the avoidance of double taxation.
The treaty replaces the article on ‘Exchange of Information’ with the the internationally accepted standard based on the Organisation for Economic Cooperation and Development (OECD) model.
The new agreement will considerably expand the existing scope of information to be obtained on request basis for the enforcement of domestic tax laws.
It will also provide access to bank information for tax purposes, and such information shall not be refused solely because the information is held by a bank or other financial institution.
For this purpose, the requesting state will provide information such as the identity of the person under investigation and period of time for which the information is requested.
The existing agreement between Pakistan and Switzerland was signed in 2005 and enforced in 2008. In August 2013, Pakistan approached Switzerland to incorporate the updated version of the agreement based on the OECD Model.
In August 2014, Pakistan delegation visited Switzerland for re-negotiation of Pak-Swiss Treaty and the initial draft agreement between the two countries was agreed.
The final negotiations were held in Berne, Switzerland in June 2016 to resolve all issues amicably, and incorporate them with Pakistan’s tax policy.
The agreement will come into force in Pakistan on first July of the next calendar year. Both countries will undertake procedures to ratify the agreement.