of Pakistan) Order, 1980

L.N. 54 of 1980

INCOME TAX ACT, 1948

(ACf NO. LIV OF 1948)

Double Taxation Relief (Taxes on Income) (Islamic Republic

of Pakistan) Order, 1980

IN exercise of the powers conferred by section 68A of the

Income Tax Act, 1948, the Minister of Finance, Customs and

People's Financial Investments has made the following order:-

This order may be cited as the Double Taxation Relief

Citation.

(Taxes on Income) (Islamic Republic of Pakistan) Order, 1980.

It is hereby declared -

CONVENTION

BETWEEN

THE REPUBLIC OF MALTA

AND THE ISLAMIC REPUBLIC OF PAKIST AN

FOR THE A VOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EV ASION

WITH THE RESPECT TO TAXES ON INCOME

The Government of the Republic of Malta and the Government of the Islamic

Republic of Pakistan, desiring to conclude a Convention for the Avoidance of

Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on in­

come, have agreed as fol1ows

CHAPTER I

Scope of the Convention

ARTICLE 1

Personal Scope

This Convention shaH apply to persons who are residents of one or both of the

Contracting States.

ARTICLE 2

Taxes Covered

(1) This Convention sha11 apply to taxes on income imposed on behalf of each

Contracting State irrespective of the manner in which they are levied.

(2) There shal1 be regarded as taxes on income all taxes imposed on total

income, or on elements of income, inc1uding taxes on gains from the alienation of

movable or immovable property, as well as taxes on the total amounts of wages and

salaries paid by enterprises.

The existing taxes to which the Convention sha1l apply are

(3)

(a)

In the case of Pakistan

the income tax, super-tax and the surcharge,

(hereinafter referred to as

Pakistan tax").

.!

In the case of Malta

(b)

the income tax and surtax, including prepayments of tax whether made

by deduction at source or otherwise,

(hereinafter referred to as "Malta tax").

(4) This Convention shall a1so apply to any identical or substantially similar

taxes which are imposed after the da te of signature of this Convention in addition

to, or in place of, the existing tClxes by eilher Contracting State Of by the Govern­

ment of any territory to which the presellt C o n v e n t i o l1 is extended under Artic1e 27

of this Convention. The competent aUi.horities of t he Contracting States shalI n o tify

to each other any significant changes which have been made in their respective

taxation laws.

B

CHAPTER 11

DefinitioDS

ARTICLE 3

General Definitions

In this Convention , unless the context otherwise requires

(1)

(a) the term "Pakistan" used in a geographical sense means Paklstan as

defined in the Constitution of the Islamic R epublic of Pakistan and also in­

cludes any area outside the territorial waters of Pakistan which in accordance

with international law, has been or may hereafter be designated , under the laws

of Pakistan, as an area within which the rights of Pakistan with respect to the

sea-bed and sub-soil and their natural resources may be exercised;

(b) the term "Malta" when used in a geogr aphical sense means the Re­

public of Malta including the Island of M alta, the Island of Gozo, the other

island.s of the Maltese Archipelago together with the territorial waters tbereof,

and any area outside the territoria1 sea of Malta which, in accordance with

international law , has been Or may hereafter be designated, under the Iaw of

Malta concern i ng the continental shelf, as an area within which the rights of

Malta wit h respect to the sea-bed and sub-soil and their natural resources may

be exercised;

(c) the terms "a Contracting State" and "the other Contracting State"

mean Pakistan or Malta as the context requires ;

(d) the term "person " inc1udes an individua1, a company and any other

body of persons;

(e) the term "company" means any body corporate or any en t i ty which is

treated as a body corporate for tax purposes;

(f) the terms " enterprise of a Contracting State" and "enterprise of t h e

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;

(g )

the term "national " means

any individual possessin g the citizenship of a Contracting State;

(i)

(ii) any legal person, partnershio and association deriving its status

as such from the law in force in a Contracting State;

(h)

the tenm "co mpetent authority" means

in the case of Pakistan, the Central Board of Revenue;

(i)

(iD in the case of Malta, the M i nister responsible for finance or his

authorised representative.

(2) In the a pp 1 ication of this Convention by a Contracting State, any term not

otherwise defined sha1l, 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 this Convention .

ARTICLE 4

Fiscal Domicile

(1) F or the purposes of this Convention, the term "resident of a Contracting

State" means any person who, under the law of that S t ate, is 1 iable to taxation

therein by reason of h i s domicile, residence, place of management or any other

criterion of a similar nature.

(2) Where by reason of the prov i sions of paragraph (1) an inruvidual is a

resident of both Contracting States, then his status shall be determined as foIlows

(a) He shall be deemed to be a resident of the Contra c t in g State in which

he has a permanent home available to him. If he has a permane n t home avail­

a bl e to him in b o th Contracting States, he shal l be deemed to be a resident of

the Contr a cting State wi t h which his personal and economic relations are

c10sest (centre of vita1 interests).

(b) If t he Contracting State in which he has his cen t re of vital interests

cannot be determined, or if he has no pe rm a n ent home avai1able to him in

either Contracting State, he shall be deemed to be a resident of the Contracting

State in which he has an habi t u al abode.

(c) If he has an. ha h itua l abode in both C on t rac t i ng 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 Contract i n g States or of neither of them,

the competent authorities of the Contracting States shall settle the qu est i on by

mutual agreement.

(3) Where by reason of the provisions of p a r ag r aph (1) a company is a resident

of both Contracting States, then it shall he deemed to be a resident of the Contract ­

ing State from whose 1aw it derives its status as such.

(4) Where by reason of the provisions of paragraph (1) a person other tha n an

individual or a company is a resident of both Contrac t ing States, the competent

authorities of t h e Contracting States shall by mu tu al agreement endeavour to settle

the question and to determine the mode of application of the Convention to such

persons.

ARTICLE 5

Permanent Establishment

(1) For the purposes of this Convention the term " per m anent establishment"

means a fixed place of business in which the business of the enterprise is wholly

or partly car ried on.

The term " p e r manent establishment" shaH include especially

(2)

a place of management;

(a)

(b)

a branch;

(c)

an office;

a factory;

(d)

(e)

a workshop;

a mine, q uarry or other p l ace of e x tract i on of natural resources includ·

(f)

ing an offshore drilling site;

(g) a building site or construction Or a sse m bly project wh i ch exists for

more than 12 months.

(3) An enterprise of a Contracting State shalI be deemed to have a perlllanent

establishment in the other Contracting St a t e if it carr i es on supervisory activities

in that other State for more than 12 months in connectioI1 with a con stru c ti on or

assembly project.

.

B

(4)

The term

"permanent establishment"

shall not be deemed to inc1ude

(a)

the use of facilities solely for the purpose of storage, display or deli­

very of goods or merchandise belonging to the enterprise;

(b)

the maintenance of a stock of goods or merchandise

belonging to the

enterprise

solely or

the purpose of storage, display or delivery;

(c)

the maintenance

of a stock of goods or merchandise belonging to the

enterprise solely for the

purpose of processing by another

enterprise;

(d)

the maintenance

of a fixed place of business

solely for the purpose of

purchasing

goods

or

merchandise,

or

for

collecting

information

for the

enterprise;

the m a i nt e na n ce of a fixed pla ce of b u s i n e ss solel y for the purpose of

(e)

advertisi n g, for the supply of infor m a t io n , for scientifie researeh or for s imila r

activities which have a preparatory or auxiliary character, for the e nt e r pr ise .

(5) A per son acting in a Contracting S ta t e on b eh al f of an enterprise of th e

other Co nt r ac tin g State - other than an agent of a n independent status to whom

paragraph (6) applies - shall be deemed to be a permanent establishment in t he

first-mentioned State if he has, and habitually exercises in t h a t State, an a u t ho r i t y

to c on cl u d e contracts in the name of the enterprise, unless h i s aetiviti·es are limited

to the purchase of g o o d s or merchandise for the enterprise.

(6) A n enterprise of a Contracting State shall not be deemed to have a per­

manent establishment in the other Contracting State m e r e l y because it c a r r ie s on

b us in es s in that other Stat\: through a broker, general commission age n t or a n y

other agent of an independent st8tus, where such persons are aeting in the o rdin a ry

course of th ei r business.

(7) The faet that a c om pany which is a r e s i d e n t of a C on tra c tin g State con­

troIs or is control1ed b y a company, which is a resident of the other C o n t racti n g

State, or w h i c h carries on b us ine ss in that other State (whether t h r o u g h a per m a ­

nent e s tab lis h m e n t or otherwise), s h a l ! not of itself make e it he r company a p e rm a­

nent estab1ishment of the other.

CHAPTER

III

Taxation of Income

ARTICLE 6

lncome from lmmovable Property

(1) I nc om e from immovable property may be taxed in the Contracting State

in w h ic h sueh property is situated.

(2) The term " imm o v a b l e property" shall be defined in accordance wjth the

law of the Contracting State in. vvhieh the property in q u e s t i o n is situated. The

term shall in any case include property acces50ry to immovable p r o p e r ty , rights to

which the provisions of g e n er a l law respecting immovable property a p ply , usufruct

of i mm o v a bl e property and rights to variable or fixed p ay m en t s as co n si d e r at io n for

the working of, or the right to work, min\:ral deposits, s o u r c e s and o t h er natura l

resources; s h i p s , boats and aircraft shall not be regarded as i mm o vab l e property.

(3) The provisions of paragraph (l) 5han apply to i n e o m e derived from the

direct use, letting, or use in any other form of immovable property.

B

(4) The provisions of paragraphs (1) 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 c ar r i e s on business in the other Contracting State

through a permanent establishment situated therein. If the enterprise carries on

business as aforesaid, the profits of the enterprise may be taxed in the other S t ate

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 Con­

tracting State carries on business in the other Co nt r a c t i n g State through a perma­

nent es ta b l i shmen t situated therein, there shall in each Contracting State be attri­

buted to that permanent establishment the profits which it m i g h t be expected to

make if it were a di s t i n c t and separate enterprise engaged in the same or similar

activities under the same or simi1ar conditions and dealing wholly independent1y

with the en t e r p r is e of which it is a permanent estabHshment.

(3) In the determination of the profits of a permanent establishment, there

shall be al10wed as deductions expenses. wh i c h are incurred for the purposes of the

permanent establishment inc1uding executive and general administrative expenses

50 incurred, whether in the S t a te in which the permanent establishment is situated

or e]sewhere.

(4) In sa far 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 appor­

tionment of the total profits of the enterprise to its various parts, nothin� in para­

graph (2) s hall preclude that Contracting State from determining the profits to be

taxed bv such an apportionment as may be customary. The method of aDportionment

adol'ted 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 re a s o n of

the mere purchase by that permanent establishment of goods or merchandise for

the enterprise.

(6) For the purposes of the preceding paragraphs, the profits to be attributed

to the per m a n e n t estab1ishment 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 A r ticl es of this C o n v e n t i o n then the provisions of those Articles shall not

,

be affected by the provisions of this Article.

ARTICLE 8

Shipping and Air Transport

(1) Profits derived by an enterprise of a Contractin� State from the operation

of ships or aireraft in international traffic shall be taxable only in that State.

(2) Notwithstanding the provisions of paragraph (1) of Artic1e 7, p r o fit s deriv­

ed from the operation of ships or aircraft used principaIIy to transport passengers

goods exclusively between places in a Contracting State may be taxed in that

or

State.

(3)

The provisions of paragraphs (1) and (2) shaH 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.

For the purposes of this artide, profits derived from the operation of ships

(4)

or aircraft in international traffic also inc1ude income derived from

(a)

the rental, lease or maintenance of ships or aircraft;

(b)

the rental, lease, use

or maintenance of containers,

trailers for the

inland transport of containers and other related equipment;

(c)

training

schemes, management and other services

Provided that such income -

(i)

accrues to a resident of a Contracting State whose income is whol1y

or mainly derived from the operation of ships or aircraft

in

international

traffic; and

(ii)

is paid by a resident of the other Contracting State whose income

is also whoHy or mainly derived from the operation of ships or aircraft in

international traffic.

(5)

Notwithstanding the other provisions of this Artic1e, profits from the ope­

ration of a ship in international traffic derived by a company which is a resident of

Malta having more than 25 per cent of its capital owned, direct1y or indirect1y, by

persons not residents of Malta, may be taxed in Pakistan unless the company proves

that the profits derived from the operation of

such ship are subject to Malta tax

without regard to any relief there from as provided for in section 86 of the Merchant

Shipping Act, 1973, or in any

identical or similar provision.

ARTICLE 9

Associated Enterprises

(1)

Where-

(a) an enterprise of a Contracting State participates direct1y or indirect1y

in the management, control or capital of an enterprise of the other Contracting

State,or

(b)

the same persons participate direct1y or indirect1y in the management,

control or capital of an enterprise of a Contracting

State and an enterprise of

the other Conrtracting 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 condi­

tions, have not so accrued, may be inc1uded 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

.B

(a) where the dividends are paid by a company resident of Pakistan to a

company resident of Malta which is the beneficial owner thereof, and which

owns 20 per cent or more of the voting power of the first-mentioned comp­

any, the Pakistan tax so charged sha11 nor exceed 15 per cent of the gross

amount;

(b) where the dividends are paid by a company resident of Malta to a

resident of Pakistan who is the beneficial owner thereof, Malta tax shall not

exceed that chargeable on the company paying the dividends in respect of the

profits so distributed, and the shareholder shal1 be entitled to receive a credit

in respect of the tax paid by the company on the profits 50 distributed.

This paragraph shall not effect the taxation of the company in respect of the

profits out of which the dividends are paid.

(3) The term "dividends" as used in this Article means income from shares,

"jouissance" shares Of "jouissance" r ig h t s mining shares, founders' shares or other

,

rights, not being debt-cIaims, 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 of which the Company making the distribu­

don i s a resident.

(4) The provisions of paragraphs (1) 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 a resident,

through a permanent establishmel1t situated therein or performs in that other State

professional services from a fixed base situated therein and the holding in respect of

which the dividends are paid is effectively connected with such permanent establish­

ment or fixed base. In such a case, the provisions of Artic1e 7 or Article 14, as the

case may be, sha11 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

that other State, or subject the company's undistributed profits to a tax on undistri­

buted profits, even if the dividends paid or the undistributed profits consist whony

Of partly of profits or income arising in such other State.

ARTICLE 11

lnterest

(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 shan not exceed 10 per cent of the gross

amount of the interest.

Notwithstanding the provisions of paragraph (2)

(3)

(a) interest arising in Malta and paid to the Government of Pakistan or to

the State Bank of Pakistan shaH be exempt from Malta tax;

(b) interest arising in Pakistan and paid to the Malta Government, the

Central Bank of Malta or the Malta Development Corporation shaH be exempt

from Pakistan tax;

(c) interest arising in a Contracting State to a financial institution of the

other Contracting State, not less than 51 per cent of whose shares carrying vot­

ing rlghts are held by the Government of that other State, sha1l be exempt from

tax in the first-mentioned State.

B

lY7

(4) The term "interest" as used in this Artic1e means income from debt-c1aims

of e v e ry kind, whether or not secured by mortgage, and whether or nat carrying a

right to partkipate in the debtor's pro:fits, and, in particular, income from Govern�

ment securities and income from bonds or debentures, including premiums and

prizes attaching to bonds or debentures.

(5) The provisions of paragraphs (1) and (2) shall not apply if the recipient of

the interest, being a resident of a Contracting State, carries on business in the other

Contracting State in which the interest arises, through a permanent establ1shment

situated therein, or performs in that other State professional services from a fixed

base situated therein and the debt-claim in respect of which the interest is paid is

effectively connected with such permanent establishment or fixed base. In such a

case, the provisions of Artic1e 7 or Article 14, 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 subdivision, a Iocal authority or a resident of that State.

Where, however, the person paying the interest, whether he is a resident of a Con­

tracting State or not, has in a Contracting State a permanent establishment in con­

nection with which the indebtedness on which the interest is paid was incurred, and

such interest is borne by such permanent establishment, then such interest s hall 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 amoums of the interest paid,

having regard to the debt-c1aim for which it is paid, exceeds th e amount which

would have been agreed upon by the payer and the recipjent in the absence of such

relationship, the provisions of this Article shall appIy only to the last-mentioned

amount. In that case, the excess part of the payments shall remain taxable accord­

ing to the law of each Contracting State, due regard being had to th e other provi­

sions of this Convention.

ARTICLE 12

Royalties

(1) Royalties arising in a Contracting State and paid to a resident of the other

Contracting State shall be taxable onIy in that other State if such resident is the

beneficia1 owner of the royalties and the royalties consist of payments of any kind

received as consideration for the use of, or the right to use, any copyright of 1iterary,

artistic or scientific work, including cinematographic films or tapes for television

or broadcasting.

(2) Royalties arising in a Contracting State and paid to a resident of the other

Contracting State may be taxed in that other Contracting State if the royalties con­

sist of payments of any kind received as a consideration for the use of, Of the right

to use, any patent, trade mark, design, model, plan, secret formula 01' process, indus­

trial, commercial or scientific equipment, or information concerning industrial, com­

mercial or scientific experience. However, such royalties may aJso be taxed in the

Contracting State in which they arise, and according to the law of that State, but if

the recipjent is the beneficial owner of the royalties, the tax sa charged shall not

exceed 10 per cen t of the gross amount of such royalties.

(3) The provisions of paragraphs (1) and (2) shall not apply if the recipient of

the roya1ties, being a resident of a Con � racting State, carries on business in tJ:e other

Contracting State in which the r oyaJtIes arise through a permanent estabhshment

situated therein, or performs in that other State professional services from a fixed

base situated therein, and the right or property in respect of which the roya1ties are

B

paid is effect i vely connected with sucħ per m an e nt establishment or fixed base. In

s u ch a case, the provisi o ns of A r ticle 7 ar Arti cle 14, a s the ca s e may be, shaH apply.

(4) Royalties shaH be deemed to ar i se in a C o n tra c ting State when the payer

is that State itself, a political subdivision, a Iocal authority or a resident of that

S tate . Wh er e, h o w e ver , the pers o n p a ying the royalties, whether he is a resident of

a C o nt rac t ing State or not, has in a C o n tr a cti n g State a per m anent establishment

in eonnectian with which the liab il ity to pay the r o yal t ies was incurred , and such

roy a lties are borne b y such permanent establishment, then such royalties shaH be

de e m e d to aTise in the Co n tr a c ting State in which the p e rm anen t estabIishment is

situated.

(5) Where, owing to a specia l relationship between the payer and the recipj e nt

or between both of them and some other person, the amount of the royalties paid,

h a vi n g regard to the use, right 01' information for which th e y ar e paid exceeds the

am ount which would ħave been agreed upon by the payer and the r e cipient in the

a b se n c e of such relationship, the provisions of this Artic1e shaH apply only to t he

last-mentioned amount. In that cas e

' ,

taxable a ccording to the law of each C ontr ac t ing State, due regard bei n g had to the

other provisions of this C onve n t i o n .

(6) Any sum der ive d from sources within one of the Con t ract i ng States from

the s ale of patent r i g hts by a resident of the other C o n traoting State who does not

carry on a trade or b usi nes s in the first-mentioned Contracting State through a per­

m an e nt establisħment s i tua t ed therein wi t h which the patent rights are eff e ctively

connected, sha 11 be exe m pt from tax in t he first-mentioned Contracting State.

ARTICLE 13

Capital Gains

(1) Gains from the a1ienation of imm ovable property, as defined in p arag r ap h

(2) of Artic1e 6, may be taxed i n the Con t r a c t ing State in which such property is

situated.

(2) Ga ins from the alienation of m ovabl e property f or m ing paTt of t he business

property of a p ermanent establishment which an enterprise of a Con t rac ti ng State

h a s in the other Con t racting State 01' of movable p r o perty per ta i ni n g to a fixed base

available to a resident of a Contracting State in the other Contracting State for the

purpose of performing pr o f es sional services, including such g ains from th e aIienation

of such a permanent establisl1ment (alone or together with the whole enterprise) or

of such a fixed base, may be taxed in the otner State. However, gains from the alien­

ation of ships or aircraft o perated by an enterprise of a Contracting State in i nt e r ­

nationa1 traffic and movable p r operty pertaining to the opera t i on of such ships or

aiTeraft, shall be taxable oniy in that Contracting State.

(3) Gains from the ali e n a tion of any pr o p e rty other t h a n those mentioned in

p a r ag T aphs (1) and (2) shall be taxable only in the C o ntracti n g State of which the

ali ena t o r is a resident.

ARTICLE l4

Independent Personal Services

(l) Income derived by a res i dent of a Contracting S t a t e in r e s pec t of profes ­

sionaI services or other indep e ndent activities of a s im ilar character shal1 be taxable

only in that State unless he has a fixed base regularly a v ail able to him in the other

Contrac t ing State for the purpose of performing his activities. li he has such a fixed

B

base, the income may be taxed in the other Contracting State but only so much of

it as is attributable to that fixed base.

(2) The term "professional services" inc1udes, especially, independent scienti­

fic, literary, artistic, educational or teaching activities as well as the independent

activities of physicians, Iawyers, engineers, architects, dentists and accountants.

ARTICLE 15

Dependent Personal Services

(1) Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and

other simiIar remuneration derived by a resident of a Contracting State in respect

of an employment shalI be taxable onIy in that State unless the employment is

exercised in the other Contracting State. If the employment is so exercised, 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 shaH 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 calendar 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 estab1ishment or a fixed

base which the employer has in the other State.

(3) Notwithstanding the preceding provisions of this Artic1e, remuneration in

respect of an employment exercised aboard a ship or aircraft operated in interna­

tional traffic by an enterprise of a Contracting State may be taxed in that State.

ARTICLE 16

Directors' Fees

Directors' fees and similar payment derived by a resident of a Contracting

State in his capacity as a member of the board of directors Or any other similar

organ of a company which is a resident of the other Contracting State may be taxed

in that other State.

ARTICLE 17

Artistes and Athletes

(1) Notwithstanding the provisions of Articles 14 and 15, income derived by

public enterta.iners, such as theatre, motion picture, radio or television artistes ,

and musicians, and by athletes, from their personal activities as such may be taxed

in the Contracting State in which these activities are exercised.

(2) Notwithstanding the provisions of Artic1e 7, where the activities mentioned

in paragraph (1) of this Artic1e 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) The provisions of paragraphs (1) and (2) shall not apply in the case of

cultural and sports programmes sponsored by or on behalf of each of the Contract­

ing States.

ARTICLE 18

Pensions

(1) Subject to the provisions of p aragraph (1) of Article 19, pensions and other

similar remuneration paid to a resident of a Contracting State shall be taxable only

in that State.

(2) As used in this ArticIe the term "pensions and other similar remuneration"

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 19

Govemment Service

(1) (a) Remuneration, other than a pension, paid by a Contracting State or

a political subdivision or a Iocal authority thereof to any individual in respect

of services rendered to that State or subdivision or Iocal authority thereof

shall be taxable only in that State.

(b)

However, such remuneration shall be taxable only in the other Con­

tracting State if the services are rendered in that State and the recipient is a

resident of that other Contracting State who

(i)

is a national of that State; Of

(ii) did not become a resident of that State solely for the purpose of

performing the services.

(2 ) (a) Any pension paid by, or out of funds created by, a Contracting State

or a political subdivision or a local authority thereof to any individuaI in res­

pect of services rendered to that State or subdivision or local authority thereof

shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting

State if the recipient is a national of and a resident of that State.

(3) The provisions of Articles 15, 16 and 18 shall apply to remuneration and

pensions in respect of services rendered in connection with any business carried on

by a Contracting State Of a political subdivision or a Iocal authority thereof.

(4) The provisions of paragraph (1) (a) shall likewise apply in respect of remu­

neration paid, under a development assistance programme of a Contracting State, a

political subdivision or a loeal authority thereof, out of funds exclusiveIy supplied

by that State, those po1itical subdivisions or Iocal authorities thereof, to a specialist

or volunteer seconded to the other Contracting State with the consent of that

other State.

ARTICLE 20

Teachers, Students and Trainees

(1) A resident of a Contracting State who visits the other Contracting State

for a period not exceeding two years, for the purpose of teaching or research at a

university, research institute, college, school or other educationl establishment in

that other Contracting State shaH be exempt from tax in that other Contracting

State in respect of any payments which he receives ror such activity.

B

(2) A resident of one of the Contracting States who is temporarily present in

the other Contracting State soIely -

(a) as a student at a recognized university, college or school in the other

Contracting State;

(b) as an apprentice to acquire technicaI, professional or business ex­

perience 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 religious, charitable, scientific or educational organiz­

ation 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.

ARTICLE 21

Other Income

(1) Items of income of a resident of a Contracting State, wherever arising, not

deaIt with in the foregoing Articles of this Convention shaH be taxable only in that

State.

(2) The provisions of paragraph (1) shaH not apply if the recipient of the

income, being a resident of a Contracting State, carries on business in the other

Contracting State through a permanent establishment situated therein, or performs

in that other State professional services from a fixed base situated therein, and the

right or property in respect of which the income is paid is effectively connected with

such permanent establishment or fixed base. In such a case, the provisions of Article

7 or Article 14, as the case may be, shaH apply.

CHAPTER IV

Eliminution of Double Taxation

ARTICLE 22

Elimination of Double Taxation

(1) Subject to the provisions of Pakistan tax law regarding the allowance of

credit against Pakistan tax in respect of foreign tax, Malta tax payable, whether

directly or by deduction by a person resident in Pakistan, in respect of income from

sources within Malta (inc1uding income accruing or arising in Malta but deemed,

under the provisions of the law of Pakistan, to accrue 01' arise in Pakistan) shall be

allowed as a credit against any Pakistan tax payable in respect of that income.

(2) Subject to the provisions of the law of Malta regarding the allowance of

credit against Malta tax in respect of foreign tax, where, in accordance with the

provisions of this Convention there is included ! n a Malta assessment income frol?

sources within Pakistan, Pakistan tax on such mcome shall be allowed as a credIt

against the relative Malta tax payable thereon.

B

(3) For the pu r po s e o f allowing credit in acco rd ance with the provisions of

this Ar tic l e , the tax referred to in paragraph (2) o f Ar tic l e 11 and p a r agraph (2) of

Article 12 of this Convention, shall be deemed to have been effectively borne at the

rate actual1y charged plus 15 per cent of the net income from tl1e sources referred

to in the said provisions, so however that the rate of tax sha11 in no case be deemed

to be le s s than 1 5 per cent of the net ineome.

V

CHAPTER

Special Provisions

ARTICLE23

N on-discrimination

(1) The nationals of a C o nt r acting State shaH not be s u bj e cted in the other

Contracting State to any t a x a t ion 01' any requirement co nn ecte d 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 establishrnent which an enterprise of a Con­

tracting 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 carry­

i ng on the same activities.

(3) E x c e pt where the provisions of p a r a g ra p h (1) of Article 9, p ara grap h (7)

of Article 11, or p arag r a p h (5) of Artic1e 12 a p p ly, interest, roya1ties and other dis­

bursements paid by an enterprise of a Contracting State to a resid e nt of the other

Contracting State shaH, for the purpose of determining the taxable profits of sueh

enterprise, be deductible under the same conditions as if th e y had been paid to a

r eside n t of the first·-mentioned State: provided that the provisions of this paTagraph

s hal1 be without prejudice to the requirements of the law of either Contracting

States regulating t he deductior. of th e said disbursements.

(4) Enterprises of a Contr a c t i n g State, the capital of which is wholly or p l rtly

owned or contr o l1 e d , directly or indirectly, by on e or more residents of the other

Contracting State, shaH not be s u bje c t e d in the first�mentiGned Contracting Stat� to

any taxation or any requirement connected therewith which is other or more bur­

densome than t he taxatio!1 and connected reQUii'e:rnents to which other similar

enterprises of that first-mentioned State a r e or may be subjected.

pa r agra p h s

Nothing

contained in the other

of this

Article

shaH be

(5)

c on st rued

-

(i) as obliging either of the Contracting States to grant to p e r s o n s not

residen t in its territory those personal allowances and reliefs for tax

purposes which are by l aw available onl y to persons who are so resident;

(ii)

as affecting any provisions of the law of Pakistan

regarding the grant

of rebate of tax to companies fulfilling

specified

requirements

regarding

the

dec1aration

and payment of dividends,

ARTICLE24

M utual Agreement Procedure

Where a resident of a Contracting

State considers

that the actions of one

(l)

'or both of the Contracting

States resu1t

or will resu1t

for him

in taxation

not in

B

accordance with this Con v e n t i on, he may, notwithstanding the remedies provided

by the nationallaws of those States, present his case to the competent authority of

the Contracting State of which he is a resident.

(2) The competent autho r ity sha1l endeavour, if the obj ect io n appears to it to

be justified and if it is not itself able to arrive at an appropriate solution, to lJ:"esol:ve

the case by mutual agreement with the competent authority of the other Contract­

ing State, with a view to the avoidance of taxation not in accordance with the

Convention.

(3) The competent authorities of the Contracting States shaH endeavour to

resolve by mutual agreement any di:fficulties or doubts ar i si n g as to the interpreta:­

tion or a pp l i c ation of the Convention. They may also consu1t with respect to the

allocation of profits to a resident of a Contracting State and its pe r ma n e l1 t establish­

ment in the other Co n tracting State or to the aI1ocation of profits between .a r es i de n t

of a Co n l T acti n g State and any associated person prov i d ed for in Article 9.

(4) The competent authorities of the Contracting States may communicate

with each other directly for the purpose of r ea c hing an agreement in the s ense of

the preceding paragraphs.

ARTICLE 25

Excha.nge of Information

(1) The competent authorities of the Contracting States sha11 ex change such

information as is necessary for the carrying out of this Convention and of the domes­

tic laws of the Contracting States concerning taxes covered by this Convention inso­

far as the taxation thereunder is in accordance with this Convention and for the pre­

vention or evasion of su c h taxes. The competent authorities shaH, through consulta­

tions develop appropriate conditions, methods and techniques c o n c er n i n g the

,

matters respecting which such exchange shall be made, as well as exchange of

information regal'ding avoidance of tax where appropriate. A n y information sa

exchanged shall be treated as secret, but may be disclosed to any person (including

a court or administrative body) concerned with the assessment, enforcement or

prosecution in respect of the taxes which are the subject of the Convention.

(2) In no case shaH the pr o v i sio n s of paragraph (1) be construed so as to

impose on one of the Contracting S t a t e s the ob l ig a t i on

(a) to carry out administrative measur es at variance with the la w s 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 norma! course of the administration of t hat or of the other Contracting

State;

(c) to supply information which would disclose any trade, business, indus­

trial, commercial or p r of e ss io nal secret or trade process, or information, the

disc10sure of w h ich would be contrary to pub l ic policy.

ARTICLE 26

Diplomatic and Consular Officials

(1) Nothing in this Convention shal1 affect the fiscal privi1eges of diplomatic

or consular officials under the general rules of international law or under the pro­

visions of special agreements.

B

(2) lnsofar as, due to privileges granted to diplomatic Or consular officials un­

der the general rules of international law or under the provisions of special inter­

national treaties, income is TI?t subject to tax in the receiving State, the right to tax

shall be reserved to the sendmg State.

ART1CLE 27

T erritorial Extension

(1) The present Convention may be extended, either in its entirety or with

modi.fications, to any territory for whose international relations either State is res­

ponsible and which imposes taxes substantially simiJ ar in character to those which

are the subject of the present Convention and any such extension shall take effect

from sueh da te and subject to such modificatiol1s and conditions (including condi­

tions as to termination) as may be specified and agreed to between the Contracting

States in notes 1'0 te exchanged for this purpose.

(2) The termination in respect of Pal<istan or Malta of the present Convention

under Article 29 shall, unless otherwise expressly agreed to by both Contracting

States, terminate the application of the present Convention to any territory to which

the Convention has been extended under this Article.

CHAPTERVI

Final Provisions

ARTICLE 28

Entry into Force

(1) This Convention shall be ratified and the instruments of ratification shall

be exchanged at Malta as soon as possible.

(2) Th e Convention shall enter into force 30 days after the exchange of instru­

ments of rati:fication, and its provisions shall have effect -

(a) in Pakistan, in respect of Pakistan tax for the "previous years" (as

defined by the tax laws of Pakistan) beginning on 01' after the first day of

January 1973; and

(b) in Malta, in respect of Malta tax for any year of assessment beginning

on or after the first day of January 1974.

ARTICLE 29

T ermination

This Convention sha11 remain in force indennitely but either of the Contracting

States may, on or befor e the thirtieth day of June i n any calendar year beginning

after the expiration of a period of three 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 Pakistan, in respect of Pakistan tax for the "previous years" (as

defined by t he tax laws of Pakistan) beginning on or after the .first day of

January in the calendar year next fol1owing that in which notice of termination

is given; and

B

(b)

in Malta, in respect of Malta tax for the years of assessment beginning

with the second year of assessment following the calendar year during which

notice of termination is given.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto by

their respective Governments, have signed this Convention.

DONE at Valletta this 8th day of Octo1;)er, 1. 975,

duplicate ID the Enghsh

m

language.

AFTAB AHMAD KHAN

J. ABELA

For the Government of the

For the Government of the

Islamic Repub1ic of Paldstan

Republic of Malta

Stampet fi-U.C.S. - Stamperija tal-Gvern - Printed at the C. O.S. - Government Printing Press

Arrangements

to have effect.

(a) that the arrangements specified in the Convention set

out in the Schedule to this order have been made with the Go­

vernment of the Islamic Republic of Pakistan with a view to

affording relief from double taxation and preventing fiscal

evasion in relation to the following taxes imposed by the laws

of the IsIamic Republic of Pakistan

the income tax, super-tax and the surcharge;

(b) that it is expedient that those arrangements should

have effect.

B