AGREEMENT BETWEEN THE GOVERNMENT OF PAKISTAN AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION.
Notification No. 40, dated the 23rd July 1955.

WHEREAS the annexed Agreement between the Government of Pakistan and the Government of the United Kingdom of Great Britain and Northern Ireland 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 49AA of the Income Tax Act, 1922 (XI of 1922), the Central Government is pleased to direct that all the provisions of the said Agreement shall be given effect to in Pakistan.
AnnexureAGREEMENT BETWEEN THE GOVERNMENT OF PAKISTAN AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES.
The Government of Pakistan and the Government of the United Kingdom of Great Britain and Northern Ireland,Desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,Have Agreed as follows:-
ARTICLE I
(1) The taxes which are the subject of the present Agreement are(a) In the United Kingdom of Great Britain and Northern Ireland:The income tax (including sur-tax), the profits tax and the excess profits levy (hereinafter referred to as "United Kingdom tax").(b) In Pakistan:The income tax, super-tax and the business profits tax (hereinafter referred to as "Pakistan 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 of any territory to which the present Agreement is extended under Article XVI.
ARTICLE II
(1) In the present Agreement, unless the context otherwise requires:(a) The term "United Kingdom" means Great Britain and Northern Ireland.(b) The term "Pakistan" means the Provinces of Pakistan, the Capital of the Federation and the Acceding States to which the laws of the Federal Government relating to taxes, which are the subject of the present Agreement, have been, or may hereafter be, extended.(c) The terms "one of the territories" and "the other territory" mean the United Kingdom or Pakistan, as the context requires.(d) The term "tax" means United Kingdom tax, or Pakistan tax, as the context requires.(e) The term "person" includes any body of persons, corporate or not corporate.(f)The term "company" means any body corporate or not corporate, assessed as a company under the relevant law of either Contracting Government.(g) The term "resident of the United Kingdom" means:(i) any company whose business is managed and controlled in the United Kingdom; or(ii) any other person who is resident in the United Kingdom for the purposes of United Kingdom tax and not resident in Pakistan for the purposes of Pakistan tax.(h) The term "resident of Pakistan" means -(i) any company whose business is managed and controlled in Pakistan, or(ii) any other person who is resident in Pakistan for the purposes of Pakistan tax and not resident in the United Kingdom for the purposes of United Kingdom tax.(i) The terms "resident of one of the territories" and "resident of the other territory" mean a person who is a resident of the United Kingdom or a person who is a resident of Pakistan, as the context requires.(j) The terms "United Kingdom enterprise" and "Pakistan enterprise" mean respectively an industrial or commercial enterprise or undertaking carried on by a resident of the United Kingdom and an industrial or commercial enterprise or undertaking carried on by a resident of Pakistan; and the terms "enterprise of one of the territories" and "enterprise of the other territory" mean a United Kingdom enterprise or a Pakistan enterprise, as the context requires.(k) 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 by an enterprise from the management, control or supervision of the trade, business, or other activity of another enterprise or concern, or remuneration, or, labour or personal services, or income from the operation of ships or aircraft.(1) The term "permanent establishment" when Used with respect to an enterprise of one of the territories, means a branch, management, factory or other fixed place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of such 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; and(ii) the fact that a company which is resident of one of the territories has a subsidiary company which is a resident of the other territory or which is engaged in trade or business in that other territory (whether through a permanent establishment or otherwise) shall not of itself constitute that subsidiary company a permanent establishment of its parent company.(2) Where under this Agreement any income is exempt from tax in one of the territories if (with or without other conditions) it is subject to tax in the other territory, and that income is subject to tax in that other territory by reference to the amount thereof which is remitted to or received in that other territory, the exemption to be allowed under this Agreement in the first-mentioned territory shall apply only to the amount so remitted or received.(3) 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 that Contracting Government relating to the taxes which are the subject of the present Agreement.
ARTICLE III
(1) The industrial or commercial profits of a United Kingdom 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 in those profits by Pakistan, but only on so much of them as is attributable to that permanent establishment.(2) The industrial or commercial profits of a Pakistan enterprise shall not be subject to United Kingdom tax unless the enterprise is engaged in trade or business in the United Kingdom through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by the United Kingdom, 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 might be accepted to derive in that other territory if it were an independent enterprise engaged in the same or similar actives under the same or similar conditions and dealing at arm's length with the enterprise of which it is a permanent establishment.
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(c) 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 derived by a resident of the United Kingdom from operating aircraft registered in the United Kingdom or ships whose port of registry is in the United Kingdom shall be exempt from Pakistan tax, unless the aircraft or ship is operated wholly or mainly between places within Pakistan.(2) Notwithstanding the provisions of Articles III and IV, profits derived by a resident of Pakistan from operating aircraft registered in Pakistan or ships whose port of registry is in Pakistan shall be exempt from United Kingdom tax, unless the aircraft or ship is operated wholly or mainly between places with the United Kingdom.
ARTICLE VI
(1) 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.(2) Nothing contained in paragraph (1) of this Article shall affect the provisions of the Pakistan law providing for the allowance of rebate of super-tax at a higher rate to companies which make such arrangements as may be prescribed in this behalf for the declaration and payment of dividends and the deduction of super-tax from dividends paid by them than that allowed to other companies:Provided that .nothing contained in this paragraph shall have the effect that super-tax is imposed on the profits of a company, which is a resident of the United Kingdom and which does not make the aforesaid prescribed arrangements, at a rate exceeding the rate payable by a company, which makes those arrangements by more than -(a) 6.25 per cent in the case of a public company, and(b) 12.50 per cent in the case of any other company:Provided further that where a company, being a resident of the United Kingdom, is public company it shall be entitled to a rebate of 3.123 per cent on so much of its income as is derived by it in the form of dividends from a subsidiary company, as defined in the Companies Act, 1913 (VII of 1913), incorporated in Pakistan.(3) Where an individual, who is a resident of the United Kingdom and is not engaged in any trade or business in Pakistan through a permanent establishment situated therein receives a dividend in respect of which he is subject to United Kingdom tax from a company which is incorporated in Pakistan, the income tax and super-tax payable by him in Pakistan in respect of the aforesaid dividend shall not exceed the aggregate of income tax and super-tax which would have been payable by him in Pakistan in respect of that dividend computed at the rates which would have been applicable to his total world income if he had been resident and ordinarily resident in Pakistan and the aforesaid total world income had been his total income:Provided that nothing contained in this paragraph shall entitle such an individual to a refund of income tax deemed to have been paid by him under the provisions of section 49B of the Income Tax Act, 1922 (XI of 1922), in respect of that dividend.(4) In paragraph (2) of this Article, the term "public company" means, in relation to any year of assessment -(a) a company, which is neither a private company within the meaning of the Companies Act, 1913 (VII of 1913), nor a company in which shares carrying more than fifty per cent of the total voting power were, at any time during the previous year, held or controlled by less than six persons and which is a company the shares of which were offered for sale in a recognised stock exchange at any time during the previous year; or(b) a company all of whose shares were held at the end of the previous year by one or more such public companies as defined in clause (a) of this paragraph.
ARTICLE VII
(1) Any royalty derived from sources within one of the territories by a resident of the other territory, who is subject to tax in that other territory in respect thereof and 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 of 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.(3) Where any royalty exceeds a fair and reasonable consideration in respect of the rights for which it is paid, the exemption provided 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) Remuneration, including pensions and annuities, paid by or on behalf of the Government of the United Kingdom to any individual for services rendered to that Government in the discharge of Government functions shall be exempt from tax in Pakistan, if the individual is not ordinarily resident in Pakistan or where the remuneration is not a pension or annuity, is ordinarily resident in Pakistan solely for the purpose 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 Governmental functions shall be exempt from tax in the United Kingdom, if the individual is not ordinarily resident in the United Kingdom or, where the remuneration is not a pension or annuity, is ordinarily resident in the United Kingdom solely for the purpose of rendering those services.(8) The provisions of this Article shall not apply to payments in respect of services rendered in connection with any trade or business carried on by either of the Contracting Governments for purposes of profit.(4) For the purposes of this Article, the term "Government of Pakistan" shall include the Government of a Province or State in Pakistan.
ARTICLE IX
(1) An individual, who is resident of the United Kingdom, 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 the United Kingdom, and(c) the profits or remuneration are subject to United Kingdom tax.(2) An individual, who is a resident of Pakistan, shall be exempt from United Kingdom tax on profits or remuneration in respect of personal (including professional) services performed within the United Kingdom in any year of assessment, if-(a) he is present within the United Kingdom 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 resident of Pakistan, and(c) the profits or remuneration are subject to Pakistan tax.(3) The provisions of this Article shall not apply to the profits or remuneration of public entertainers such as stage, motion picture or radio artists, musicians and athletes.
ARTICLE X
(1) Any pension or annuity [other than a pension or annuity of the kind referred to in paragraphs (1) and (2) of Article VIII] derived from sources within one of the territories by an individual who is a resident of the other territory and subject to tax in that other territory in respect thereof shall be exempt from tax in the first-mentioned territory.(2) In this Article the term "annuity" where it first appears, 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.
ARTICLE XI
A professor or teacher from one of the territories, who receives remunerations for teaching during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other territory, shall be exempt from tax in that other territory in respect of that remuneration.
ARTICLE XII
A student-trainee or business apprentice from one of the territories, who is receiving full-time education or training in the other territory, shall be exempt from tax in that other territory on payments made to him by persons in the first-mentioned territory for the purpose of his maintenance, education or training.
ARTICLE XIII
(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom Tax or tax payable in a territory outside the United Kingdom, Pakistan tax payable, whether directly or by deduction, in respect of income from sources within Pakistan shall be allowed as a credit against any United Kingdom tax payable in respect of that income.Where such income is an ordinary dividend paid by a company which is a resident of Pakistan, the credit shall take into account (in addition to any Pakistan tax appropriate to the dividend) the Pakistan tax payable in respect of its profits by the company paying the dividend and where it is a dividend paid on participating preference shares and representing both dividend at the fixed rate to which the shares are entitled and an additional participation in profits, the Pakistan tax so payable by the company shall likewise be taken into account is so far as the dividend exceeds that fixed rate.For the purpose of this paragraph, the term "Pakistan" shall include the agricultural income tax imposed by the Government of any Province or State in Pakistan and any tax of substantially similar character imposed after date of signature of this Agreement by the Government of any Province or State in Pakistan or by the Government of any territory to which the present Agreement is extended under sub-paragraph (b) of paragraph (3) of Article XVI.(2) Subject to such provisions (which shall not affect the general principles hereof) as may be made in Pakistan United Kingdom tax payable, whether directly or by deduction by a person resident in Pakistan, in respect of income from sources within the United Kingdom (including income accounting or arising in the United Kingdom but deemed, under the provisions of the law of Pakistan, to accrue or arise in Pakistan) shall be allowed as a credit against any Pakistan tax payable in respect of that income.(3) Notwithstanding the provisions of paragraphs (1) and (2) of this Article where tax is imposed by both Contracting Governments on income derived from sources outside both Pakistan and the United Kingdom by a company which is resident in Pakistan for the purposes of Pakistan tax and is also resident in the United Kingdom for the purposes of United Kingdom tax there shall be allowed against the tax imposed by each Contracting Government a credit which bears the same proportion to the amount of that tax (as refused by any credit allowed in respect of tax payable in the country from which the income is derived) or to the amount of the tax imposed by the other Contracting Government (reduced as aforesaid) whichever is the less, as the former amount (before any such reduction) bears to the sum of both amounts (before any such reduction).(4) For the purposes of this Article, profits or remuneration for personal including professional services performed in one of the territories shall be treated as income from sources within that territory, and the services of an individual whose services are 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 be treated as performed in that territory.
ARTICLE XIV
(1) The taxation 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 or for the administration of statutory provisions against legal avoidance 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 taxation authorities of the Contracting Governments may consult together, as may be necessary, for the purpose of carrying out the provisions of the present Agreement and in particular the provisions of Articles III and IV.(3) As used in this Article the term "taxation authorities" means in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorised representative and in the case of Pakistan, the Central Board of Revenue or their authorised representative, and in the case of any territory to which the present Agreement is extended under Article XVI, the competent authority for the administration in such territory of the taxes to which the present Agreement applies.
ARTICLE XV
(1).The residents of one of the territories shall not be subjected in the other territory to any taxation or any requirement connected therewith which is other, higher or more burdensome than the taxation and connected requirements to which the residents of the latter territory are or may be subjected.(2) The enterprises of one of the territories shall not be subjected in the other territory, in respect of profits attributable to their permanent establishments in that other territory, to any taxation which is other, higher or more burdensome than the taxation to which the enterprises of that other territory and, in the case of companies, to which enterprises of that other territory assessed accompanies under the relevant laws of that other territory are or may be subjected in respect of the light profits.(3) In this Article, the term "taxation" means the taxes which are the subject of the present Agreement.(4) Nothing contained in this Article shall be construed -(a) as obliging either of the Contracting Governments to grant to persons not resident in its territory those personal allowances and relief for tax purposes which are by law available only to persons who are so resident, or, to charge persons (other than companies), who are not resident in its territory, at the lower rates of income tax chargeable only on persons (other than companies) who are so resident; or(b) as affecting the provisions of paragraphs (2) and (3) of Article VI.
ARTICLE XVI
(1) The present Agreement may be extended, either in its entirety or with modifications, to any territory to which this Article applies 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 the United Kingdom of the present Agreement under Article XVIII 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.(3) The territories to which this article applies are -(a) in relation to the United Kingdom:Any territory other than the United Kingdom for whose international relations the United Kingdom is responsible:(b) in relation to Pakistan:Any territory other than Pakistan for whose international relations Pakistan is responsible.
ARTICLE XVII
The present Agreement shall come into force on the date when the last of all such things shall have been done in the United Kingdom and Pakistan as are necessary to give the Agreement the force of law in the United Kingdom and Pakistan respectively, and shall thereupon have effect-(a) In the United Kingdom:as respects income-tax (including super-tax), for any year of assessments beginning on or after the 6th day of April, 1955; as respects profit 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 6th day of April, 1955;(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, 1955, or are attributable to so much of any chargeable accounting period falling partly before and partly after that date as falls after that date;as respects excess profits levy, in respect of 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 6th day of April, 1955;(b) In Pakistan:as respects income tax and super-tax, for any year of assessment beginning on or after the 1st day of April, 1955;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, 1955;(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, 1955, 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 XVIII
The present Agreement shall continue in effect indefinitely but either of the Contracting Government may on or before the 30th day of June in any calendar year not earlier than the year 1957 give to the other Contracting Government written notice of termination and in such event, the present Agreement shall cease to be effective -(a) In the United Kingdom:as respects income-tax (including sur-tax), for any year of assessment beginning on or after the 6th day of April in the calendar year next following that in which the notice is given;as respects profits tax in respect of the following profits -(i) profits by reference to which income-tax is chargeable for any year or assessment beginning on or after the 6th day of April in the calendar year next following that in which the notice is given;(ii) other profits being profits by reference to which income-tax is 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 that date as falls after that date;(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 calendar year next following that in which the notice is given; 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 calendar year next following that in which the notice is given;(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 that date as falls after that date.

AGREEMENT BETWEEN THE GOVERNMENT OF PAKISTAN AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES.
Notification No. 56(K)/62, dated the 9th January, 1962.

WHEREAS the annexed Agreement between the Government of Pakistan and the Government of the United Kingdom of Great Britain and Northern Ireland 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 49AA of the Income Tax Act, 1922 (XI of 1922), and in supersession of Ministry of Finance (Revenue Division) Notification No. 40, dated the 23rd July 1955, the Central Government is pleased to direct that all the provisions of the said Agreement shall be given effect to in Pakistan.
Annexure
AGREEMENT BETWEEN THE GOVERNMENT OF PAKISTAN AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES.
The Government of Pakistan and the Government of the United Kingdom of Great Britain and Northern Ireland,
Desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,
Have Agreed as follows:-
ARTICLE I
(1) The taxes which are the subject of the present Agreement are:-
(a) In the United Kingdom of Great Britain and North Ireland ·The income tax (including sur-tax) and the profits tax (hereinafter referred to as "United Kingdom tax").
(b) In Pakistan:The income and super-tax (hereinafter referred to as "Pakistan tax").
(2) The present Agreement shall also apply to any identical or substantially similar taxes subsequently imposed in addition to, or in place of, the taxes specified in paragraph (1) of this Article by either Contracting Government or by the Government of any territory to which the present Agreement is extended under Article XVII.
ARTICLE II
(1) In the present Agreement, unless the context otherwise requires:
(a) The term "United Kingdom" means Great Britain and North Ireland;
(b) The term "Pakistan" means the Provinces of Pakistan and the Federal Territory of Karachi;
(c) The terms "one of the territories" and "the other territory" mean the United Kingdom or Pakistan, as the context requires;
(d) The term "tax" means United Kingdom tax or Pakistan tax, as the context requires;
(e) The term "person" includes any body of persons, corporate or not corporate;
(f) The term "company" means any body corporate or not corporate, assessed as a company under the relevant laws of either Contracting Government;
(g) The term "resident of the United Kingdom" means -
(i) Any company whose business is managed and controlled in the United Kingdom; or
(ii) Any other person who is resident in the United Kingdom for the purposes of United Kingdom tax and not resident in Pakistan for the purposes of Pakistan tax;
(h) The term "resident of Pakistan" means -
(i) Any company whose business is managed and controlled in Pakistan; or
(ii) Any other person who is resident in Pakistan for the purposes of Pakistan tax and not resident in the United Kingdom for the purposes of United Kingdom tax;
(i) The terms "resident of one of the territories" and "resident of the other territory" means a person who is a resident of the United Kingdom or a person who is a resident of Pakistan, as the context requires:
(j) The term "United Kingdom enterprise" and "Pakistan enterprise" mean respectively an industrial or commercial enterprise or undertaking carried on by a resident or the United Kingdom and an industrial or commercial enterprise or undertaking carried on by a resident of Pakistan; and the terms "enterprise of one of the territories: and "enterprise of the other territory" mean a United Kingdom enterprise or a Pakistan enterprise, as the context requires;
(k) The term "industrial or commercial profits" includes rents or royalties in respect of motion picture films and films for use in connection with television but does not include income in the form of dividends, interest, or royalties, or a fee or other remuneration derived by an enterprise from the management, control or supervision of the trade, business or other activity of another enterprise or concern, or remuneration for labour or personal services, or income from the operation of ships or aircraft;
(1) The term "permanent establishment" when used with respect to an enterprise of one of the territories means a branch, management, factory, or other fixed place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of such enterprise or has a stock of goods or 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 carried on business dealings in that other territory through a bona fide broker, general commission agent or other independent agent acting in the ordinary course of his business as such or because it makes purchases of goods or merchandise direct from an independent exporter in that other territory in the normal course of international trade; and
(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 is engaged in trade or business in that other territory (whether through a permanent establishment or otherwise) shall not of itself constitute that subs/diary company a permanent establishment of its parent company; and
(m) The term "taxation authorities" means, in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorised representative and, in the case of Pakistan, the Central Board of Revenue or their authorised representative; and, in the case of any territory to which the present Agreement is extended under Article XVII, the competent authority for the administration in such territory of the taxes to which the present Agreement applies.
(2) Where under this Agreement any income is exempt from tax in one of the territories if (with or without other conditions) it is subject to tax in the other territory and that income is subject to tax in that other territory by reference to the amount thereof which is remitted to, or received in that other territory, the exemption to be allowed under this Agreement in the first-mentioned territory shall apply only to the amount so remitted or received.
(3) 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 that Contracting Government relating to the taxes which are the subject of the present Agreement.
ARTICLE III
(1) The industrial or commercial profits of a United Kingdom 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 in that permanent establishment.
(2) The industrial or commercial profits of a Pakistan enterprise shall not be subject to United Kingdom tax unless the enterprise is engaged in trade or business in the United Kingdom through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by the United Kingdom, 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.
(4) In determining the industrial or commercial profits of a permanent establishment, there shall be allowed as deductions all expenses which would be deductible if the permanent establishments were an independent enterprise in so far as they are reasonably allocable to the permanent establishment, including executive and general administrative expenses so deductible and allocable, whether incurred in the territory in which the permanent establishment is situated or elsewhere.
ARTICLE IV
Where -
(a) an enterprise 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 derived by a resident of the United Kingdom from operating aircraft registered in the United Kingdom or ships whose port of registry is in the United Kingdom, shall by exempt from Pakistan tax, unless the aircraft or ship is operated wholly or mainly between places within Pakistan.
(2) Notwithstanding the provisions of Articles III and IV, profits derived by resident of Pakistan from operating aircraft registered in Pakistan or ships whose port of registry is in Pakistan shall be exempt from United Kingdom tax, unless the aircraft or ship is operated wholly or mainly between places within the United Kingdom.
ARTICLE VI
(1) 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 or 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 profit 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:
Provided that nothing contained in this paragraph shall affect the provisions of the Pakistan law providing for the allowance of rebate of super-tax at a higher rate to companies which made such arrangements, as may be prescribed in this behalf, for the declaration and payment of dividends and the deduction of super-tax from dividends paid by them than that allowed to other companies ·
Provided further that nothing contained in this paragraph shall have the effect that super-tax may be imposed on the profits of a company which is a resident of the United Kingdom and which does not make the aforesaid prescribed arrangements, at a rate exceeding the rate payable by company, which makes those arrangements, by more than 10 per cent.
(2) The rate of Pakistan super-tax on dividends paid to a public company, being a resident of the United Kingdom, by a company, being a resident of Pakistan and engaged in an industrial undertaking in Pakistan, shall, if the first-mentioned company owns more than fifty per cent of the voting shares of the latter company and the dividends are allocable to profits of the industrial undertaking and Pakistan income-tax and super-tax has been paid by the Pakistan company on such profits, not exceeding the following percentages, namely:-
(a) 15 per cent in the case of industrial undertakings set up before the fifteenth day of August, 1947, and
(b) 10 per cent in the case of industrial undertakings set up after the fourteenth day of August, 1947.
(3) The provisions of section 23-A of the Pakistan Income-tax Act relating to the compulsory distribution of company profits shall not apply to the income of a company being a resident of Pakistan, more than fifty per cent of the voting shares of which are owned by a public company, being a resident of the United Kingdom, if the first-mentioned company is engaged in an industrial undertaking in Pakistan and its undistributed profits are wholly or mainly retained for the purposes of industrial development and expansion in Pakistan.
(4) Where an individual, who is a resident of the United Kingdom and is not engaged in any trade or business in Pakistan through a permanent establishment situated therein, receives a dividend in respect of which he is subject to United Kingdom tax from a company which is incorporated in Pakistan, the Pakistan tax payable by him in respect of the aforesaid dividend shall not exceed the Pakistan tax which would have been payable by him in respect of that dividend computed at the rates which would have been applicable to his total world income if he had been resident and ordinarily resident in Pakistan and the aforesaid total world income had been his total income:
Provided that nothing contained in this paragraph shall entitle such an individual to a refund of income-tax demanded to have paid by him under the provisions of section 49B of the Pakistan Income-tax Act in respect of that dividend.
(5) Dividends paid by a company which is a resident of the United Kingdom to a resident of Pakistan, who is subject to tax in Pakistan in respect thereof and does not carry on a trade or business in the United Kingdom through a permanent establishment situated therein, shall be exempt from United Kingdom sur-tax.
(6) In paragraphs (2) and (3) of this Article -
(a) The term "public company' means, in relation to any year of assessment -
(i) a company which does not restrict the right to transfer its shares, which does not prohibit the issue of its shares to the public or the sale of its shares at a recognised stock exchange and of which shares carrying more than 50 per cent of the voting power were held or controlled at any time during the previous year by not less than six persons; or
(ii) a company all the shares of which were held at the end of the previous year by one or more such public companies as defined in sub-paragraph (a) (i) of this paragraph; and
(b) The term "industrial undertaking" means -
(i) an undertaking engaged in -
(aa) The manufacture of goods or materials or the subjection of goods or materials to any process which results in substantially changing their original condition; or
(bb) Ship-building; or
(cc) Electricity, hydraulic power, gas or water supply; or
(dd) Mining including the working of an oil-well or the source of any mineral deposit; or
(ii) any other undertaking which is declared by the taxation authorities in Pakistan to be an industrial undertaking for the purposes of Pakistan tax laws.
ARTICLE VII
Interest on bonds, debentures, deposits, securities, notes or any other form of indebtedness (including mortgages or bonds, secured by real property) in connection with trade, business or other transactions carried on in one of the territories shall, for the purposes of Article XVI, be treated as income from sources within that territory and may be taxed in that territory.
ARTICLE VIII
(1) Any royalty derived from sources within one of the territories by a resident of the other territory, who is subject to tax in that other territory in respect thereof and 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 rent or royalty in respect of motion picture films or films for use in connection with television or any royalty or other amount paid in respect of the operation of a mine or quarry or of any other extraction of natural resources.
(3) Where any royalty exceeds a fair and reasonable consideration in respect of the right for which it is paid, the exemption provided 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 IX
(1) Remuneration, including pensions and annuities, paid by or on behalf of the Government of the United Kingdom to any individual for services rendered to that Government in the discharge of Government function shall be exempt from tax in Pakistan, if the individual is not ordinarily, resident in Pakistan or, where there remuneration is not a pension or annuity, is ordinarily resident in Pakistan solely for the purpose 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 Governmental functions shall be exempt from tax in the United Kingdom, if the individual is not ordinarily resident in the United Kingdom or, where the remuneration is not a pension or annuity, is ordinarily resident in the United Kingdom solely for the purpose of rendering those services.
(3) For the purpose of this Article, the term "Government of Pakistan" shall include the Government of a Province or a State in Pakistan.
(4) The foregoing provisions of this Article shall not apply to payments in respect of services rendered in connection with any trade or business carried on by either of the Contracting Governments of purposes of profit.
ARTICLE X
(1) An individual, who is a resident of the United Kingdom, 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 18,1 days during that year, and
(b) the services are performed for. or on behalf of, a resident of the United Kingdom, and
(c) the profits or remuneration are subject to United Kingdom tax.
(2) An individual, who is a resident of Pakistan shall be exempt from United Kingdom tax on profits or remuneration in respect of personal (including professional) services performed within the United Kingdom in any year of assessment if-
(a) he is present within the United Kingdom 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
(c) the profits of remuneration are subject to Pakistan tax.
(3) The provisions of paragraphs (1) and (2) of this Article shall not apply to the profits or remuneration of public entertainers, such as stage, motion picture, radio or television artists, musicians and athletes.
(4) Where an individual is in any year domiciled in the United Kingdom and is in that year resident in Pakistan for the purposes of Pakistan tax but not ordinarily resident in Pakistan, the income profits and gains accruing or arising to him without Pakistan during that year and not received in or brought into Pakistan during that year shall not be included in this income for that year subject to tax in Pakistan unless they are derived from a business controlled, or a profession or vocation set up in Pakistan.
(5) For the purposes of paragraph (4) of this Article, an individual shall be deemed to be not ordinarily resident in Pakistan in any year if-
(a) he has not been resident in Pakistan for the purposes of Pakistan tax in nine out of the ten years preceding that year; or
(b) he has not during the seven years preceding that year been in Pakistan for a period of, or for periods amounting in all to, more than two years.
ARTICLE XI
(1) Any pension or annuity [other than a pension or annuity of the kind referred to in paragraphs (1) and (2) of Article IX] derived from sources within one of the territories by an individual who is a resident of the other territory and subject to tax in that territory in respect thereof shall be exempt from tax in the first-mentioned territory.
(2) In this Article, the term "annuity" where it first appears, 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 payment in return for adequate and full consideration in money or money's worth.
ARTICLE XII
A professor or teacher from one of the territories, who receives remuneration for teaching, during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other territory, shall be exempt from tax in that other territory in respect of that remuneration.
ARTICLE XIII
(1) An individual, who immediately before visiting one of the territories, is a resident of the other territory and is temporarily present in the first-mentioned territory solely as a student at a recognised university, college or school in the first-mentioned territory, or as a business apprentice therein, shall be from tax in the first-mentioned territory on -
(a) all remittances from the second-mentioned territory for the purposes of his maintenance, education or training; and
(b) any remuneration for personal services rendered in the first-mentioned territory with a view to supplementing the resources available to him for such purposes.
(2) An individual, who immediately before visiting one of the territories, is a resident of the other territory and is temporarily present in the first-mentioned territory for a period not exceeding two years for the purpose of study, research or training solely as a recipient of a grant, allowance or award from a scientific, educational, religious or charitable organisation or under a technical assistance programme entered into by one of the Contracting Governments shall be exempt from tax in the first-mentioned territory on -
(a) the amount of such grant allowance or award; and
(b) any remuneration for personal services rendered in the first-mentioned territory provided such services are in connection with its study, research to training or are incidental thereto.
(3) An individual who immediately before visiting one of the territories, is a resident of the other territory and is temporarily present in the first-mentioned territory for a period not exceeding twelve months solely as an employee of or under contract with, the Government or an enterprise of the second-mentioned territory for the purpose of acquiring technical, professional or business experience shall be exempt from tax in the first-mentioned territory on -
(a) all remittances from the second-mentioned territory for the purposes of his maintenance, education or training; and
(b) any remuneration so far as it is not in excess of 500 pounds sterling or its equivalent sum in Pakistani rupees at the official rate of exchange, for personal services rendered in the first-mentioned territory, provided such services are in connection with his studies or training or are incidental thereto.
ARTICLE XIV
(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax or tax payable in a territory outside the United Kingdom. Pakistan tax payable, whether directly or by deduction, in respect of income from sources within Pakistan shall be allowed as a credit against any United Kingdom tax payable in respect of that income.
Where such income is an ordinary dividend paid by a company which is a resident of Pakistan, the credit shall take into account (in addition to any Pakistan tax appropriate to the dividend) the Pakistan tax payable in respect of its profits by the company paying the dividends, and where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, the Pakistan tax payable by the company shall likewise be taken into account in so far as the dividend exceeds that fixed rate.
(2) For the purposes of paragraph (1) of this Article, the term "Pakistan tax payable" shall-
(a) include the agricultural income tax imposed by the Government of any Province in Pakistan and any tax of substantially similar character imposed after the date of signature of this Agreement by the Government of Pakistan or any Province or State in Pakistan or by the Government of any territory to which the present Agreement is extended under sub-paragraph (b) of paragraph (3) of Article XVII; and
(b) be deemed to include any amount which would have been payable as Pakistan tax for any year but for an exemption granted for that year or any part thereof under -
(i) any of the following provisions or statutory rules, that is to say -
(aa) section 15-BB of the Pakistan Income Tax Act;
(bb) clauses (xiii) and (xiv) of sub-section (3) of section 4 of the said Act; and
(cc) notification S.R.O. 17(R), dated the 1st July, 1960, under section 60(1) of the said Act,
so far as they were in force on, and have not been modified since, the date of the signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or
(ii) any other provision or statutory rule which may subsequently be made granting an exemption which is agreed by the taxation authorities of the Contracting Governments to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.
(3) Subject to the provisions of the Pakistan Income Tax Law regarding the allowance as a credit against Pakistan tax or tax payable in a country outside Pakistan, United Kingdom tax payable, whether directly or by deduction by a person resident in Pakistan, in respect of income from sources within the United Kingdom (including income accruing or arising in the United Kingdom put deemed under the provisions of the law of Pakistan, to accrue or arise in Pakistan) shall be allowed as a credit against any Pakistan tax payable in respect of that income.
(4) Notwithstanding the provisions of paragraphs (1) and (3) of this Article where tax is imposed by both Contracting Governments on income derived from sources outside both Pakistan and the United Kingdom by a company which is resident in Pakistan for the purposes of Pakistan tax and is also resident in the United Kingdom for the purposes of United Kingdom tax, there shall be allowed against the tax imposed by each Contracting Government a credit which bears the same proportion the amount of that tax (as reduced by any credit allowed in respect of tax payable in the country from which the income is derived) or to the amount of the tax imposed by the other Contracting Government (reduced as aforesaid), whichever is the less, as the former (amount before any such reduction) bears to the sum of both amounts (before any such reduction).
(5) For the purposes of this Article, profits or remuneration for personal (including professional) services performed in one of the territories shall be treated as income from sources within that territory, and the services of an individual whose services are 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 be treated as performed in that territory.
ARTICLE XV
(1) The taxation 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 or for the administration of statutory provisions against legal avoidance 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 person 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 taxation 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 XVI
(1) The residents of one of the territories shall not be subjected in the other territory to any taxation or any requirement connected therewith which is either higher or more burdensome than the taxation and connected requirements to which the residents of the latter territory are or may be subjected.
(2) The enterprises of one of the territories shall not be subjected in the other territory, in respect of profits attributable to their permanent establishment in that other territory, to any taxation which either, higher or more burdensome than the taxation to which the enterprises of that other territory and, in the case of companies, to which enterprises of that other territory assessed as companies under the relevant laws of that other territory are or may be subjected in respect of the like profits.
(3) In this Article, the term "taxation" means the taxes which are the subject of the present Agreement.
(4) Nothing contained in this Article shall be construed -
(a) as obliging either of the Contracting Governments to grant 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 or to charge persons (other than companies), who are not resident in its territory, at the lower rates of income-tax chargeable only on persons (other than companies) who are so resident; or
(b) as affecting the provisions of paragraphs (1) and (4) of Article VI.
ARTICLE XVII
(1) The present Agreement may be extended, either in its entirety or with modifications, to any territory to which this Article applies 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 the United Kingdom of the present Agreement under Article XIX 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.
(3) The territories to which this Article applies are -
(a) in relation to the United Kingdom:
Any territory other than the United Kingdom for whose international relations the United Kingdom is responsible;
(b) in relation to Pakistan:
Any territory other than Pakistan for whose international relations Pakistan is responsible.
ARTICLE XVIII
The present Agreement shall come into force on the date when the last of all such things shall have been done in the United Kingdom and Pakistan as are necessary to give the Agreement the force of law in the United Kingdom and Pakistan respectively, and shall, thereupon have effect-
(a) In the United Kingdom:
as respects income-tax (including sur-tax), for any year of assessment beginning on or after the sixth day of April, 1960.
As respect 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 sixth day of April, 1960; 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 first day of April, 1960, or attributable to so much of any chargeable accounting period falling partly before and partly after date as falls after that date.
(b) in Pakistan:as respects income-tax and super-tax, for any year of assessment, beginning on or after the first day of July, 1960.
ARTICLE XIX
The present Agreement shall continue in effect indefinitely but either of the Contracting Governments may, on or before the thirtieth day of June in any calendar year not earlier than the year 1963, give to the other Contracting Government written notice of termination and, in such event, the present Agreement shall cease to be effective-
(a) In the United Kingdom:
as respects income-tax (including sur-tax), for any year of assessment beginning on or after the sixth day of April in the calendar year next following that in which the notice is given;
as respects 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 sixth day of April in the calendar year next following that in which the notice is given;
(ii) other profits being profits by reference to which income-tax if not chargeable, but which arise in any chargeable accounting period beginning on or after the first 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 that date as falls after that date; and
(b) In Pakistan:
as respects income-tax and super-tax, for any year of assessment beginning on or after the first day of July in the calendar year next following that in which the notice is given.
IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed the present agreement.
DONE in duplicate at London this twenty-fourth day of April, one thousand nine hundred and sixty-one.
MOHAMMAD YOUSUF, Lt. General,For the Government of Pakistan SEWYN OYD,For the Government of United Kingdom.
MUHAMMAD HUSAIN,for Joint Secretary
C.N. 2(1)-TL/60.
Published in the Gazette of Pakistan, Extraordinary, Pages 20-25(I), dated 19-01-1962.

[Notification No. S.R.O. 1722(I)/73,dated the 11th December, 1973]

Whereas the operative Agreement for the Avoidance of Double Taxation with respect to Taxes on Income between Pakistan and the United Kingdom in its sub-clause (ii) to clause (b) of sub-Article (2) of Article XIV provides that the term "Pakistan tax payable" shall be deemed to include any amount which would have been payable as Pakistan tax for any year but for an exemption granted for that year or any part thereof under any provision or statutory rule which may be made after signing of the agreement to grant an exemption which is agreed to by the taxation authorities of the Contracting Governments to be substantially similar in character to exemptions mentioned in sub-clause (i) to clause (b) of sub-Article (2) to Article XIV, the taxation authorities of Pakistan and the United Kingdom have agreed that Notification No. S.R.O. 625 (I) dated Islamabad, the 10th August, 1972 is substantially similar in character to the Notification S.R.O. 17(R), dated 1st July, 1960 and would qualify for credit under Article XIV (2) (b) (ii) of the Agreement for the Avoidance of Double Taxation between Pakistan and the United Kingdom, mentioned above.

GOVERNMENT OF PAKISTANMINISTRY OF FINANCE AND ECONOMIC COORDINATION(Finance Division)NOTIFICATIONIslamabad, the 8th February, 1988
S.R.O. 87 (I)/88, dated 8th February, 1988.

WHEREAS the annexed Convention between the Government of the Islamic Republic of Pakistan and the Government of the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains 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 enter into force on the 8th day of December, 1987, and shall have effect in Pakistan for any assessment year beginning on or after the first day of July, 1988.
AnnexCONVENTION BETWEEN THE ISLAMIC REPUBLIC OF PAKISTAN AND THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS
The Government of the Islamic Republic of Pakistan and the United Kingdom of Great Britain and Northern Ireland;DESIRING to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains;HAVE AGREED as follows:
ARTICLE 1PERSONAL SCOPE
This Convention shall apply to persons who are residents of one or both of the Contracting States.
ARTICLE 2TAXES COVERED
(1) The taxes which are the subject of this Convention are:(a) in the United Kingdom of Great Britain and Northern Ireland:(i) the income tax;(ii) the corporation tax;(iii) the capital gains tax;(hereinafter referred to as "United Kingdom tax");(b) in the Islamic Republic of Pakistan:(i) the income tax;(ii) the super tax;(iii) the surcharge;(hereinafter referred to as "Pakistan tax").(2) This Convention shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Convention in addition to, or in place of, the taxes referred to in paragraph (1) of this Article. The competent authorities of the Contracting States shall notify each other of any substantial changes which are made in their respective taxation laws.
ARTICLE 3GENERAL DEFINITIONS
(1) For the purposes of this Convention, unless the context otherwise requires:(a) the term United Kingdom means Great Britain and Northern Ireland, including any area outside the territorial sea of the United Kingdom which in accordance with international law has been or may hereafter be designated, under the laws of the United Kingdom concerning the Continental Shelf, as an area within which the rights of the United Kingdom with respect to the sea-bed and sub-soft and their natural resources may be exercised;(b) the term "Pakistan" used in the 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 laws of Pakistan and international law is an area within Which the rights of Pakistan with respect to the sea-bed and sub-soil and their national resources may be exercised;(c) the term "national" means:(i) in relation to the United Kingdom, any British citizen or any British subject not possessing the citizenship of any other Commonwealth country or territory, provided he bas the right of abode in the United Kingdom; and any legal person, partnership, association or other entity deriving its status as such from the law in force in the United Kingdom;(ii) in relation to Pakistan, any individual possessing the nationality of Pakistan; and any legal person, Partnership or association deriving its status as such from the law in force in Pakistan;(d) the terms "a Contracting States" and "the other Contracting State" mean the United Kingdom or Pakistan, as the context requires;(e) the term "person" means an individual, a company and any other body of persons;(f) the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes;(g) 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;(h) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;(i) the term "competent authority" means, in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorised representative, and, in the case of Pakistan, the Central Board of Revenue or its authorised representative.(2) As regards the application of this 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 this Convention.
ARTICLE 4FISCAL DOMICILE
(1) For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax 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) of this Article an individual is a resident of both Contracting States, then 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 closer (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 no 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) of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.
ARTICLE 5PERMANENT ESTABLISHMENT
(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.(2) The term "permanent establishment,, includes especially;(a) a place of management:(b) a branch;(c) an office;(d) a factory,(e) a workshop;(f) a warehouse;(g) premises used for receiving or soliciting orders;(h) a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources.(3) A building site or construction or installation project constitutes a permanent establishment only if it lasts for more than six months.(4) Notwithstanding,, the preceding provisions of this Article, the term "permanent establishment shall be deemed not to include:(a) the use of facilities solely for the purpose of storage or display 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 or display;(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 of collecting information, for the enterprise;(e) the maintenance of a fixed place of business solely for the purpose of carrying on for the enterprise, any other activity of a preparatory or auxiliary character;(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.(5) Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a person - other than an agent of an independent status to whom paragraph (6) of this Article applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person:(a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph (4) of this Article which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or(b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.(6) 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, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.(7) 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 either company a permanent establishment of the other.
ARTICLE 6INCOME FROM IMMOVABLE PROPERTY
(1) Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.(2) The term "immovable property" shall have the meaning which it has under 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, livestock and equipment used in agriculture and forestry rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or 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 (1) of this Article shall apply to income derived from the direct use, letting, or use in any other form of immovable property.(4) The provisions of paragraphs (1) and (3) of this Article shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.
ARTICLE 7BUSINESS 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 the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable directly or indirectly to that permanent establishment.(2) 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 were 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 determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including a reasonable allocation of executive and general administrative expenses incurred for the purposes of the enterprise as a whole, whether in the Contracting State in which the permanent establishment is situated or elsewhere. However, no such deduction 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, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services Performed or for management, or except in the case of a banking enterprise, by way of interest on monies lent to the permanent establishment. Likewise, no account shall be taken in the determination of the profits of a permanent establishment of amounts charged (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, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise; by way of interest on monies lent to the head office of the enterprise or any of its other offices.(4) 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.(5) Where profits include items of income or capital gains 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.(6) In so far as it bas 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) of this Article 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 contained in this Article.(7) For the purposes 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.
ARTICLE 8SHIPPING AND AIR TRANSPORT
(1) Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.(2) If the place of effective management of a shipping enterprise is aboard* a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.* The word "abroad" has wrongly appeared as "abroad" in the Official Gazette.(3) The provisions of this Article shall also apply to profits derived from participation in a pool, a joint business or an international operating agency.
ARTICLE 9ASSOCIATED ENTERPRISES
WHERE(a) where 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 on the management, control or capital of an enterprise of a Contracting State and an 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 may be included by a Contracting State in the profits of that enterprise and taxed accordingly.
ARTICLE 10DIVIDENDS
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 also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but where the beneficial owner of the dividends is a resident of the other Contracting State the tax so charged shall not exceed:(a) 15% of the gross amount of the dividends, if the: beneficial owner is a company;(b) 20% of the gross amount of the dividends in all other cases.3. Notwithstanding the provisions of paragraph (2) of this Article, where the dividends are paid to a company which is a resident of the Untied Kingdom by a company which is a resident of Pakistan and which is engaged in an industrial undertaking in Pakistan, the Pakistan tax shall not exceed 10 per cent of the gross amount of the dividends if the company which is a resident of the United Kingdom:(a) controls more than 25 per cent of the voting power of the company paying the dividends and the industrial undertaking is set up in Pakistan after the date on which this Convention enters into force; or(b) controls more than 50 per cent of the voting power of the company paying the dividends in all other cases.(4) For the purposes of this Article:(a) the term "dividends" means income from 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 laws of the State of which the company making the distribution is a resident and also includes any other item which, under the laws of the Contracting State of which the company paying the dividend is a resident, is treated as a dividend or distribution of a company,(b) the term industrial undertaking" means:(i) an undertaking engaged in:(aa) the manufacture of goods or materials or the subjection of goods or materials to any process which results in substantially changing their original condition; or(bb) ship-building, or(cc) electricity, hydraulic power, gas or water supply, or(dd) mining including the working of an oil-well or the source of any mineral deposit; or(ii) any other undertaking which is declared by the competent authority in Pakistan to be an industrial undertaking for the purposes of Pakistan tax laws.5. The provisions of paragraphs 1, 2 and 3 of this Article shall not apply if the beneficial owner 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 establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 15 of this Convention, as the case may be shall apply.6. 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, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other state, nor 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 that other State.
ARTICLE 11INTEREST
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 also be taxed in the Contracting State in which it arises and according to the laws of that State, but where the beneficial owner of the interest is a resident of the other Contracting State the tax so charged shall not exceed 15 per cent of the gross amount of the interest.3. Notwithstanding the provisions of paragraph (2) of this Article interest arising in a Contracting State shall be exempt from tax in that State if it is derived and beneficially owned by the Government of the other Contracting State or a local authority thereof or, subject to the agreement of the competent authorities of the Contracting State, any agency or instrumentality of that Government or local authority.4. The term "interest" as used in this Article means income from debt-claims of very kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures. The term "interest" shall not include any item which is treated as a distribution under the provisions of Article 10 of this Convention.5. The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner 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 establishment situated therein, or performs in that other State independent personal services from a fixed based 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 case the provisions of Article 7 or Article 15, of this Convention 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, 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 or a fixed base in connection with which the indebtedness on which the interest is paid was incurred and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, paid exceeds for whatever reason the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount of interest. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.
ARTICLE 12ROYALTIES
(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 also be taxed in the Contracting State in which they arise and according to the laws of that State, but where the beneficial owner of the royalties is a resident of the other Contracting State the tax so charged shall not exceed 12-1/2 per cent of the gross amount of the royalties.(3) The term "royalties" as used in this Article means payments of any kind received as a 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, plan, secret formula or process, or for the use oil or the right to use, industrial, commercial, or scientific equipment, or for information (know-how) concerning industrial, commercial or scientific experience.(4) The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or Performs in that other State independent personal seal, ices from a fixed base situated therein and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base In such cases the provisions of Article 7 or 15 of this Convention, 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, 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 or a fixed base in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.(6) Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties paid exceeds, for whatever reason, the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.
ARTICLE 13TECHNICAL FEES
1. Technical fees arising in a Contracting State which are derived by a resident of the other Contracting State may be taxed in that other State.2. However, such technical fees may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but where the beneficial owner of such technical fees is a resident of the other Contracting State the tax so charged shall not exceed 12-1/2 per cent of the gross amount of the technical fees.3. The term "technical fees" as used in this article means payments of any kind to any person, other than to an employee of the person making the payments in consideration for any services of a technical, managerial or consultancy nature.4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the technical fees, being resident of a Contracting State, carries on business in the other Contracting State in which the technical fees arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein and the technical fees are effectively connected with such permanent establishment or fixed base. In such ease, the provisions of Article 7 or Article 15, as the case may be, shall apply.5. Technical fees shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the technical fees, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay technical fees was incurred, and such technical fees are borne by that permanent establishment or fixed base, then such technical fees shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the technical fees paid exceeds, for whatever reason, the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this article shall apply to the last-mentioned amount. In such ease, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.
ARTICLE 14CAPITAL GAINS
1. Subject to the provisions of paragraph (2) of this Article, capital gains which arise in a Contracting State may be taxed by that State in accordance with the provisions of its domestic law.2. Gains from the alienation of ships or aircraft operated in international traffic and any property, other than immovable property, pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
ARTICLE 15INDEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Article 13, income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State, except in the following circumstances when such income may also be taxed in the other Contracting State:(a) if he has 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 that other Contracting State: or(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in the fiscal year concerned in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.2. The term "professional services" includes especially independent scientific, literary and artistic educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.
ARTICLE 16DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 17, 19, 20, 21 and 22, 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 so exercised, such remuneration as is derived therefrom may be taxed in that other State.2. Notwithstanding the provisions of paragraph 1, of this Article 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 any period of 12 months; 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 derived in respect of an employment exercised aboard* a ship or aircraft operated in international tragic may be taxed the Contracting State in which the place of effective management of the enterprise is situated.* The word "abroad" has wrongly appeared as "abroad" in the Official Gazette.
ARTICLE 17DIRECTORS' FEES
Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.
ARTICLE 18ARTISTS AND ATHLETES
1. Notwithstanding the provisions of articles 15 and 16 of this Convention, income derived by a resident of a Contracting State as an entertainer such as a theatre, motion picture, radio or television artist or a musician or as an athlete, from his personal activities as such exercised in the other Contracting State may be taxed in that other State.2. Where income in respect of personal activities exercised by an entertainer oran athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of articles 7, 15 and 16, of this Convention, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.
ARTICLE 19PENSIONS
(1) Subject to the provisions of paragraph (2) of Article 20, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State and any annuity paid to such a resident shall be taxable only in that State.(2) The term "annuity" means a stated sum payable periodically at stared times, during life or during a specified or ascertainable period of time under any obligation to make the payments in return for adequate and full consideration in money or money's worth.
ARTICLE 20GOVERNMENT SERVICE
1. (a) Remuneration, other than a pension. paid by a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that state or sub-division or authority 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 other Contracting state and the individual is a resident of that other State who:(i) is a national of that State; or(ii) did not become a resident of that State solely for the purpose of rendering the services.2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that State or sub-division or authority thereof shall be taxable only in that State.(b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident and a national of, that state.3. The provisions of Articles 16, 17, and 19 of this Convention shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division or a local authority thereof.
ARTICLE 21STUDENTS AND TRAINEES
1. An individual who was a resident of a Contracting State or was a resident of that State immediately before making a visit to the other Contracting State and who is temporarily present in that other State for the primary purpose of:(a) studying at a university or other recognised educational institution in that other Contracting State; or(b) securing training required to qualify him to practise a profession or a professional speciality;(c) studying or doing research as a recipient of a grant, allowance or award from a governmental, religious, char/table, scientific, literary or educational organisation;shall not be subject to tax by that other Contracting State with respect to:(i) the amount of such grant, allowance or award:(ii) remittances from abroad for the purposes of his maintenance, education, study, research or training; and(iii) income from personal services rendered in that other Contracting State (other than any rendered by an articled clerk or other person undergoing professional training to the person or partnership to whom he is articled or who is providing the training) not exceeding the sum of 750 pounds sterling, or its equivalent in Pakistan rupees as the case may be, during any year of assessment or taxable year.2. The benefits under paragraph (1) of this Article shall apply only for such period of tithe as may be reasonably or customarily required for the purpose of the individual's visit, but in no event shall any individual have the benefit of that paragraph for more than five years from the date of his first arrival in the other Contracting State.3. An individual who was a resident of a Contracting State or was a resident of that State immediately before making a visit to the other Contracting State and who is present in that other State for a period not exceeding twelve months from the date of his first arrival in that other Contracting State in connection with that visit, as a Participant in a programme sponsored by the Government of that other Contracting State for the purposes of training, research or study, or as an employee of or under contract with the Government or an enterprise of the first-mentioned Contracting State for the purpose of acquiring technical, professional or business experience from a person other than that Government or that enterprise, shall not be subject to tax by that other Contracting State with respect to:(a) all remittances from abroad for purposes of his maintenance, training, research or study; and(b) any remuneration so far as it does not exceed the sum of 1,500 pounds sterling, or its equivalent in Pakistan rupees as the case may be, during any year of assessment or taxable year for personal services in that other Contracting State in connection with his studies or training.
ARTICLE 22TEACHERS
(1) An individual who visits one of the Contracting States for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college or other recognised educational institution in that Contracting State, and who was immediately before that visit a resident of the other Contracting State, shall be exempted from tax by the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for such purpose.(2) This Article shall not apply to income from research unless such research is undertaken by the individual in the public interest and not primarily for the benefit of some other private person or persons.
ARTICLE 23ELIMINATION OF DOUBLE TAXATION
(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax or tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):(a) Pakistan tax payable under the laws of Pakistan and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Pakistan (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed .by reference to the same profits, income or chargeable gains by reference to which the Pakistan tax is computed;(b) in the case of a dividend paid by a company which is a resident of Pakistan to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying dividend, the credit shall take into account (in addition to any Pakistan tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Pakistan tax payable by the company in respect of the profits out of which such dividend is paid.(2) In Pakistan double taxation shall be eliminated as follows:subject to the provisions of the laws of Pakistan regarding the allowance as a credit against Pakistan tax, the amount of United Kingdom tax payable under the laws of the United Kingdom and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of Pakistan, in respect of income from sources within the United Kingdom which has been subjected to a tax both in Pakistan and the United Kingdom shall be allowed as credit against the Pakistan tax payable in respect of such income 'but in an amount not exceeding that proportion of Pakistan tax which such income bears to the entire income chargeable to Pakistan tax(3) For the purpose of paragraph (1) of this Article, the term "Pakistan tax payable" shall be deemed to include any amount which would have been payable as Pakistan tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under any of the following provisions of Pakistan law:(a) section 48 of the Income Tax Ordinance, 1979 (XXXI of 1979), (as amended), Clauses 7,8, 75, 76, 80(c) and (cc), 81, 95B, 96, 98, 99, 100, 101, 102, 119, 120, 121, 121A, 12lB, 122, 122A, 123, 124, 125 and 125A of Part I and Clause i of Part II of the Second Schedule to that Ordinance; so far as they were in force on, and have not been modified since the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or(b) any other provision which may subsequently be made granting an exemption from; or reduction of, tax which is agreed by the competent authorities of the Contracting State to be of a substantially' similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character: Provided that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from any source if the income arises in a period starting more than ten years after the exemption from, or reduction of, Pakistan tax was first granted in respect of that source.(4) For the purposes of paragraphs (1) and (2) of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State.(5) Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other State and the profits so included are profits which would have accrued to that enterprise of the other State if the conditions made between the enterprises had been those which would have been made between independent enterprises dealing at arm's length, the amount included in the profits of both enterprises shall be treated for the purposes of this Article as income from a source in the other State of the enterprise of the first-mentioned State and relief shall be given accordingly under the provisions of paragraph (1) of paragraph (2) or this Article.
ARTICLE 24NON-DISCRIMINATION
(1) 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) Except where the provisions of Article 9, paragraph (7) of Article 11, paragraph (6) of Article 12, or paragraph (6) of Article 13, of this Convention apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.(4) Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned 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 the first-mentioned State are or may be subjected.(5) Nothing contained in this Article shall be construed:(a) as obliging either Contracting State to grant to individuals not resident in that State any of the personal allowances, reliefs and reductions for tax purposes which are granted to individuals so resident; or(b) as affecting the provisions of the Pakistan law providing for a higher allowance or rebate of super-tax to those companies which make the prescribed arrangement for the declaration and payment of dividends.(6) In this Article the term "taxation" means taxes to which this Convention applies.
ARTICLE 25MUTUAL 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 or accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is resident.(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 a satisfactory solution, to resolve the case by mutual agreement with competent authority of the other Contracting State, with a view to avoidance of taxation not in accordance with the Convention.(3) The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention.(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.
ARTICLE 26EXCHANGE OF INFORMATION
(1) The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or for the prevention of fraud or the administration of statutory provisions against legal avoidance in relation to the taxes covered by this Convention, insofar as the taxation thereunder is not contrary to this Convention. Any information received by a contracting State shall be treated as secret and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which covered by this Convention. Such persons or authorities shall use the information only for such purposes they may disclose the information in public court proceedings or in judicial decision.(2) In no case shall the provisions of paragraph (1) of this Article be construed so as to impose on the competent authorities of either Contracting State the obligation:(a) to carry out administrative measures at variance with the laws and administrative practice prevailing in either Contracting State;(b) to supply information which is not obtainable under the laws or in the normal course of the administration of either Contracting State;(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (order public).
ARTICLE 27MEMBERS OF DIPLOMATIC OR PERMANENT MISSIONS AND CONSULAR POSTS
(1) Nothing in this Convention shall affect any fiscal privileges accorded to members of diplomatic or permanent missions or consular posts under the general rules of international. law, or under the provisions of special agreements.(2) Notwithstanding the provisions of paragraph (1) of Article 4 of this Convention, an individual who is member of a diplomatic or permanent mission or consular posts of a Contracting State or of any third State which is situated in the other Contracting State or who is an official of an international organisation, and any member of the family of such an individual, shall not be deemed to be a resident of the other State if he is subject to tax on income or capital gains in that other State only if he derives income or capital gains from sources therein.
ARTICLE 28ENTRY INTO FORCE
(1) Each of the Contracting State shall notify to the other the completion of the Procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect:(a) in relation to payments referred to in Article 13 of this Convention to amounts paid on or after 1st July, 1985;(b) in relation to all other provisions of this Convention:(i) in the United Kingdom:(aa) in respect of income tax and capital gains tax, any year of assessment beginning on or after 6 April in the calendar year next following that in which the Convention enters into force;(bb) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the Convention enters into force;(ii) in Pakistan;for any year of assessment beginning on or after 1st July in the calendar year next following that in which the Convention enters into force.(2) Subject to the provisions of paragraph (3) of this Article, the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Pakistan for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income signed at London on 24th April, 1961 (hereinafter referred to as "the 1961 Agreement") shall terminate and cease to be effective from the date upon which this Convention has effect in respect of the taxes to which this Convention applies in accordance with theprovisions of paragraph (1) of this Article.(3) Where any provision of the 1961 Agreement would have afforded any greater relief from tax than is due under this Convention, any such provision as aforesaid shall continue to have effect:(a) in the United Kingdom, for any year of assessment of financial year; and(b) in Pakistan, for any year of assessment; beginning, in either case, before the entry into force of this Convention.
ARTICLE 29TERMINATION
This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year after the year 1992. In such event, the Convention shall cease to have effect:(a) in the United Kingdom:(i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;(ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given;(b) in Pakistan, for any year of assessment beginning on or after 1st July in the calendar year next following that in which the notice is given.IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Convention.DONE in duplicate at Islamabad this 24th day of November, 1986.
for the Government of the Islamic Republic of Pakistan
for the Government of the United Kingdom of Great Britain and Northern Ireland.

AHADULLAH AKMAL, Additional Secretary[C. No. 2960IT/66.]Published in the Gazette of Pakistan, Extraordinary, Pages 125-145 (II), dated 10-02-1988.