Avoidance of double taxation: FBR to implement Pak-Swiss convention from July 1

The Federal Board of Revenue would implement convention on the avoidance of double taxation between Pakistan and Switzerland from July 1, 2009 for promotion of economic co-operation and investment between the two states. In this regard, the FBR has issued an SRO.1290(I)/2008 here on Friday.
According to the notification, the convention between Pakistan and Switzerland for the previous avoidance of double taxation with respect to taxes on income will terminate upon enforcement of new convention. Pakistan and the Swiss Confederation had signed a treaty for avoidance of double taxation previously payable on the income of residents and businessmen of the countries.
As per revised convention, in case of companies having 20 percent share, dividend will be taxed at 10 percent, and all other cases will be taxed at 20 percent in the source country. Similarly, interest income may also be taxed in the contracting state in which it arises at 10 percent of the gross amount.
The convention further stipulates royalty in the source country to be taxed at 10 percent; fee for technical services to be taxable at 10 percent in the source country; and grant of exemption to students on remuneration from the employment which does not exceed 18,000 Swiss francs or the equivalent thereof in Pakistan currency at the official exchange rate.
The convention will also provide adequate certainty in respect of taxation rules applicable to cross border business transactions, dividends, interests, royalties and fee for technical services, etc. Taxpayers of both the countries will get relief from double taxation resulting in boosting up the trading activities.
The competent authorities of Pakistan/Switzerland will exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as it is necessary for carrying out the provisions of this Convention in relation to taxes. Any information so exchanged will be treated as secret and will not be disclosed to any persons other than those concerned with the assessment and collection of taxes. No information as aforesaid will be exchanged which would disclose any trade, business, industrial or professional secret or trade process.
Sources said that there is no provision in the avoidance of double taxation convention between Pakistan and Switzerland to provide information on 'fiscal evasion' to respective authorities.