Pak-India dual-taxation convention draft: FBR awaits NoC from foreign ministry

The Federal Board of Revenue is eagerly awaiting the No-Objection-Certificate (NOC) from the Ministry of Foreign Affairs for clearance of the initial draft pertaining to the comprehensive avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between Pakistan and India.
Sources told Business Recorder here on Friday that Ministry of Commerce has given clearance for the proposed convention whereas the response of Ministry of Foreign Affairs has not been received by the FBR. Without the NOC from the Ministry of Foreign Affairs, the FBR is not in a position to move a summary to the Economic Co-ordination Committee of the Cabinet for approval of the draft of the said convention between Pakistan and India.
Around 9-10 months back, the FBR had sought comments from the Ministry of Foreign Affairs and Ministry of Commerce on the initial draft of the comprehensive avoidance of double taxation between Pakistan and India. Commerce Ministry has given its concurrence on the new agreement, but so far Ministry of Foreign Affairs has not given any comments despite several reminders by the FBR.
At present Pakistan had inked a limited purpose treaty with India on the avoidance of double taxation of income derived from international air transport. This agreement was signed on December 31, 1988 and enforced from August 1, 1989. At that time, S K Singh the then Ambassador of India to Pakistan had inked the said convention on the behalf of the Indian Government.
The limited purpose treaty only deals with the exemption of tax on the profits derived by an enterprise of Pakistan or India from the operation of aircrafts in international traffic. Following the grant of Most Favored Nation (MFN) status to India, trade between both countries is expected to increase in future which requires a comprehensive agreement on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between Pakistan and India.
Sources added that an exercise has been started to draft a comprehensive convention on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between Pakistan and India. As per Article-3 of the Avoidance of Double Taxation agreement between Pakistan and India, profits derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be exempt from tax in the other State.
Under the existing agreement for the avoidance of double taxation of income derived from international air transport, in case a comprehensive agreement for the avoidance of double taxation with respect to taxes on income, including inter alia income derived from International Air Transport is concluded between the Contracting States, this Agreement (limited treaty) shall cease to have effect from the date on which such comprehensive agreement enters into force.