Dual taxation treaty: FBR officials in Switzerland to re-negotiate convention

The senior tax officials of the Federal Board of Revenue (FBR) have reached Switzerland to re-negotiate the convention on avoidance of double taxation between Pakistan and Switzerland with particular focus on exchange of information related to clauses of the existing convention. Sources told Business Recorder here on Saturday that FBR Chief Income Tax officers Malik Amjad Zubair Tiwana and Muhammad Iqbal Chief (International Taxes) FBR are representing the Pakistani side.
The second round of negotiations between Pakistan and Switzerland would focus on OECD model on exchange of information and tax rates on interest, royalty, dividend income. The FBR intends to restore rates of 10 percent rate on interest, royalty, dividend income etc under the said convention.
During the first round of talks, Swiss officials visited Pakistan to discuss these issues. Now, the second round of talks has been held at Switzerland. Both Zubair Tiwana and Muhammad Iqbal have ample experience in drafting of tax laws, meetings with international organisations and revision of the conventions on avoidance of double taxation with different countries. Tax authorities are expecting some breakthrough in the said meetings with Swiss authorities, sources added.
The FBR wants to re-negotiate and upgrade treaty on Avoidance of Double Taxation with Switzerland to tax undeclared money held in the Swiss bank accounts by the Pakistani nationals. In the past, the Cabinet had given its approval for renegotiating Pakistan-Switzerland Avoidance of Double Taxation Agreement (DTA). The existing Pakistan-Switzerland DTA will be re-negotiated and upgraded in line with the latest trends in all important areas of international co-operation.
The proposed Article 26 (exchange of information) of the convention on Avoidance of Double Taxation, being renegotiated between Pakistan and Switzerland, would bound the Swiss tax authorities to exchange all requested information, including confidential bank account information of Pakistanis maintaining Swiss accounts. Pakistan and Switzerland signed Convention on Avoidance of Double Taxation in 2005 which was enforced in 2008.
This agreement contained old version of Article 26 on Exchange of Information. In 2010, Switzerland agreed to adopt latest version of Article 26 of the OECD Model Tax Convection in its Agreements on Avoidance of Double Taxation with other countries. In this backdrop, Federal Board of Revenue (FBR) moved Summary to the Federal Cabinet seeking permission under Rule 16(I)(h) of the Rules of Business, 1973 to upgrade and renegotiate the existing Pak-Swiss treaty with special reference to Article 26 on Exchange of Information. The Cabinet accorded approval to renegotiate Pakistan Switzerland Avoidance of Double Taxation Agreement. Accordingly, in August 2014, Convention on Avoidance of Double Taxation was renegotiated, highlight of which was replacement of archaic formulation of Article 26 with a new one reflecting internationally accepted standard on "Exchange of Information" backed by both OECD and UN.
The new Article, upon formal signing of the ADTA will oblige the Swiss Authorities to exchange all requested information, including heretofore confidential bank account information. Information requested under new Article cannot be refused or declined on the mere pretext that the same is not of any use for their domestic taxation and is held by any other authority and not available with the tax authorities. However, the said Article provides for Exchange of Information upon request and does not support automatic exchange of information. The renegotiated Pak-Swiss Treaty is still under the process of review in respect of certain articles of the Convention. Pakistan has joined Global Forum as its 111th Member in 2013.