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  • Mar 17th, 2017
  • Comments Off on Dual taxation treaty: Swiss team due next month to ink revised convention
A delegation of tax authorities from Switzerland is expected to come to Pakistan by mid-April to ink the revised convention on 'avoidance of double taxation' between Pakistan and Switzerland with particular focus on exchange of information regarding bank accounts.

The finance minister Ishaq Dar had already given a statement on the floor of National Assembly that Pakistan was going to sign an agreement with Switzerland on March 21 on exchange of information about bank accounts.

According to Dar, Federal Board of Revenue (FBR) held several meetings with the Swiss authorities and now they have invited Pakistan to sign the agreement, adding it will be new exchange of information which is globally acceptable, he added.

In a new development, Pakistani delegation would not visit Switzerland. However, a Swiss delegation is likely to visit Pakistan for exchange on the said convention in mid-April.

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.

The Article 26 of the OECD model could help access bank accounts of citizens and their assets, but the information received or exchanged will be treated as secret and can only be disclosed to persons or authorities including courts and administrative bodies like tax department for assessment purposes.

The FBR wanted 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. 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.

Pakistan has already signed the Multilateral Convention on Tax Matters with Organisation for Economic Cooperation and Development (OECD) on September 14, 2016 which is going to be operationalised next year. Pakistan is the 104th member of the organisation. He said that 90 countries have agreed to operationalise it next year. He said these countries indicated on June 7, 2016 that those countries including Pakistan, whose system is compatible, are ready to start the spontaneous exchange of information. They decided to start operational system from next year.

After the operationalisation of this convention, it will be impossible to keep tax evaded money in these countries. Pakistan would take benefit from the exchange of information. After this agreement Pakistan would become a member of a global forum on exchange of tax information of offshore accounts and investments.

This membership will enable Pakistan to receive and send information on tax data under automatic exchange as well as to fight tax fraud and evasion at the international level. This may help retrieve important bank accounts, dividends, and interest and asset ownership information from all signatories to the convention.

Copyright Business Recorder, 2017


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