(1) Where a resident taxpayer, or a Pakistani national residing abroad is aggrieved by any action of the tax authorities of any country outside Pakistan with which Pakistan has signed an Agreement for the Avoidance of Double Taxation for the reason that, according to him, such action is not in accordance with the terms of the agreement with such other country outside Pakistan, he may make an application to the Competent Authority in Pakistan seeking to invoke the provision of the Mutual Agreement Procedure, if any, provided therein, in the Form prescribed in rule 19F.
(2) The Competent Authority of Pakistan upon satisfaction that,-
(a) the taxpayer has reasonable grounds to justify Competent Authority "assistance;
(b) the application has been made within two years from the date of notification of the cause of grievance; and
(c) the double taxation or other impending grievance is more than a mere possibility;
shall cause to take up the matter with the Competent Authority of the country concerned and endeavor to resolve the matter through consultative measures.
(3) In case the Competent Authority in Pakistan decides not to intervene in the matter, it will inform the taxpayer applicant within thirty days of the receipt of the application, of its decision and grounds thereof inwriting.
(4) If during the course of mutual agreement proceedings, the Competent Authority of the other country requires any clarification, verification of facts, or guarantees, that shall be communicated to the applicant taxpayer, and after the receipt of the same shall be passed on to the Competent Authority of the other country.
(5) At any time, if the terms and conditions of the impending resolution are not satisfactory to the taxpayer, he may withdraw from the MAP proceedings and pursue any right of appeal under the normal course available.
(6) The Competent Authority of Pakistan would communicate the outcome of the Mutual Agreement Proceedings taken up with the other country to the applicant taxpayer in writing.
(1) Where a reference is received from the Competent Authority of a country outside Pakistan under an agreement with that country with regard to any action taken by any income-tax authority in Pakistan, the Competent Authority in Pakistan shall call for a report from the Commissioner concerned and, if required, examine the relevant records, and shall endeavour to arrive at a resolution of the case on unilateral basis in terms of the liberal interpretation of the legal provisions applicable.
(2) The Competent Authority of Pakistan shall entertain all such requests from the Competent Authority of a treaty partner country that are about but not limited to–
(a) tax demands that have arisen or are likely to arise as a result of a tax audit, assessment or re-assessment proceedings, or a tax appeal, or a review by a Commissioner of Income Tax of an assessment or re-assessment proceedings on the grounds that it is prejudicial to the interest of the revenue;
(b) Withholding tax on income or other similar advance taxes that are levied under the Ordinance; and.
(c) interpretation and application of any provision of the laws governing the taxes covered in the relevant treaty as applicable to the non-resident person.
(3) The Competent Authority of Pakistan may decline a MAP request made by the Competent Authority of a treaty partner country, if it is not received within two years from the date of notification of the order or notice giving rise to the cause of grievance.
(4) In case the Competent Authority of Pakistan cannot resolve the matter on unilateral basis, it would cause to communicate with the Competent Authority of the other country, and both authorities would endeavor to resolve the matter through a consultative process, and arrive at a mutually agreed settlement.
(5) If during the course of the mutual agreement proceedings, the Competent Authority of Pakistan requires any clarification, verification of facts, or an irrevocable bank guarantee, the same shall be communicated to the applicant taxpayer, under intimation to the Competent Authority of the country through which the reference for mutual agreement proceedings was received.
(6) Wherever required the Competent Authority of Pakistan shall give an opportunity of being heard to the applicant taxpayer in person, through an authorized representative or a counsel.
(7) The resolution arrived at under mutual agreement procedure, in consultation with the competent authority of the country outside Pakistan, shall be communicated, wherever necessary, to the Commissioner concerned, inwriting.
(8) During the pendency of the Mutual Agreement proceedings the Competent Authority of Pakistan may, depending on the merits of each case, direct the Commissioner concerned to put on hold the recovery proceedings of any amount of tax, additional tax or penalty that may be outstanding against such taxpayer, if the taxpayer furnishes, as security, an irrevocable Bank Guarantee issued by any scheduled bank, or a Pakistani branch of a foreign bank approved by the State Bank of Pakistan to carry out business of banking in Pakistan as prescribed in rule 19G.
(9) The amount of the irrevocable Bank Guarantee shall be equal to–
(a) the amount of tax, additional tax or penalty as has been imposed through the order or notice that is the subject matter of MAP proceedings; or
(b) if no amount has yet been imposed through an order or notice, the amount determined by the Commissioner concerned.
(10) The Competent Authority of Pakistan shall endeavor to resolve or close the case within a period of one year from the date on which it receives the reference under the Mutual Agreement Procedure provision as contained in the Agreement for Avoidance of Double Taxation between Pakistan and that other state.
(11) The effect to the resolution arrived at under Mutual Agreement Procedure shall be given by the Commissioner, notwithstanding any time limitations contained in the Ordinance, within thirty days of receipt of the same, if the taxpayer-
(a) gives his acceptance to the resolution delivered under the Mutual Agreement Procedure; and
(b) withdraws his appeal, if any, pending on the issue which was the subject matter for adjudication under Mutual Agreement Procedure.
(12) The amount of tax, additional tax or penalty already determined shall be recomputed in accordance with the decision taken under the Mutual Agreement Procedure in the manner laid down in the Ordinance and the rules in such a way it does not contravene or negate the resolution arrived at.
(13) The Commissioner concerned shall draw-down upon the Bank Guarantee as specified in sub- rule (8) in writing within ten days from the notice of acceptance of MAP resolution given by the application in pursuance to the issuance of the resolution or notification of closure of the MAP proceedings by the Competent Authority of Pakistan.
Application under rule 19A shall be submitted on the form prescribed as under:
To
The Competent Authority of Pakistan, Federal Board of Revenue,
Constitution Avenue,
Islamabad.
Whereas the applicant is aggrieved by the action of the tax authority of __________________________________________________(name of the country) in respect of the tax year ending on __________________________ for the reasons given hereunder, the matter may kindly be taken up with the competent authority of _________________________________________
(name of the country) under Article_________________________________________________ of the
______________________________________________________________ (specify the agreement between Pakistan and country). The relevant details in this regard are as under:-
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Name of the applicant |
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Present and permanent address in Pakistan |
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Residential status or nationality |
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CNIC and NTN |
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Entitlement to invoke MAP Proceedings (Residence or Nationality) |
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Telephone No. |
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Name and designation of Tax Authority in the foreign country (Treaty Partner) |
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Date of the notice or order giving rise to the action |
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Is the order or action of the income-tax authority of the country outside Pakistan not in accordance with the agreement? If so, the reasons thereof (attach separate sheet if required). |
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Have you filed any appeal in the foreign country against the order or notice giving rise to the cause of grievance? |
Copies of the following documents in support of our claim are enclosed, namely:-
(1) Order or Notice giving rise to the cause of grievance
(2) Computerized National Identity Card
(3) ………….
I. son/ daughter/ wife of Mr. solemnly declare that to the best of my knowledge and belief, the information given in this application and the annexures and statements accompanying it is correct.
2. I also declare that to the best of my knowledge, I have not concealed any fact or information which could be relevant for deciding my application.
3. I further declare that I am making this application in my capacity as (designation) and that I am competent to make this application and verify it.
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Signatures: |
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An irrevocable Bank Guarantee shall be furnished in all cases, unless specifically exempted by the Competent Authority of Pakistan, on the format as prescribed as under:
To,
The President of Pakistan acting through and represented
by the Commissioner “Inland Revenue”,
INSERT: LTU/RTO
Government of Pakistan INSERT: City
Bank Guarantee as security for keeping the recovery of Tax Demand in abeyance during the pendency of the proceedings of Mutual Agreement Procedure (MAP) under the Agreement for Avoidance of Double Taxation.
This Deed of Bank Guarantee made this day of , 20, by INSERT: Name and Address of Guaranteeing Bank (hereinafter called "the Bank", which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) to the President of Pakistan acting through and represented by the Commissioner INSERT: LTU/RTO, Government of Pakistan, INSERT: City, (hereinafter called "the Government")
WHEREAS the Government has agreed that [INSERT: Name, Address, and National Tax Number of the Taxpayer] (hereinafter called "the Taxpayer", which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) shall furnish a Bank Guarantee in respect of a demand of Rs.[INSERT: Amount of Tax in dispute] for the tax year(s)..., in lieu of which the recovery of any part of such demand shall not be enforced until thirty days after the Commissioner receives written notice of the MAP Agreement arrived at between the Competent Authorities of the Governments of Pakistan and the [INSERT: Name of the Country]
AND WHEREAS THE Bank has, at the request of the Taxpayer, agreed to execute these presents:
NOW THEREFORE THIS DEED WITNESSES AS FOLLOWS:
In consideration of the Government agreeing to treat the Taxpayer as not in default for Rs. INSERT: Amount of Tax in dispute, plus interest specified in paragraph 1 below for the tax year(s),
1. The Bank irrevocably guarantees and undertakes, for the term provided in paragraph 2 that the Bank shall indemnify and keep indemnified the Government to the extent of the said sum of Rs. INSERT: Amount of Tax in dispute (Rupees [written text] and the recurring additional tax accruing at the rate specified in the Ordinance. The Bank further guarantees and undertakes that on advice from the Government that the Taxpayer has failed and neglected to observe any of its obligations to the Government with regard to the terms and conditions of any agreements between the Taxpayer and the Government or between the Competent Authority of Pakistan and that of the country on whose request MAP proceedings were initiated that may underlie or subsequently cover and encompass this Bank Guarantee, the decision of the Government as to whether any amount should be paid out by the Bank to the Government hereunder shall be final and binding.
2. The Bank further agrees that the guarantee herein contained shall remain in full force and effect for a period of one year from the date hereof or till [INSERT: date]; and if the
Government, in case the MAP proceedings are not finalized till the aforementioned date, does not receive a renewal of this Bank Guarantee or a substitute Bank Guarantee for the amounts of tax and interest in dispute prior to thirty days before the expiration date of this Bank Guarantee, the Government may instruct the Bank to pay the guaranteed amounts prior to expiration of the Bank Guarantee.
Provided that, notwithstanding any other thing contained herein, the liabilities of the Bank shall be limited to the maximum of the guaranteed amount of Rs.[INSERT: Amount of tax in dispute] (Rupees INSERT: written text), as increased by interest pursuant to paragraph 1 during the term of this Bank Guarantee; and unless a claim in writing is lodged with the Bank, or action to enforce the claim under the guarantee is filed or initiated against the Bank, within six months from the date of expiry of the guarantee period fixed hereunder or where such period is extended under the terms of this guarantee from the date of such extended period as the case may be, all the rights of the Government under this guarantee shall be forfeited and the Bank shall be relieved and discharged from liabilities here under.
3. The obligations of the Bank to the Government under this Bank Guarantee will terminate on issuance of the Notification by the Commissioner drawing down upon the bank guarantee upon the occurrence of any of the following; namely:-
(i) the payment by the Bank or the Taxpayer to the Government of the guaranteed amounts;
(ii) the payment by the taxpayer to the government of all amounts owed, as agreed to by the Competent Authorities in a MAP Agreement;
(iii) a MAP Agreement by the Competent Authorities proclaiming that the government will not seek to recover any part of the previously-demanded amount; or
(iv) the taxpayer furnishes to the Government afresh security from the Bank, or a similar security from another Bank.
4. The guarantee herein contained shall not be discharged or affected by any change in the constitution either of the taxpayer or of the Bank.
5. The Government shall have the fullest liberty without affecting the guarantee to postpone foranytime,orfromtimetotime,anyofthepowersexercisablebyitagainstthetaxpayer, or to either enforce or forbear any of the terms and conditions under this guarantee or under the Ordinance and the rules, and the Bank shall not be released from its liabilities under this guarantee by any exercise by the government of the liberty with reference to the matter aforesaid or by reasons of time being given to the taxpayer, or by any other act of forbearance or enforcement on the part of the Government, or by any indulgence bythe Government to the taxpayer, or by any other matter or thing whatsoever which under the law relating to sureties would but for these provision have the effect of so releasing the Bank from its suchliability.
6. The Bank hereby agrees and undertakes that any claim which the Bank may have against thetaxpayershallbesubjectandsubordinatetothepriorpaymentandperformanceinfull of all the obligations of the Bank hereunder and the Bank will not without prior written consent of the Government exercise any legal rights or remedies of any kind in respect of any such payment or performance so long as the obligations of the Bank hereunder remain owing and outstanding, regardless of the insolvency, liquidation or bankruptcy of the taxpayer or otherwise howsoever. The Bank will not counter claim or set off against its liabilities to the Government hereunder any sum outstanding to the credit of the Government with it.
7. This Bank Guarantee shall be governed by and construed in accordance with the laws of the Islamic Republic of Pakistan (without regard to its principles of conflict of laws).
8. The Bank undertakes not to revoke this guarantee during its currency except with the prior consent of the Government inwriting.
9. Notwithstanding anything hereinbefore contained liability of the Bank under this guarantee is restricted to Rs.[INSERT: Amount of Tax in dispute, plus interest specified in paragraph 1 above] (Rupees [written text]) and is valid for the period(s) described in paragraph 2 above. Unless a demand or claim under this guarantee is lodged with the Bank on or before INSERT: date, as established in paragraph 2 above], all rights of the Government under the said guarantee shall be forfeited and the Bank shall be relieved and discharged from all liabilities there under whether or not this document shall have been returned to the Bank.
IN WITNESS WHEREOF, the Bank, through its duly authorized representative, has set its hand stamp on this …………… day of …………… at………………
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For and on behalf of the Bank |
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Designation |
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Witness |
[Attorney per power of Attorney No. |
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Signature |
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……………..Date………………….] |
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