The Federal Board of Revenue (FBR) will develop a model for the Avoidance of Double Taxation agreements to cater to the specifics of Pakistan’s economy and taxation system.
According to the IRS Strategic Plan (2022-23), the FBR will conduct a review of all the Double Taxation agreements to identify any significant tax loss, lop-sided arrangements, treaty shopping potential, and adjustments required in view of changing circumstances.
The model tax treaty will not be a one-size-fits-all; rather, it will provide the preferred option in case of negotiations with countries having different types of economic policies, as well as the nature of economic integration with Pakistan. The agreements where changes are required may be renegotiated.
In this connection, the FBR will enhance the capacity to optimally design international agreements. The training and other actions will be taken to build capacity to better protect the interests of revenues in multilateral agreements for cooperation and the exchange of information.
The Avoidance of Double Taxation agreements are renegotiated periodically, and capacity building and specialization are required to protect the revenue interests and to take maximum advantage of opportunities. Under the plan, expertise will be developed for multilateral negotiations and designing corresponding domestic legislation.
Increasing international transactions are a growing dimension of business transactions. Taxing these transactions can be complex and international efforts are required to ensure tax is paid in the relevant jurisdictions. Building on developments in international tax risks and mitigating such risks requires a clear focus on the legislative framework for international transactions.
The FBR will also strengthen legislation on the taxation of international transactions. To protect revenue in cases involving transfer pricing, base erosion, and profit shifting through transactions across borders, the legislative regime will be strengthened by bringing legislation in accordance with international best standards, the IRS Strategic Plan added.