Pakistan - Norway Tax Treaty
St.prp. nr. 51 1986—87
Overenskomst mellom Kongeriket Norge 0g den Islamske Republikken Pakistan til unngéelse av dobbelbeskatning 0g forebyggelse av skatteunndragelse med hensyn til skatter av inntekt
Vedlegg
Convention between the Kingdom of Norway and the Islamic Republic of Pakistan for the avoidance of double taxation and the prevention of fiscal eva- sion with respect to taxes on income
The Government of the Kingdom of Norway and the Government of the Islamic Republic of Pakistan desiring to conclude a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, have agreed as follows:
Article 1 PERSONAL SCOPE
This Convention shall apply to persons who are residents of one or both of the Contracting States.
Article 2 TAXES COVERED
(1) This Convention shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local au- thorities, irrespective of the manner in which they are levied.
(2) The existing taxes to which the Convention shall apply are: a) In Pakistan:
(i) the income tax;
(ii) the super tax; and
(iii) the surcharge;
(hereinafter referred to as «Pakistan tax») b) In Norway:
(i) the national tax on income (inntektsskatt til staten);
(ii) the county municipal tax on income (inntektsskatt til fylkeskommunen);
(iii) the municipal tax on income (inntektsskatt til kommu— nen);
(iv) the national contributions to the Tax Equalisation Fund (fellesskatt til Skattefordelingsfondet);
(v) the national tax relating to income from the exploration for and the exploitation of submarine petroleum re- sources and activities and work relating thereto, includ- ing pipeline transport of petroleum produced (skatt til staten vedrerende inntekt i forbindelse med under- sekelse etter og utnyttelse av undersjaiske petroleums— forekomster 0g dertil knyttet virksomhet 0g arbeid, herunder mrledningstransport av utvunnet petro- leum);
(vi) the national dues on remuneration to non—resident ar- tistes (avgift til staten av honorarer som tilfaller kunstnere bosatt i utlandet);
(vii) the seamen's tax (sjemannsskatt);
(hereinafter referred to as «Norwegian tax»). (3) The Conventionshall also apply to any identical or substantially similar taxes which are imposed after the date of signature of the
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(1)
(2)
Convention in addition to, or in place of, the taxes referred to above. The competent authorities of the Contracting States shall notify each other of any substantial changes whiph have been made in their respective taxation laws.
Article 3 GENERAL DEFINITIONS
For the purposes of this Convention, unless the context otherwise requires:
a)
b)
C)
d)
f)
g)
h)
the term «Pakistan» means Pakistan as defined in the Consti- tution of the Islamic Republic of Pakistan and includes any area outside the territorial waters of Pakistan which under the laws of Pakistan and in accordance with international law is an area within which the rights of Pakistan with re- spect to the seabed and subsoil and their natural resources may be exercised;
the term «Norway» means the Kingdom of Norway, including any area outside the territorial waters of the Kingdom of Nor- way where the Kingdom of Norway, according to Norwegian legislation and in accordance with international law, may ex- ercise her rights with respect to the seabed and subsoil and their natural resources; the term does not comprise Svalbard, J an Mayen and the Norwegian dependencies («biland»);
the term «person» includes an individual, a company and any other body of persons;
the term «company» means any body corporate or any entity which is treated as a body corporate for tax purposes;
the terms «enterprise of a Contracting State» and «enterprise
of the other Contracting State» mean respectively an enter-
prise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting
State;
the term «international traffic» means any transport by a
ship or aircraft operated by an enterprise which has its place
of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;
the term «national» means:
(i) any individual posessing the nationality of a Contract- ing State;
(ii) any legal person, partnership and association deriving its status as such from the laws in force in a Con- tracting State;
the term «competent authority» means:
(i) in Pakistan, the Central Board of Revenue or its au- thorised representative;
(ii) in Norway, the Minister of Finance and Customs or his authorised representative.
As regards the application of the Convention by a Contracting State, any term not defined therein shall, unless the context oth- erwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Convention applies.
1986—87
12 St.prp. nr. 51 Vedlegg Overenskomst mellom Kongeriket Norge 0g den Islamske Republikken Pakistan til unngaelse av dobbelbeskatning 0g forebyggelse av skatteunndragelse med hensyn til skatter av inntekt Article 4 RESIDENT
(1)
(2)
(3)
(1)
(2)
(3)
(4)
For the purposes of this Convention, the term «resident of a Con-
tracting State» means any person who, under the laws of that
State, is liable to tax therein by reason of his domicile, residence,
place of management or any other criterion of a similar nature.
But this term does not include any person who is liable to tax in
that State in respect only of income from sources in that State.
Where by reason of the provisions of paragraph (1) an individual
is a resident of both Contracting States, then his status shall be
determined as follows:
a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a perma- nent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and eco- nomic relations are closer (centre of vital interests);
b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
Where by reason of the provisions of paragraph ( 1) a person other
than an individual is a resident of both Contracting States, then it
shall be deemed to be a resident of the State in which its place of effective management is situated.
Article 5 PERMANENT ESTABLISHMENT
For the purposes of this Convention, the term «permanent estab-
lishment» means a fixed place of business through which the busi-
ness of the enterprise is wholly or partly carried on.
The term «permanent establishment» includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop;
f) a warehouse;
g) a permanent sales exhibition; and
h) a mine, an oil or gas well, a quarry or any other place of ex- traction of natural resources.
The term «permanent establishment» likewise encompasses a
building site, a construction, assembly or installation project or
supervisory activities in connection therewith, but only where
such site, project or activities continue for a period of more than
six months.
Notwithstanding the preceding provisions of this Article, the term
«permanent establishment» shall be deemed not to include:
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(5)
(5)
(7)
(3)
a) The use of facilities solely for the purpose of storage or dis- play of goods or merchandise belonging to the enterprise;
b) The maintenance of a stock of goods or merchandise be- longing to the enterprise solely for the purpose of storage or display;
- The maintenance of a stock of goods or merchandise be— longing to the enterprise solely for the purpose of processing by another enterprise;
d) The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;
e) The maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.
notwithstanding the provisions of paragraphs (1) and (2), where a person - other than an agent of an independent status to whom paragraph (7) applies — is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first- mentioned Contracting State in respect of any activities Which that person undertakes for the enterprise, if such a person:
a) has and habitually exercises in that State an authority to con- clude contracts in the name of the enterprise, unless the ac— tivities of such person are limited to those mentioned in para- graph (4) which, if exercised through a fixed place of busi- ness, would not make this fixed place of business a perma— nent establishment under the provisions of that paragraph; or
b) has no such authority, but habitually maintains in the first— mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.
Notwithstanding the preceding provisions of this Article, an in- surance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a per— son other than an agent of an independent status to whom para- graph (7) applies.
An enterprise shall not be deemed to have a permanent estab— lishment in a Contracting State merely because it carries on busi- ness in that State through a broker, general commission agent or any other agent of an independent status, provided that such per- sons are acting in the ordinary course of their business, However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this para- graph unless he demonstrates that the transactions have been made under arm's length conditions. In such cases the provisions of domestic laws will apply, due regard being had to other provi- sions of this Convention.
The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent estab- lishment of the other.
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(1)
(2)
(3)
(4)
(1)
(2)
(3)
Article 6 INCOME FROM IMMOVABLE PROPERTY
Income derived by a resident of a Contracting State from immov- able property (including income from agriculture or forestry) sit— uated in the other Contracting State may be taxed in that other State.
The term «immovable property» shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include prop— erty accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immov- able property and rights to variable or fixed payments as consi- deration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.
The provisions of paragraph (1) shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
The provisions of paragraphs (1) and (3) shall also apply to the in- come from immovable property of an enterprise and to income from immovable property used for the performance of indepen— dent personal services.
Article 7 BUSINESS PROFITS
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situ- ated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to:
a) that permanent establishment;
b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent estab- lishment: or
c) other business activities carried on in that other State of the same or similar kind as those effected through that perma- nent establishment.
The provisions of sub-paragraphs b) and c) above shall not apply if the enterprise proves that such sales or activities could not have been reasonably undertaken by the permanent establishment. Subject to the provisions of paragraph (3), where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and deal- ing wholly independently with the enterprise of which it is a per- manent establishment.
a) In the determination of the profits of a permanent estab- lishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent estab- lishment including executive and general administrative ex-
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(4)
(5)
(5)
(7)
(1)
(2)
penses so incurred, whether in the State in which the perma- nent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the taxation laws of the Contracting State in which the perma- nent establishment is situated.
b) However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimburse- ment of actual expenses) by the permanent establishment to the head-office of the enterprise or any of its other offices by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, of amounts charged (otherwise than towards reimbursement of actual expenses) by the per- manent establishment to the head—office of the enterprise or any of its other offices, by way of royalties, fees or other si- milar payments in return for the use of patents or other rights, or by way of commission for specific services perform- ed or for management, or, except in the case of a banking en— terprise, by way of interest on moneys lent to the head-office of the enterprise, or any of its other offices.
No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. In so far as it has been customary in a Contracting State to de— termine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enter- prise to its various parts, nothing in paragraph (2) of this Article shall preclude that Contracting State from determining the prof- its to be so taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles laid down in this Article.
For the purposes of the preceding paragraphs, the profits to be at-
tributed to the permanent establishment shall be determined by
the same method year by year,un1ess there is good and sufficient reason to the contrary.
Where profits include items of income which are dealt with sepa-
rately in other Articles of this Convention, then the provisions of
those Articles shall not be affected by the provisions of this Arti- cle.
Article 8 SHIPPING AND AIR TRANSPORT
Profits from the operation of aircraft in international traffic shall be taxable only in the Contracting State in which the place of ef- fective management of the enterprise is situated.
With respect to profits derived by the air transport consortium Scandinavian Airlines System (SAS) the provisions of paragraph (1) shall apply, but only to such part of the profits as corresponds to the participation held in that Consortium by Det Norske Luft- fartsselskap A/ S (DNL), the Norwegian partner of the Scandina- vian Airlines System (SAS).
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(3)
(4)
Profits from the operation of ships in international traffic may be taxed in the Contracting State in which the effective management of the enterprise is situated. However, such profits derived from sources within the other Contracting State may also be taxed in that other State in accordance with its domestic law. Provided that for the first ten years for which this Convention is effective,
the tax so charged in that other State shall be reduced by 50 per
cent.
The provisions of the foregoing paragraphs shall also apply to profits derived from the participation in a pool, a joint business or in an international operating agency.
Article 9 ASSOCIATED ENTERPRISES
Where
an enterprise of a Contracting State participates directly or indi- rectly in the management, control or capital of an enterprise of the other Contracting State, or
the same persons participate directly or indirectly in the man- agement, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in their commercial of financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed ac- cordingly.
(1)
(2)
(3)
(4)
Article 10 DIVIDENDS
Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not ex- ceed 15 per cent of the gross amount of the dividends.
This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends'are paid.
The term «dividends» as used in this Article means income from shares, or other rights, not being debt—claims, participating in profits, as well as income from other corporate rights which is subject to the same taxation treatment as income from shares by the laws of the State of which the company making the distribu- tion is a resident.
The provisions of paragraphs ( 1) and (2) shall not apply if the ben- eficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a perma— nent establishment situated therein, or performs in that other
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(5)
(1)
(2)
(3)
(4)
(5)
State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply.
Where a company which is a resident of a Contracting State de- rives profits or income from the other Contracting State, that oth- er State may not impose any tax on the dividends paid by the com- pany, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of—which the dividends are paid is effectively connected with a permanent es— tablishment or a fixed base situated in that other State, nor sub- j ect the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistri— buted profits consist wholly or partly of profits or income arising in such other State.
Article 11 INTEREST
Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
Notwithstanding the provisions of paragraph (2), any such inter- est as is mentioned in paragraph (1) shall be taxable only in the Contracting State of which the recipient is a resident if such recip- ient is the beneficial owner of the interest and if such interest is paid, a) in the case of Norway, to the Norwegian Government or the Bank of Norway; and b) in the case of Pakistan, to the Pakistan Government or the State Bank of Pakistan. The competent authorities of the Contracting States may de- termine by mutual agreement any other institution to which this paragraph shall apply. The term «interest» as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attach- ing to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. The provisions of paragraphs (1) and (2) shall not apply if the hen- eficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal ser- vices from a fixed base situated therein, and the debt—claims in re- spect of which the interest is paid is effectively connected with a) such permanent establishment or fixed base, or with b) business activities referred to under c) of paragraph ( 1) of Ar- ticle 7. In such cases the provisions of Article 7 or Article 15, as the case may be, shall apply.
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(6)
(7)
(1)
(3)
(4)
Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such perma- nent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent estab- lishment or fixed base is situated.
Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other per- son, the amount of the interest, having regard to the debt—claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last- mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Con- tracting State, due regard being had to the other provisions of this Convention.
Article 12 ROYALTIES
Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficialowner of the royalties the tax so charged shall not exceed 12 per cent of the gross amount of the royalties.
The term «royalties» as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, se- cret formula or process, or for the use of, or the right to use, indus- trial, commercial, or scientific equipment, or for information con- cerning industrial, commercial or scientific experience.
The provisions of paragraphsflnfl) and (2) shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal ser- vices from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with,
a) such permanent establishment or fixed base, or
b) business activites referred to under c) of paragraph (1) of Ar-
ticle 7.
In such cases, the provisions of Article 7 or Article 15, as the case may be, shall apply.
(5)
Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local au- thority or a resident of that State. Where, however, the person
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(5)
(1)
(2)
(3)
(4)
(5)
paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent estab- lishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent es- tablishment or fixed base is situated.
Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other per- son, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last—mentioned amount. In such case, the excess part of the payments shall remain taxable ac— cording to the laws of each Contracting State, due regard being had to the other provisions of this Convention.
Article 13 FEES FOR TECHNICAL SERVICES
Fees for technical services arising in a Contracting State and paid to an enterprise of the other Contracting State may be taxed in that other State.
However, such fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the benificial owner thereof, the tax so charged shall not exceed 12 per cent of the gross amount of the fees.
The term «fees for technical services» as used in this Article means any consideration (including any lump sum consideration) for the provision of or rendering of any managerial, technical or consultancy services (including the provision by the enterprise of the services of technical or other personnel) but does not include consideration for any construction, assembly or like project un- dertaken by the recipient or consideration which would be income falling under Article 15 of the Convention.
The provisions of paragraphs (1) and (2) shall not apply if the ben- eficial owner of the fees for technical services being a resident of a Contracting State, carries on business in the other Contracting State in which the fees for technical services arise, through a per- manent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein and the contract in respect of which the fees for technical services are paid is effectively connected with,
a) such permanent establishment or fixed base, or
b) business activities referred to under
c) of paragraph (1) of Article 7.
In such cases the provisions of Article 7 or Article 15, as the case may be, shall apply.
Fees for technical services shall be deemed to arise in a Con— tracting State when the payer is that State itself, a political subdi- vision, a local authority or a resident of that State. Where, how- ever, the person paying the fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection
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(3)
(1)
(2)
(3)
(4)
(5)
(1)
with which the obligation to make the payments was incurred, and the payments are borne by such permanent establisment or fixed base, then such fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other per- son, the amount of the fees for technical services exceeds the amount which would have been paid in the absence of such rela- tionship, the provisions of this Article shall apply only to the last- mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Conven- tion.
Article 14 CAPITAL GAINS
Gains derived by a resident of a Contracting State from the alien- ation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Gains from the alienation of movable property forming part of the business property of a permanent establishment Which an enter- prise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resi- dent of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establish- ment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.
Gains from the alienation of ships or aircraft operated in inter- national traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enter- prise is situated.
Gains from the alienation of shares in a company which is a resi- dent of a Contracting State may be taxed in that State, but only if the shares alienated form part of an interest of at least 30 per cent in the company.
Gains from the alienation of any property other than those re- ferred to in paragraphs (1), (2), (3) and (4) shall be taxable only in the Contracting State of which the alienator is a resident.
Article 15 INDEPENDENT PERSONAL SERVICES
Income derived by a resident of a Contracting State in respect'of professional services or other activities of an independent charac- ter shall be taxable only in that State except in the following cir- cumstances, when such income may also be taxed in the other Contracting State:
a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or
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(2)
(1)
(2)
(3)
(1)
(2)
b) if his stay in the other Contracting state is tor a period or pe- riods amounting to or exceeding in the aggregate 183 days in any twelve month period; in that case only so much of the in- come as is derived from his activities performed in that other State may be taxed in that other State.
The term «professional services» includes especially independent
scientific, literary, artistic, educational or teaching activities as
well as the independent activities of physicians, lawyers, engi- neers, architects, dentists and accountants.
Article 16 DEPENDENT PERSONAL SERVICES
Subject to the provisions of Articles 17, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such re— muneration as is derived therefrom may be taxed in that other State.
Notwithstanding the provisions of paragraph( 1), remuneration
derived by a resident of a Contracting State in respect of an em-
ployment exercised in the other Contracting State shall be tax- able only in the first—mentioned State if:
a) the recipient is present in the other State for a period or peri- ods not exceeding in the aggregate 183 days in any twelve month period, and
b) the remuneration is paid by, or on behalf of, an employer who is a resident of the State of which the recipient is a resident and whose activity does not consist of the hiring out of labour, and
c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
Notwithstanding the preceding provisions of this Article, re- muneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective man- agement of the enterprise is situated. Where a resident of Norway derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by the air transport consortium Scandinavian Airlines System (SAS), such remuneration shall be taxable only in Norway.
Article 17
DIRECTORS’ FEES AND REMUNERATION OF TOP-LEVEL MANAGERIAL OFFICIALS
Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or of a similar organ of a company which is a resident of the other Contracting State may be taxed in that other State. Salaries, wages and other similar remuneration derived by a resi- dent of a Contracting State in his capacity as on official in a top- level managerial position of a company which is a resident of the other Contracting State may be taxed in that other State.
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(1)
(2)
(3)
(1)
(2)
. Article 18 INCOME EARNED BY ENTERTAINERS AND ATHLETES
Notwithstanding the provisions of Articles 15 and 16, income de- rived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musi— cian, or as an athlete, from his personal activities as such exer- cised in the other Contracting State, may be taxed in that other State.
Where income in respect of personal activities exercisedsby an en- tertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the enter- tainer or athlete are exercised.
Notwithstanding the provisions of paragraphs( 1) and (2), income derived from such activities as defined in paragraph (1) perform- ed within the framework of official cultural exchange between the two Contracting States, shall be taxable only in the State of which the entertainer or athlete is a resident.
Article 19 GOVERNMENT SERVICE
a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such remuneration shall be taxable only in the oth- er Contracting State if the services are rendered in that State and the individual is a resident of that State who:
(i) is a national of that State; or (ii) did not become a resident of that State solely for the purpose of rendering the services.
The provisions of Articles 16 and 17 shall apply to remuneration
other than a pension in respect of services rendered in connection
with a business carried on by a Contracting State or a political subdivision or a local authority thereof.
Article 20
PENSIONS, ALIMONY, ANNUITIES, AND PAYMENTS UNDER
(1)
(2)
SOCIAL SECURITY SYSTEM
Pensions (including Government pensions and payments under a social security system), alimony and annuities paid to a resident of a Contracting State shall be taxable only in that State.
The term «annuity» means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in re- turn for adequate and full consideration in money or money‘s worth.
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Article 21 STUDENTS AND BUSINESS APPRENTICES
A student or business apprentice who is a resident of a Con—
tracting State at the beginning of a visit to the other Contracting State for the purposes of receiving education or training in that other State, shall be exempt from tax in that other State in respect of remittances from abroad for the purposes of his maintenance, education and train-
ing.
(1) (2)
(3)
(4)
(5)
Article 22 OFFSHORE ACTIVITIES
The provisions of this Article have effect notwithstanding any other provision of this Convention. A person who is a resident of a Contracting State and carries on activities offshore in the other Contracting State in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in that other State shall, subject to paragraphs (3) and (4) of this Article, be deemed in relation to those activities to be carrying on business in that other State through a permanent establishment or fixed base situated there- in.
The provisions of paragraph (2) shall not apply where the activ-
ities are carried on for a period not exceeding 30 days in the ag-
gregate in any twelve month period. However, for the purposes of this paragraph:
a) activities carried on by an enterprise associated with another enterprise shall be regarded as carried on by the enterprise with which it is associated if the activities in question are substantially the same as those carried on by the last—men- tioned enterprise;
b) two enterprises shall be deemed to be associated if one is con- trolled directly or indirectly by the other, or both are control- led directly or indirectly by a third person or persons.
Profits derived by a resident of a Contracting State from the transportation of supplies or personell to a location, or between 10- cations, where activities in connection with the exploration or ex- ploitation of the seabed and subsoil and their natural resources are being carried on in a Contracting State, or from the operation of tugboats and other vessels auxiliary to such activities, shall be taxable only in the Contracting State in which the place of effec- tive management of the enterprise is situated.
a) Subject to sub-paragraph b) of this paragraph, salaries,
wages and similar remuneration derived by a resident of a .
Contracting State in respect of an employment connected with the exploration or exploitation of the seabed and subsoil and their natural resources situated in the other Contracting State may, to the extent that the duties are performed off- shore in that other State, be taxed in that other State provid- ed that the employment offshore is carried on for a period ex- ceeding 30 days in the aggregate in any twelve month period.
b) Salaries, wages and similar remuneration derived by a resi- dent of a Contracting State in respect of an employment exer- cised aboard a ship or aircraft engaged in the transportation of supplies or personell to a location, or between locations, where activities connected with the exploration or exploita-
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(1)
(2)
(3)
(1)
(2)
tion of the seabed and subsoil and their natural resources are being carried on in a Contracting State, or in respect of an employment exercised aboard tugboats or other vessels oper- ated auxiliary to such activities, shall be taxable only in the Contracting State in which the place of effective manage- ment of the enterprise is situated.
Article 23 OTHER INCOME
Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
The provisions of paragraph (1) shall not apply to income, other than income from immovable property as defined in paragraph (2) of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such per- manent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply. Notwithstanding the provisions of paragraphs (1) and (2), items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Con- tracting State may be taxed in that other State.
Article 24 ELIMINATION OF DOUBLE TAXATION
In the case of Pakistan, double taxation shall be avoided as fol- lows: subject to the provisions of the laws of Pakistan regarding the al- lowance as a credit against Pakistan tax, the amount of Nor- wegian tax payable under the laws of Norway and in accordance with the provisions of this Convention, whether directly or by de- duction, by a resident of Pakistan, in respect of income from sources within Norway which has been subjected to a tax both in Pakistan and Norway shall be allowed as a credit against the Pa- kistan tax payable in respect of such income but in an amount not exceeding that proportion of Pakistan tax which such income bears to the entire income chargeable to Pakistan tax. In the case of Norway, double taxation shall be avoided as follows: a) where a resident of Norway derives income which, in accord- ance with the provisions of this Convention, may be taxed in Pakistan, N orway shall, subject to the provisions of sub—para- graphs b), c) and d), exempt such income from tax;
b) where a resident of Norway derives items of income which, in accordance with the provisions of Articles 8, 10, 11, 12, 13, 17, 22 and paragraph (3) of Article 23 may be taxed in Pakistan, Norway shall allow as a deduction from the tax on the income of that person an amount equal to the tax paid in Pakistan. Such deduction shall not, however, exceed that part of the tax,
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as computed before the deduction is given, which is attribut- able to such items of income derived from Pakistan;
- for the purposes of the deduction referred to in subparagraph b) above with respect to income covered by Articles 10 and 11 the term «tax paid in Pakistan» shall be deemed to include any amount which would have been payable as Pakistan tax under the laws of Pakistan and in accordance with this Con— vention for any year but for an exemption from, or reduction of, tax granted for that year under the provisions of clauses (75) to (82) of the Second Schedule of the Income Tax Ordi- nance, 1979 or under any substantially similar provisions which may replace or be added to the aforesaid provisions. Similarly for the purposes of the deduction referred to in sub- paragraph b) above with respect to income covered by Arti- cles 12 and 13, the term «tax paid in Pakistan» shall be deem- ed to include any amount which would have been payable as Pakistan tax under the laws of Pakistan or in accordance with this Convention for any year but for an exemption from, or reduction of, tax granted for that year under a tax incen- tive scheme. The provisions of of this subparagraph shall ap- ply for the first ten years for which the Convention is effec- tive, but the competent authorities of the Contracting States may consult each other to determine whether this period shall be extended;
d) where in accordance with any provision of the Convention in- come derived by a resident of Norway is exempt from tax in Norway, Norway may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.
Article 25 NON-DISCRIMINATION
(1) Nationals of a Contracting State shall not be subjected in the oth-
(2)
(3)
er Contracting State to any taxation or any requirement connec— ted therewith, which is other or more burdensome than the tax— ation and connected requirements to which nationals of that oth- er State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Con— tracting States. Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith which is other or more burden- some than the taxation and connected requirements to which na- tionals of the State concerned in the same circumstances are or may be subjected. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation le- vied on enterprises of that other State carrying on the same activ- ities in the same circumstances and under the same conditions. If a company of a Contracting State has a permanent estab- lishment in the other Contracting State, that other State may tax the permanent establishment at the rate applying to non—distrib- uted profits of a company resident of that other State.
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(4) Interest, royalties, fees for technical services and other disburse-
(5)
(6)
(7)
(8)
(1)
ments paid by an enterprise of a Contracting State to a resident of
the other Contracting State shall, for the purpose of determining
the taxable profits of such enterprise, be deductible under the
same conditions as if they had been paid to a resident of the first-
mentioned State. However, the preceding provisions of this para-
graph shall not apply,
a) in cases where the provisions of Article 9, paragraph (7) of Ar- ticle 11, paragraph (6) of Article 12, or paragraph 6 of Article 13 apply or,
b) in cases where the disbursements are made without with- holding and depositing tax chargeable under the domestic law and in accordance with the provisions of this Convention.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be sub- jected in the first-mentioned State to any taxation or any re- quirement connected therewith which is other or more burden— some than the taxation and connected requirements to which oth- er similar enterprises of the first—mentioned State are or may be subjected.
Nothing contained in the preceding paragraphs of this Article
shall be construed —
a) as obliging either of the Contracting States to grant to per— sons not resident in its territory those personal allowances and reliefs for tax purposes which are by law available only to persons who are so resident;
b) as affecting any provisions referred to in subsection (3) of section 50 or paragraph (3) of Part IV of First Schedule to the Income Tax Ordinance, 1979; or
c) as affecting any provisions of the law of Pakistan regarding the grant of rebate of tax to companies fulfilling specific re- quirements regarding the declaration and payment of divi— dends.
The provisions of this Article shall not be construed as obliging a
Contracting State to grant to nationals of the other Contracting
State not being nationals of the first Contracting State any excep-
tional tax relief accorded to repatriating nationals of this Con-
tracting State.
The provisions of this Article shall, notwithstanding the provi-
sions of Article 2, apply to taxes of every kind and description.
Article 26 MUTUAL AGREEMENT PROCEDURE
Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irre— spective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Con- tracting State of which he is a resident or, if his case comes under paragraph (1) of Article 25, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.
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(2) The competent authority shall endeavour, if the objection appears
(3)
(4)
(1
(2)
V
to it to be justified and if it is not itself able to arrive at a satisfac- tory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Con— vention. Any agreement reached shall be implemented notwith- standing any time limits in the domestic law of the Contracting States.
The competent authorities of the Contracting States shall endeav- our to resolve by mutual agreement any difficulties or doubts aris- ing as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.
The competent authorities of the Contracting States may commu- nicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. The compe- tent authorities may through consultations develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article.
Article 27 EXCHANGE OF INFORMATION
The competent authorities of the Contracting States shall ex— change such information as is necessary for carrying out the pro— visions of this Convention or of the domestic laws of the Con- tracting States concerning taxes covered by the Convention, inso- far as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any in- formation received by a Contracting State shall be treated as se- cret in the same manner as information obtained under the do- mestic laws of that State. However, if the information is originally regarded as secret in the transmitting State it shall be disclosed only to persons or authorities (including courts and administra- tive bodies) involved in the assessment or collection of, the en- forcement or prosecution in respect of, or the determination of ap- peals in relation to, the taxes which are the subject of the Conven- tion. Such persons or authorities shall use the information only for such purposes but may disclose the information in public court proceedings or in judicial decisions. The competent authorities may through consultations develop appropriate conditions, meth- ods and techniques concerning the matters in respect of Which such exchanges of information shall be made, including, where appropriate, exchanges of information regarding tax avoidance.
In no case shall the provisions of paragraph (1) be construed so as
to impose on a Contracting State the obligation:
a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Con- tracting State;
b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
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c) to supply information which would disclose any trade, busi- ness, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be con- trary to public policy (ordre public).
Article 28 DIPLOMATIC AGENTS AND CONSULAR OFFICERS Nothing in this Convention shall affect the fiscal privileges of dip-
lomatic agents or consular officers under the general rules of inter- national law or under the provisions of special agreements.
Article 29 TERRITORIAL EXTENSION
(1) This Convention may be extended, either in its entirety or with
(2)
any necessary modifications to any part of the territory of the Contracting States which is specifically excluded from the ap— plication of the Convention or to any State or territory for whose international relations Norway or Pakistan is responsible, which imposes taxes substantially similar in character to those to which the Convention applies. Any such extension shall take effect from such date and subject to such modifications and conditions, in— cluding conditions as to termination, as may be specified and agreed between the Contracting States in notes to be exchanged through the diplomatic channels or in any other manner in ac- cordance with their constitutional procedures.
Unless otherwise agreed by both Contracting States, the termi- nation of the Convention by one of them under Article 31 shall also terminate, in the manner provided for in that Article, the ap- plication of the Convention to any part of the territory of the Con- tracting States or to any State or territory to which it has been ex- tended under this Article.
Article 30 ENTRY INTO FORCE
This Convention shall enter into force on the later of the dates on
which the respective Governments have notified each other in writing that the formalities constitutionally required in their respective States have been complied with, and its provisions shall have effect:
a) in respect of taxes withheld at the source on amounts paid or remitted to non-residents on or after the first day of J anuary in the calendar year next following that in which the Conven- tion enters into force; and
b) in respect of other taxes on income derived on or after the first day of J anuary in the calendar year next following that in which the convention enters into force.
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1986—87
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Article 31 TERMINATION
This Convention shall remain in force indefinitely, but either of the Contracting States may, on or before 30th June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State, through the diplomatic channels, written notice of termination.
In such event the Convention shall cease to have effect:
a) in respect of taxes withheld at the source on amounts paid or re- mitted to non-residents on or after the first day of J anuary in the calendar year next following the notice of termination; and
b) in respect of other taxes on income derived on or after the first day of J anuary in the calendar year next following the notice of termination. '
In witness whereof the undersigned, being duly authorized there- to, have signed the present Convention.
Done at Islamabad, this 7th. day of October, 1986, in duplicate in the English language.
For the Government of For the Government of the Kingdom of Norway the Islam Republic of Pakistan Bemt Stangholm I. A Imtiazi PROTOCOL
At the signing of the convention between the Kingdom of Norway and the Islamic Republic of Pakistan for the avoidance of Double Tax- ation and the Provention of Fiscal Evasion with respect to Taxes on Income, the undersigned have agreed that the following provisions shall form an intergral part of the Convention:
a) With reference to paragraph (2) of Articles 10, 11, 12 and 13, it is understood that the amount of additional tax payable in a Con- tracting State for not depositing tax within time and the amount of any penalty, fee or charge payable in that State on account of a tax offence shall not be considered for the purposes of determin— ing the maximum amount of tax that may be levied in that State.
b) With reference to paragraph (3) of Article 8, it is understood that the competent authorities of the Contracting States may consult each other to determine whether the period of 10 years mentioned in the paragraph may be extended.
In witness whereof the undersigned, being duly authorized there- to, have signed this Protocol.
Done at Islamabad, this 7th. day of October, 1986, in duplicate in the English language.
For the Government of For the Government of the Kingdom of Norway the Islam Republic of Pakistan
Bemt Stangholm I. A. Imtiazi