Pakistan, China agree on tax exemption for energy projects

Islamabad

Pakistan and China have signed Avoidance of Double Taxation Agreement under which the profits earned by Chinese banks on investment of $34 billion into energy projects of Pakistan would be exempted from payment of taxes.

“We have expanded the list by including those Chinese banks providing loans to their companies for investing $34 billion into energy projects so the income tax on the profits of these banks will be exempted from paying income tax. This incentive will help boosting pace on energy projects under China Pakistan Economic Corridor (CPEC) worth $34 billion,” a top official of FBR confided to The News here on Friday.

FBR Chairman Nisar Muhammad Khan told The News that the FBR was already providing such incentive to other Chinese companies and signing of third protocol under this agreement would help those Chinese banks to enjoy income tax incentive that will be financing crucial energy projects under CPEC initiatives.

Another official of the FBR said that they were providing such incentives only for energy projects in Pakistan. Under CPEC initiative, China has committed $51 billion with Pakistan including $34 billion for energy projects, $11 billion for roads and other infrastructure projects and remaining $5 billion for infrastructure related to Pakistan Railways.

However, according to official announcement made by the FBR, stating that the Third Protocol to the Avoidance of Double Taxation Agreement between Pakistan and China was signed on December 8, 2016 at a ceremony held in the FBR Headquarters at Islamabad. 

Nisar Muhammad and Wang Jun, Commissioner State Administration of Taxation (SAT), China, signed the third protocol on behalf of Pakistan and China respectively. The signing of the protocol was overseen by Haroon Akhtar Khan, Special Advisor to the Prime Minister on Revenue.

Haroon Akhtar Khan in his address shared his experiences in China and appreciated the way China has developed in such a short span of time. He welcomed the Chinese delegation to FBR and hoped that the two tax authorities will continue mutual cooperation in the area of taxation.

Earlier, in his opening remarks, Nisar Muhammad, Chairman FBR, welcomed the Chinese delegation to FBR and underscored the significance of the CPEC for the people of both the countries. He emphasized that the Tax Administrations of both the countries should cooperate in various international commitments like Multilateral Convention on Mutual Administrative Assistance in Tax Matters, Base Erosion and Profit Shifting (BEPS) Framework and other international and OECD initiatives.

Wang Jun, Commissioner State Administration of Taxation (SAT), China highlighted various aspects of Pakistan-China friendship and appreciated the efforts of FBR and SAT to arrive at agreement on the Third Protocol to the Avoidance of Double Taxation Agreement. He was also of the view that FBR and SAT must open new vista for mutual cooperation in various areas, including capacity building of the human resource.