ISLAMABAD: Switzer­land is yet to ratify the revi­sed Agreement on Avoidance of Double Taxation with respect to taxes on income despite commitment with Pakistan to do the same from July 2017.

The agreement will allow both countries to shore up a mechanism for information sharing to detect tax evaders.

Pakistan and Switzerland signed the agreement on March 22, 2017 and had agreed to ratify it before July 2017.

After signing, the two sides had agreed to undertake internal procedures for ratification of the agreement. After the exchange of ratification instruments, the agreement will come into force in both countries.

An official source in the FBR told Dawn that Pakistan had already ratified the agreement and sent through foreign office to the Swiss government last year. He said several reminders were also sent to the Pakistani High Commission to take up the issue with the relevant Swiss authorities.

Meanwhile, a senior tax official claimed that one article of the revised agreement which relates to exchange of information come into force from January 1, 2018. The condition for this article is signing of the agreement and not ratification, the official added.

The two countries initiated talks on the revised agreement in 2014, following unconfirmed reports that Pakistani nationals had over $200 billion stashed in Swiss banks.

The revised agreement contains improvements with regard to the taxation of service fees and capital gains resulting from the sale of qualifying participants.

Upon approval from the federal cabinet in August 2013, Pakistan had approached Switzerland for incorporating the updated version of the Article on Exchange of Information based on the OECD Model.

Under the revised agreement, these rules promote economic exchange in bilateral relations. The agreement also contains an arbitration clause, which should guarantee the avoidance of double taxation.

One of the important aspects of the treaty is the replacement of the Article on “Exchange of Infor­mation” with the new one reflecting the internationally accepted standard which is based on the OECD Model.

The new Article on Exchange of Information will considerably expand the existing scope of information to be obtained on request basis for the enforcement of domestic tax laws. It will also provide access to bank information for tax purposes and such information shall not be refused solely because the information is held by a bank or other financial institution.

Published in Dawn, March 15th, 2018