Avoidance of Double Taxation treaty violation: several states slap heavy taxes on Pak airlines: FBR

The Federal Board of Revenue has detected serious violations of the convention on Avoidance of Double Taxation by some countries which are charging Pakistani airlines' business operations to heavy taxes despite tax exemption granted by the Pakistani tax authorities to foreign airlines of these countries.
Sources told Business Recorder on Wednesday that the FBR has shared the information with the Pakistani airlines about violations of the Avoidance of Double Taxation by certain countries. The tax administrations of these countries are charging Pakistani airlines with tax despite the fact that the FBR has granted exemption to their airlines under Avoidance of Double Taxation conventions.
Sources said the FBR is also planning to revisit the international taxation regime governing airlines business keeping in view the Avoidance of Double Taxation agreements. In this connection, the FBR has written letters to all Pakistani airlines operating aboard to know about the taxes on income paid by local airlines in other countries.
Sources said that the FBR has informed the M/s Pakistan International Airlines, M/s Shaheen Airlines and M/s Airblue that the government of Pakistan has entered into an extensive network of Avoidance of Double Taxation Agreements with other countries whereby incomes earned by Pakistani airlines by flying to foreign destinations are either to be exempted or taxed at a reduced rate. The list of countries with which Pakistan has such agreements can be accessed at: http://www.fbr.gov.pk.
The FBR has received information to the effect that some of the countries have charged Pakistani airlines' business operations to tax at hefty rates. Such scenario is not only violative of the mutually binding agreements, but also weighs heavily against the interest of the country as, one of the hand, Pakistan exempts those countries' airlines calling on Pakistani airports, and on the other, ends up paying taxes to those countries, which, in all fairness, ought not to be paid, and if at all, those are to be paid to the Government of Pakistan, FBR stated.
It is against this backdrop that the airlines are being requested to furnish FBR the complete profile of the international operations/destinations along with taxes, if any, paid in those countries over the past five years. The FBR also solicits any suggestions/recommendations towards fine-tuning our international taxation regime governing airlines business. The airlines can submit the response in this regard to FBR before December 1, 2011, sources added.