Avoidance of Double Taxation: Pakistan, Lithuania sign draft convention

Pakistan and Lithuania have initialled the draft convention on Avoidance of Double Taxation and prevention of fiscal evasion with respect to taxes on income. According to an announcement of the FBR here on Saturday, the second round of negotiations on the Convention for Avoidance of Double Taxation between Pakistan and Lithuania was held in Islamabad from 14th to 17th March, 2011.
After detailed deliberations, consensus was reached on all issues and the draft Convention was initialled by the respective heads of the two delegations on March 17. The finalised draft was initialled by. Khawar Khurshid Butt, Member (Inland Revenue), FBR and Ms Audrone Misiunaite, Head of the Direct Taxes and International Taxation Division of the Tax Department of the Ministry of Finance, Lithuania on behalf of their respective Governments.
Khawar Khurshid Butt, Member (Inland Revenue) expressed the hope that the Agreement will not only provide safeguards against double taxation on the income of the residents of both the countries but will also promote economic co-operation and investment. It will further strengthen the existing bilateral economic relations between the two contracting states. The two sides agreed to complete their internal procedures at the earliest to bring the Convention into force. Audrone Misiunaite expressed gratitude for the warm hospitality extended by Pakistan to her team.
When contacted, sources said that the basic purpose of an income tax treaty is to facilitate international trade and investment by removing tax barriers. An income tax treaty establishes a stable framework that allows international trade and investment to flourish, by setting out clear ground rules that govern tax matters between the contracting states, and by providing certainty to business environment.
It protects the taxpayers from excessive taxation, double taxation and discriminatory tax treatment. It also provides a mechanism for dealing with disputes or questions of application that may arise after the treaty came into force. Another major objective of a tax treaty, although of greater interest to tax authorities, is the prevention of tax evasion through exchange of information between tax authorities, sources added.