The Issue Of Interpretation Of Article 13 (2) Of The Agreement Between Peoples Republic Of China And The Islamic Republic Of Pakistan For Avoidance Of Double Taxation And The Prevention Of Fiscal Evasion With Respect To Evasion Of Taxes.

• Published date: 24 September 2025
• Law Firm: Yousaf Amanat & Associates
• Author: Yousaf Amanat

There are various Chinese companies working in Pakistan. A lot of these companies are working on infrastructure projects involving constructions of Power Projects, Dams and Highways. These companies then further contract out parts of the work involving designing and engineering of the works to other companies who are resident in China. A legal proposition arises when these companies are tasked with deducting tax from payments to Chinese resident companies under the Income Tax Ordinance 2001. The Chinese resident companies rightfully object since they are already being taxed under China's own tax regime and additionally being taxed under the Pakistan tax regime appears unfair to them.

China and Pakistan both are signatories to the Agreement between Peoples Republic of China and the Islamic Republic of Pakistan for avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Evasion of Taxes. This tax treaty was signed in 1989 and specifically deals with the issues of double taxation. We are however surprised to find that most Chinese companies are either not aware of this treaty or have not given it the due consideration they ought to have. Even if the Chinese Companies refer to the Treaty for relief, the problem of interpretation of the articles which they are faced with leads them astray.

For the purposes of this paper we have tried to demonstrate this problem of...