(1) The Federal Government may enter into a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement or similar agreement or mechanism for the avoidance of double taxation or for the exchange of information for the prevention of fiscal evasion or avoidance of taxes including automatic and spontaneous exchange of information with respect to taxes on income imposed under this Ordinance or any other law for the time being in force and under the corresponding laws in force in that country and may, by notification in the official Gazette, make such provisions as may be necessary for implementing the said instruments.”; and
“(1A) Notwithstanding anything contained in any other law to the contrary, the Board shall have the powers to obtain and collect information when solicited by another country under a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement, a similar arrangement or mechanism.
(1B) Notwithstanding the provisions of the Freedom of Information Ordinance, 2002 (XCVI of 2002), subject to clause (a) of sub-section (3) of section 216 of this Ordinance any information received or supplied, and any concomitant communication or correspondence made, under a tax treaty, a tax information exchange agreement, a multilateral convention, a similar arrangement or mechanism, shall be confidential.
(2) Subject to section 109, where] any agreement is made in accordance with sub-section (1), the agreement and the provisions made by notification for implementing the agreement shall, notwithstanding anything contained in any law for the time being in force, have effect in so far as they provide for at least one of the following–
(a) relief from the tax payable under this Ordinance;
(b) the determination of the Pakistan-source income of non- resident persons;
(c) where all the operations of a business are not carried on within Pakistan, the determination of the income attributable to operations carried on within and outside Pakistan, or the income chargeable to tax in Pakistan in the hands of non- resident persons, including their agents, branches, and permanent establishments in Pakistan;
(d) the determination of the income to be attributed to any resident person having a special relationship with a non-resident person; and
(e) the exchange of information for the prevention of fiscal evasion or avoidance of taxes on income chargeable under this Ordinance and under the corresponding laws in force in that other country.
(3) Notwithstanding anything contained in sub-sections (1) or (2), any agreement referred to in sub-section (1) may include provisions for the relief from tax for any period before the commencement of this Ordinance or before the making of the agreement.
(1) The Commissioner may, in respect of any transaction between persons who are associates, distribute, apportion or allocate income, deductions or tax credits between the persons as is necessary to reflect the income that the persons would have realised in an arm’s length transaction.
(2) In making any adjustment under sub-section (1), the Commissioner may determine the source of income and the nature of any payment or loss as revenue, capital or otherwise.
(3) Every taxpayer who has entered into a transaction with its associate shall:
(a) maintain a master file and a local file containing documents and information as may be prescribed;
(b) keep maintain and furnish to the Board] prescribed country-by- country report, where applicable;
(c) keep and maintain any other information and document in respect of transaction with its associate as may be prescribed; and
(d) keep the files, documents, information and reports specified in clauses (a) to (c) for the period as may be prescribed.
(4) A taxpayer who has entered into a transaction with its associate shall furnish, within thirty days the documents and information to be kept and maintained under clause (a), (c) or (d) of] sub-section (3) if required by the Commissioner in the course of any proceedings under this Ordinance.;
(5) The Commissioner may, by an order in writing, grant the taxpayer an extension of time for furnishing the documents and information under sub-section (4), if the taxpayer applies in writing to the Commissioner for an extension of time to furnish the said documents or information:
Provided that the Commissioner shall not grant an extension of more than forty-five days, when such information or documents were required to be furnished under sub-section (4), unless there are exceptional circumstances justifying a longer extension of time.
(1) For the purposes of determining liability to tax under this Ordinance, the Commissioner may–
(a) recharacterise a transaction or an element of a transaction that was entered into as part of a tax avoidance scheme;
(b) disregard a transaction that does not have substantial economic effect; or
(c) recharacterise a transaction where the form of the transaction does not reflect the substance.
(d) from tax year 2018 and onwards, disregard an entity or a corporate structure that does not have an economic or commercial substance or was created as part of the tax avoidance scheme.
(2) In this section, “tax avoidance scheme” means any transaction where one of the main purposes of a person in entering into the transaction is the avoidance or reduction of any person’s liability to tax under this Ordinance.
(3) Reduction in a person's liability to tax as referred to in sub-section (2) means a reduction, avoidance or deferral of tax or increase in a refund of tax and includes a reduction, avoidance or deferral of tax that would have been payable under this Ordinance, but are not payable due to a tax treaty for the avoidance of double taxation as referred to in section107.
(l) The Directorate General of international Tax Operations shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint.
(2) The Board may, by notification in the official Gazette,
(a) specify the functions and jurisdiction of the Directorate General and its officers;and
(b) confer the powers of authorities specified in section 207 upon the Directorate General and itsofficers.
(3) The functions and powers of the Directorate General of International Tax Operations shall include but not limitedto-
(a) receive and send information from other jurisdictions under spontaneous, automatic and on demand exchange of information under exchange of information agreements;
(b) levy and recover tax by passing an assessment order under section I23(1A) in case of undeclared off-shore assets and incomes;
(c) receive, transmit and exchange country reports to the jurisdictions that are parties to international by country agreements with Pakistan; and
(d) conduct transfer pricing audit in cases selected for such audit by the Director General of international Tax Operations.
(2) The Board may, by notification in the official Gazette, specify the criteria for selection of the taxpayer for transfer pricing audit.
Explanation- For the removal of doubt, it is clarified that transfer pricing audit refers to the audit for determination of transfer price at arm's length in transactions between associates and is independent tax audit under section 177 and 2l4C which is audit of the income tax affairs of the taxpayer.
(5) Transfer pricing audit of cases selected under clause (d) of sub-section (3) shall be conducted as per procedure given in section 177 and all the provisions oftheOrdinance,exceptthefirstprovisotosub-section(1),sub-section(6A), (10) and (14) of section 177, shall apply accordingly.
(6) Nothing contained in this section shall prevent the Commissioner from determination of transfer price at arm’s length in transactions between associates while conducting audit of income tax affairs of a taxpayer under section 177 or 214C or during proceedings under section 122.
