INTERNATIONAL TAX PLAZA - Ireland signs new DTAs with Pakistan and Zambia

Details: Published: 24 April 2015

(April 24, 2015)

The Irish revenue has published 2 newly signed DTAs. The first is a DTA that has been concluded between Ireland and Pakistan, which after both countries have completed their respective ratification procedures will replace the existing Convention that was signed on April 13, 1973. The second is a DTA between Ireland and Zambia, which after both countries have completed their respective ratification procedures will replace the existing Convention that was signed on April 29, 1971.

Newly signed DTA with Pakistan

The Convention between the Government of Ireland and the Government of the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was signed on April 16, 2015.

Paragraph 3 of Article 5 of the new DTA (“PERMANENT ESTABLISHMENT”) determines that the term “permanent establishment” also encompasses a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last more than 6 months.

With respect to withholding taxes on dividends Paragraph 2 of Article 10 the new DTA (“DIVIDENDS”) determines the following:

“However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the share capital of the company paying the dividends;

(b) 10 per cent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.”

Paragraph 2 of Article 11 of the new DTA (“INTEREST”) limits the interest withholding taxes to be withheld by the Source State to a maximum of 10%.

Paragraph 2 of Article 12 of the new DTA (“ROYALTIES AND FEES FOR TECHNICAL SERVICES”) limits the withholding taxes to be withheld over Royalties and Fees for Technical Services by the Source State to a maximum of 10%.

Paragraph 3, sub-paragraph b of Article 12 of the new DTA (“ROYALTIES AND FEES FOR TECHNICAL SERVICES”) defines Fees for Technical Services as payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention.

The new DTA also contains an Article regarding Offshore Activities (Article 22). Furthermore the new DTA arranges for a Mutual Agreement Procedure (Article 25) as well as for the Exchange of Information (Article 26).

As stated above although the Convention has been signed it has not yet entered into force. For the Convention to enter into force the respective ratification procedures have to been finalized in both countries.

For further information click here to be forwarded to our Section DTAs. If you then click on Ireland you will be forwarded directly to the section of the website of the Irish Revenue where you can find the text of both the old and the new DTAs that Ireland has concluded with Pakistan.

Newly signed DTA with Zambia

The Convention between Ireland and the Republic of Zambia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains was signed on March 31, 2015.

Paragraph 3 of Article 5 of the new DTA (“PERMANENT ESTABLISHMENT”) determines that the term “permanent establishment” shall be deemed to include:

(a) a building site, a construction, assembly or installation project or any supervisory activity in connection with such site, project or activity, but only where such site, project or activity continues for a period of more than 183 days;

(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by an enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the Contracting State for a period or periods exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned;

(c) for an individual, the performing of services in a Contracting State by that individual, but only if the individual’s stay in that State, for the purpose of performing those services, is for a period or periods aggregating more than 183 days within any twelve-month period commencing or ending in the fiscal year concerned;

(d) an installation or structure used for the exploration for natural resources provided that the installation or structure continues for a period of not less than 183 days.

With respect to withholding taxes on dividends Paragraph 2 of Article 10 the new DTA (“DIVIDENDS”) a.o. determines the following:

Paragraph 2 of Article 11 of the new DTA (“INTEREST”) limits the interest withholding taxes to be withheld by the Source State to a maximum of 10% of the gross amount of the interest.

Paragraph 2 of Article 12 of the new DTA (“ROYALTIES”) limits the withholding taxes to be withheld over Royalties by the Source State to a maximum of 10% of the gross amount of the royalties.

The new DTA also contains an Article regarding Miscellaneous Rules Applicable to certain Offshore Activities (Article 21). Furthermore the new DTA arranges for a Mutual Agreement Procedure (Article 25) as well as for the Exchange of Information (Article 26).

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