Article 14 Capital Gains 1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other Contracting State. 2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other Contracting State. 3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation f such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that Contracting State. 5. Gains from the alienation of shares other than those mentioned in paragraph 4 representing a participation of at least 25 per cent in a company which is a resident of a Contracting State may be taxed in that Contracting State. 6. Gains derived by a resident of a Contracting State from the alienation of any property other than that referred to in paragraphs 1 to 5 and arising in the other Contracting State may be taxed in that other Contracting State. Article 15 Independent Personal Services 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that Contracting State except in one of the following circumstances, when such income also be taxed in the other Contracting State: (a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or (b) if his stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days in the calendar year concerned; in that case, only so much of the income as is derived from his activities performed in that other Contracting State may be taxed in that other Contracting State. 2. The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. Article 16 Dependent Personal Services 1. Subject to the provisions of Article 17, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other Contracting State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other Contracting State. 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. Article 17 Director's Fees 1. Director's fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of directors of a company which is a resident of the other Contracting State may be taxed in that other Contracting State. 2. Salaries, wages and other similar remuneration derived by a resident of a Contracting State in his capacity as an official in a top-level managerial position of a company which is a resident of the other Contracting State may be taxed in that other Contracting State. Article 18 Artistes and Athletes 1. Notwithstanding the provisions of Articles 15 and 16, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other Contracting State. 2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised. 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, income derived from such activities as are referred to in paragraph 1, performed under a cultural agreement or arrangement between the Contracting States shall be exempt from tax in the Contracting State in which the activities are exercised if the visit to that state is wholly or substantially supported by public or government funds of either Contracting State. Article 19 Pensions 1. Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that Contracting State. 2. Notwithstanding the provisions of paragraph 1, pensions paid and other similar payments made by the Government of a Contracting State or a local authority thereof under a public welfare scheme of the social security system of that Contracting State shall be taxable only in that Contracting State. Article 20 Government Service 1. (a) Remuneration, other than pension, paid by the Government of a Contracting State or a local authority thereof to an individual in respect of services rendered to the Government of that Contracting State or a local authority thereof, in the discharge of functions of a governmental nature, shall be taxable only in that Contracting State. (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State who: (i) is a national of that other Contracting State; or (ii) did not become a resident of that other Contracting State solely for the purpose of rendering the services. 2. (a) Any pension paid by, or out of funds to which contributions are made by, the Government of a Contracting State or a local authority thereof to an individual in respect of services rendered to the Government of that Contracting State or a local authority thereof shall be taxable only in that Contracting State. (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other Contracting State. 3. The provisions of Articles 16, 17, 18 and 19 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by the Government of a Contracting State or a local authority thereof. Article 21 Teachers and Researchers 1. An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is present in the first-mentioned Contracting State for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or educational institution or scientific research institution accredited by the Government of the first-mentioned State shall be exempt from tax in the first-mentioned Contracting State, for a period of two years from the date of his first arrival in the first-mentioned Contracting State, in respect of remuneration for such teaching, lectures or research, and other income received outside the first-mentioned Contracting State. 2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons. Article 22 Students and Trainees A student, business apprentice or trainee who is or was immediately before visiting a Contracting State a resident of the other Contracting Stated and who is present in the first-mentioned State solely for the purpose of his education, training shall be exempt from tax within a period of five years from the date of his first arrival in that first-mentioned State on the following payments or income received or derived by him for the purpose of his maintenance, education or training: (a) payments derived from sources outside that Contracting State for the purpose of his maintenance, education, study, research or training; (b) grants, scholarships or awards supplied by the Government, or a scientific, educational, cultural or other tax-exempt organization; and (c) income derived from personal services performed in that Contracting State. Article 23 Other Income 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that Contracting State. 2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply. 3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may be taxed in that other Contracting State. Article 24 Elimination of Double Taxation 1. In Pakistan, double taxation shall be eliminated as follows: (a) Subject to the provisions of the laws of Pakistan, regarding the allowance as a credit against Pakistan tax, the amount of Chinese tax payable, under the laws of China and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of Pakistan, in respect of income derived from China, shall be allowed as a credit against the Pakistan tax payable in respect of such income. The amount of credit, however, shall not exceed the amount of the Pakistan tax on that income computed in accordance with the taxation laws of Pakistan. (b) Where the income derived from China is a dividend paid by a company which is a resident of China to a company which is a resident of Pakistan and which owns not less than 10 per cent of the shares of the company paying the dividend, the credit shall take into account the tax paid to China by the company paying dividend in respect of its income. (c) For the purpose of sub-paragraphs (a) and (b), Chinese tax paid shall include the amount of Chinese tax which would have been paid if the Chinese tax had not been exempted, reduced or refunded in accordance with: (i) Article 5 and 6 of the Income Tax law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment and Article 3 of the Detailed Rules and Regulations for the implementation of the Income Tax law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment; (ii) Articles 4 and 5 of the Income Tax Law of the People's Republic of China concerning Foreign Enterprises; (iii) Articles 1, 2, 3, 4 and 10 of Part 1, Articles 1, 2, 3, and 4 Part 2 and Article 1, 2 and 3 of Part 3 of the interim provisions of the State Council of the People's Republic of China on Reduction in or Exemption from Enterprise Income Tax and the Consolidated Industrial and Commercial Tax for Special Economic Zones and Fourteen Coastal Cities; (iv) Articles 12 and 19 of the State Council Regulations for the Encouragement of Investment in the Development of Hainan Island; (v) Articles 8, 9 and 10 of the State Council Regulations concerning the Encouragement of Foreign Investment; and (vi) Articles 1, 2 and 3 of the Interim Provisions of the Ministry of Finance of the People's Republic of China regarding (reduction in or exemption from) Enterprise Income Tax and Industrial and Commercial Consolidated Tax for Encouraging Foreign Investment in the Coastal Open Economic Areas; (vii) any other similar special incentive measures designed to promote economic development in the People's Republic of China which may be introduced in the laws of the People's Republic of China after the date of signature of this Agreement, and which may be agreed upon by the competent authorities of the Contracting States. 2. In the case of China, double taxation shall be eliminated as follows: (a) Where a resident of China derives income from Pakistan of this Agreement, may be credited against the Chinese tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Chinese tax on that income computed in accordance with the taxation laws and regulations of China. (b) Where the income derived from Pakistan is a dividend paid by a company which is a resident of Pakistan to a company which is a resident of China and which owns not less than 10 percent of the shares of the company paying the dividend, the credit shall take into account the tax paid to Pakistan by the company the dividend in respect of its income. (c) For the purpose of sub-paragraphs (a) and (b), Pakistan tax paid shall include: (i) the amount of Pakistan tax which would have been paid if the Pakistan tax had not been exempted, reduced or refunded in accordance with the tax incentives granted under Pakistan Income Tax Ordinance, 1979, as amended from time to time; (ii) any other similar special incentive measures designed to promote economic development in the Islamic Republic of Pakistan which may be introduced in the laws of the Islamic Republic of Pakistan after the date of signature of this Agreement, and which may be agreed upon by the competent authorities of the Contracting States. 3. In the application of paragraph 1 (c) or paragraph 2 (c) of this Article in relation to dividend, interest, royalty income and fees for technical services to which Articles 10, 11, 12 and 13 respectively apply, the amount of Pakistan tax or Chinese tax shall be deemed to be the amount equal to: (i) in the case of dividends, 15 per cent of the gross amount of such dividends; (ii) in the case of interest, 10 per cent of the gross amount of such interest; (iii) in the case of royalties, 15 per cent of the gross amount of such royalties; and (iv) in the case of fees for technical services, 15 per cent of the gross amount of such fees. Article 25 Non-Discrimination 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other Contracting State in the same circumstances are or may be subjected. The provisions of this paragraph shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other Contracting State than the taxation levied on enterprises of that other Contracting State carrying on the same activities. 3. Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, apply interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. 4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. 5. Nothing contained in the preceding paragraphs of this Article shall be construed as obliging either of the Contracting States, to grant to a resident of the other Contracting State those allowances, relief, reductions, credits and rebates for tax purposes which are by law available only to resident of the Contracting State. Article 26 Mutual Agreement Procedure 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the provisions of this Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in this Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities shall through consultations develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article. Article 27 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agreement, insofar as the taxation thereunder is not contrary to this Agreement, in particular for the prevention of evasion of such taxes. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws and the administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). Article 28 Diplomatic Agents and Consular Officers Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officers under general rules of international law or under the provisions of special agreement. Article 29 Entry into Force Each of the Contracting States shall notify to the other the completion of the procedures required by its law for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications and shall thereupon have effect: (a) in Pakistan: (i) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of July of the year next following that in which the Agreement enters into force; and (ii) in respect of other taxes for assessment years beginning on or after the first day of July of the year next following that in which the Agreement enters into force. (b) in China: (i) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of July of the year next following that in which the Agreement enters into force; and (ii) in respect of other taxes for taxation years beginning on or after the first day of January of the year next following that in which the Agreement enters into force. Article 30 Termination This Agreement shall continue in effect indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give written notice of termination to the other Contracting State through the diplomatic channel. In such event this Agreement shall cease to have effect as respects income derived during the taxable years beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given. DONE at Islamabad, this 15th day of November, 1989, in duplicate in the English and Chinese languages, both texts being equally authentic. For the Government of the People's For the Government of the Islamic Republic of China Republic of Pakistan