Ministry of Finance (MoF) has completed arrangements for $ 600 million commercial loan from two Chinese banks. The funds will be used to finance the balance of payments deficit in addition to providing budgetary support, reported a national daily.
Under the Rules of Business, 1973, one of the ways the Finance Division meets current and development expenditure needs of the country is through arranging finances on commercial terms from international financial markets. Sources have confirmed the arrangement and negotiation process of two financing facilities of $ 300 million each (total $ 600 million) with Industrial Commercial Bank of China (ICBC) and Bank of China. In addition, the loan agreements have been given a go-ahead signal by the Ministry of Law and Justice from the legal point of view.
Federal Board of Revenue (FBR) has also granted necessary tax exemptions under the avoidance of double taxation agreement between Pakistan and China. According to FBR, interest will accrue to Bank of China in Pakistan under the Second Protocol to Avoidance of Double Taxation Agreement (ADTA) between Pakistan and China.
The sources said similar treatment is being accorded to the Industrial and Commercial Bank of China (ICBC) under the Third Protocol under avoidance of double taxation agreement between Pakistan and China. However, the Third Protocol has not been enforced as yet and likely to be enforced some time after its vetting from the Law Division. The Third Protocol will be enforced from the date of the receipt of the latter notification by the two countries.
FBR maintains that the matter concerning tax exemption of interest income arising in Pakistan for the ICBC and Bank of China has already been catered for in the protocols to the avoidance of double taxation agreement between the two countries.