TMI BlogAgreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries - Sri LankaX X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government hereby notifies that the provisions of DTAA annexed hereto shall be given effect to in the Union of India with effect from the 1 st day of April, 2014. [F. NO. 501/10/1995-FTD-I] Annexure AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Democratic Socialist Republic of Sri Lanka, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes. on income and with a view to promoting economic cooperation between the two countries, have agreed as follows: ARTICLE I PERSONS COVERED This Agreement shall apply to persons who are residents of one or both of the Contracting States. Article 2 TAXES COVERED 1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate for tax purposes; (f) the term enterprise applies to the carrying on of any business; (g) the terms enterprise of a Contracting State and enterprise of the other Contracting State mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; (h) the term international traffic means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; (i) the term competent authority means: (i) in India: The Finance Minister, Government of India, or his authorized representative; (ii) in Sri Lanka: The Commissioner General of Inland Revenue; (j) the term national means:- (i) any individual possessing the nationality of a Contracting State; (ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State; (k) the term tax means Indian tax or Sri Lanka tax, as-the context requires, but shall not include any amount which is payable in ' respect of any default or omissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 1, a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall settle the question by mutual agreement. Article 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term permanent establishment includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on; (h) a sales outlet ; (i) a warehouse in relation to a person providing storage facilities for others. 3. (a) A building site or construction, installation or assembly project or a drilli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph, or (b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; (c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise or for the enterprise and other enterprises which are controlling, controlled by , or subject to the same common control as that enterprise. 6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies. 7. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ships in international traffic may be taxed in the first mentioned State, but the tax so charged shall be reduced by an amount equal to 50 per cent thereof. 3. If the place of effective management of a shipping enterprise is aboard a-ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident. 4. Profits derived by a transportation enterprise which is a resident of a Contracting State from the use, maintenance, or rental of containers (including trailers and other equipment for the transport of containers) used for the transport of goods or merchandise in international traffic which is incidental to its international operations of aircrafts or, ships shall be regarded as profits derived from the operation of such aircrafts or ships in international traffic and would be taxed subject to the provisions of paragraph 1 and 2 respectively, unless the containers are used solely within the other contracting State. 5. For the purposes of this Article interest on investments directly connected with the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 7.5 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 3. The term dividends as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest for the purpose of this Article. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest in paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is a resider of that State. Where, however, the person paying the interest, whether he is resident of a Contracting State or not, has in a 'Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then, such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, or performs that other State independent personal services from a fixed base situated therein and the right or property in respect of which the royalties or fees for technical service( are paid is effectively connected with such permanent establishment or fixed base. such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. (a) Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties fees for technical services, whether he is a resident of a Contracting State or nc has in a Contracting State a permanent establishment or a fixed base connection with which the liability to pay the royalties or fees for technic services was incurred, and such royalties or fees for technical services are borrow by such permanent establishment or fixed base, then such royalties or fees f technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. (b) Where under sub-paragraph (a) royalties or fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident of a Contracting State may be taxed in that State. 6. Gains from the alienation of any property other than that referred to in paragraphs 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is resident. Article 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State: (a) if he has a fixed base regularly available to him in the other Contracting State 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 State; or (b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal activities exercised by an artiste or a sportsperson in his capacity as such accrues not to the artiste or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the artistes or sportsperson are exercised. 3. The provisions of paragraphs I and 2, shall not apply to income from activities performed in a Contracting State by artistes or sportspersons if the activities are substantially supported by public funds of one or both of the Contracting States or of political subdivisions or local authorities thereof. In such a case, the income shall be taxable only in the Contracting State of which the artist or sportsperson is a resident. Article 18 PENSIONS AND ANNUITIES 1. Subject to the provisions of paragraph. 2 of Article 19, pensions and other similar remuneration and any annuities paid to a resident of a Contracting State in consideration of past employment and any annuity paid to such a resident shall be taxable only in that State. 2. The term annuity means a stated sum payable periodically at stated times during life or during a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting State in the fiscal year in which he visits the other Contracting State or in the immediately preceding fiscal year. 3. For the purposes of paragraph 1 approved institution means an institution which has been approved in this regard by the Government of the concerned Contracting State. Article 21 STUDENTS 1. A student who is or was a resident of one of the Contracting States immediate before visiting the other Contracting State and who is present in that other Contracting State solely for the purpose of his education or training shall, beside grants, scholarships and any payments received from sources outside that State the purpose of his maintenance, education or training, be exempt from tax in the other Contracting State on remuneration which he derives from an employment which he/she exercises in the other Contracting State if the employment is directly related to his studies. 2. The exemption available under paragraph 1 above in respect of remuneration from employment shall not exceed an amount equal to US$ 3000/- per annum. 3. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India is exempt from tax in India, India may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. 3. In Sri Lanka: (a) Where a resident of Sri Lanka derives income which, in accordance with the provisions of this Agreement, may be taxed in India, Sri Lanka shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in India. Such deduction shall not, however, exceed that portion of the tax as. computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in India. (b) Where in accordance with any provision of, the Agreement, income derived by a resident of Sri Lanka is exempt from tax in Sri Lanka, Sri Lanka may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. Article 24 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 require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult 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 24, 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 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 resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified copies of the documents) 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). 4. If information is requested by a Contracting State in accordance with this Article, the. other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of paragraph 3 or 4 shall not, in that Contracting State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that Contracting State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that Contracting State, have any priority applicable to that revenue claim under the laws of the other Contracting State. 7. Proceedings with respect to the existence, validity or the amount, of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that Contracting State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State. 8. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned Contracting State, the relevant revenue claim ceases to be: (a) in the case of a request under paragraph 3, a revenue claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock exchanges, or (ii) at least 50% of the aggregate vote or value of the shares in the company is owned directly or indirectly by one or more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50% of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individual residents of either of the Contracting States, or (c) a partnership or association of persons, at least 50% or more of whose beneficial interests is owned by one or more individual residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50% of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individual residents of either of the Contracting States, or (d) A charitable institution or any other tax-exempt entity whose main activities are carried on in either of the Contracting States. Provided that the persons mentioned above will not be entitled to the benefits of the Agreement if more than 50% of the person& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes to avoid taxes to which this Agreement applies. Article 29 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements. Article 30 ENTRY INTO FORCE 1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Agreement. 2. This Agreement shall enter into force on the date of the later of the notifications referred to in paragraph 1 of this Article. 3. The provisions of this Agreement shall have effect: (a) In India, in respect of income derived in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force; and (b) In Sri Lanka, in respect of income derived in any taxable year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force. 4. The Convention between the Government of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the total amount received by the enterprise, but shall be determined only on the basis of that part of the receipts which is attributable to the actual activity of the permanent establishment for such sales or business. Likewise in the case of contracts for survey, supply, services, constructions or installations, when the enterprise has a permanent establishment, the profits of such permanent establishment shall not be determined on the total amount of the contract, but shall be determined only on the basis of that part of the contract which is effectively carried out by the permanent establishment in the Stat, where the permanent establishment is situated. (ii) It is understood that in relation to this Agreement if at any time the provisions c the domestic law of a Contracting State are more beneficial to a resident of the other Contracting State, then such more beneficial provisions of the domestic shall prevail over the provisions of this Agreement. (iii) It is understood that, in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
