TMI BlogConvention for avoidance of Double Taxation between Republic of India and Republic of Sri LankaX X X X Extracts X X X X X X X X Extracts X X X X ..... alist Republic of Sri Lanka for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital The Government of the Republic of India and the Government of the Democratic Socialist Republic of Sri Lanka desiring to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, 2 [ HAVE AGREED as ] follows: ARTICLE 1 Personal Scope This convention shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 2 Taxes Covered 1. This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation. 3. The existing taxes to which this Convention shall apply 3 [ are- ] (a) In Sri Lanka: (i) the income-tax, including the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject of this Convention. ARTICLE 4 Fiscal Domicile 1. For the purposes of this Convention, the term resident of a Contracting State means any person who, under the law of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein. 2. Where by reason of the provisions of paragraph (1) of this article an individual is a resident of both Contracting States, then his status shall be determined as follows: (a) he shall be deemed to be a resident of the State in which he has a permanent home available to him. If he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests); (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a preparatory or auxiliary character in the trade or business of the enterprise. 4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph (6) of this Article applies-shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise. 5. 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 independent status to whom paragraph (6) of this Article applies. 6. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that State through a broker, general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the same or similar kind as those sold through that permanent establishment, or (c) other business activities carried on in that other State of the same or similar kind as those effected through that permanent establishment. The provisions of sub-paragraphs (b) and (c) above shall not apply if the enterprise proves that such sales or activities are not attributable to the permanent establishment. 2. Subject to the provisions of paragraph (3) of this Article, 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 the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARTICLE 8 Shipping and Air Transport 1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 2. Notwithstanding the provisions of paragraph (1), profits derived from the operation of ships in international traffic may be taxed in the Contracting State in which such operation is carried on; but the tax so charged shall not exceed 50 per cent. of the tax otherwise imposed by the internal law of that State. Provided that for the purpose of the calculation of the tax, such profits shall be deemed to be an amount not exceeding the rates presently provided in the taxation laws of the respective States for the computation of such profits. 3. The provisions of paragraphs (1) and (2) of this Article shall likewise apply in respect of profits from the participation in a pool, a joint business or an international operating agency of any kind by enterprises engaged in the operation of ships or aircraft in international traffic. 4. For the purpose of paragraph 1, interest on funds conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paying the dividends is a resident and according to the laws of that State, but the tax so charged shall not exceed 15 per cent. of the gross amount of the dividends. 3. The term dividends as used in this Article means income from shares, mining shares, founders' 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 taxation law of the State of which the company making the distribution is a resident. 4. The provisions of paragraphs (1) and (2) of this Article 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 and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and interest is borne by such permanent establishment, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated. 7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. ARTICLE 12 Royalties 1. Royalties arising in a contracting State and paid to a resident of the other Contracting Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting State, due regard being had to the other provisions of this Convention. ARTICLE 13 Capital gains 1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in paragraph (2) of Article 6 and situated in the other Contracting State may be taxed in that other 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 (including such gains from the alternation of such a permanent establishment alone or with the whole enterprise), may be taxed in that other State. 3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of 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 stocks/shares of a company may be taxed in the Contracting State in which they have been issued. 5. Gains from the alienation of any property other than that referred to in paragraphs (1) to (4) of this A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees Directors' 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 State. ARTICLE 17 Artistes and Athletes 1. Notwithstanding the provisions of Articles 14 and 15, income derived by public entertainers (such as theatre, motion picture, radio or television artistes and musicians) or athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. Provided that such income shall not be taxed in the said Contracting State if the visit of the public entertainers or athletes to that State is directly or indirectly supported wholly or substantially, from the public funds of the Government of the 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, 14 and 15, be taxed in the Contracting State in which the activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately before such visit was a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration for such teaching or research. ARTICLE 21 Students and Apprentices 1. Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State. 2. In respect to grants, scholarships and remuneration from employment not covered by paragraph (1) of this Article a student or business apprentice described in paragraph (1) of this Article shall, in addition, be entitled during such education or training to the same exemptions, reliefs or reductions in respect of taxes available to residents of the State which he is visiting. ARTICLE 22 Other Income Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, the credit aforesaid shall be allowed in the first instance against income-tax payable by the company in India, and as to the balance, if any, against surtax payable by it in India. 3. For the purposes of paragraph (2) of this Article, the term Sri Lanka tax payable shall be deemed to include any amount which would have been payable as Sri Lanka tax for any year but for an exemption or reduction of tax granted for that year or any part thereof under: (a) any of the following provisions, that is to say sections 11, 16, 17, 18, 19, 20, 21, 22 and 85 of the Sri Lanka Inland Revenue Act, No. 28 of 1979 so far as they were in force on and have not been modified since, the date of the signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or (b) any agreement entered into under section 17 of the Greater Colombo Economic Commission Law No. 4 of 1978; or (c) any other provisions which may subsequently be made granting an exemption or reduction of tax which is agreed by the competent authorities to be of a substantially similar character, if it has not been modified thereafter or has been modified only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 3. Except where the provisions of paragraph (1) 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. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State. 4. Enterprises of a Contracting State, the capital of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in this Article. In addition, a competent authority may devise appropriate unilateral procedures, conditions, methods and techniques to facilitate the above-mentioned bilateral actions and the implementation of the mutual agreement procedure. 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 Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention, in so far as the taxation thereunder is not contrary to the Convention in particular for the prevention of fraud or 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 in the same manner as information obtained under the domestic laws of that State. However, if the information is originally regarded as secret in the transmitting State it 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as respects taxes on income to which the present Convention applies in accordance with the provisions of paragraph (2) of this Article. ARTICLE 30 Termination This Convention shall remain in force indefinitely but either Contracting State may, on or before June 30, in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State, through diplomatic channels, written notice of termination. In such event, the Convention shall cease to have effect-- (a) In Sri Lanka-- (i) in respect of income assessable for any year of assessment commencing on or after 1st April in the calendar year next following that in which such notice is given; (ii) in respect of capital assessable for any year of assessment commencing on or after 1st April in the calendar year next following that in which such notice is given. (b) In India-- (i) in respect of income assessable for the assessment year commencing on the 1st day of April in the second calendar year next following the calendar year in which the notice is given, and subsequent years; (ii) in respect of capital assessable for any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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