Sino-Lanka Double Taxation Relief Pact in force

The Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion between Sri Lanka and China entered into force on May 23, 2005, the Finance Ministry said yesterday.

In terms of Article 28 of the Agreement, its provisions will be applicable in Sri Lanka for the year of assessment commencing on April 1, 2006.

This Agreement falls broadly within the pattern of the agreements that Sri Lanka has concluded with other countries and provides incentives to stimulate investment and transfer of technology into the country.

This agreement provides for exemption of profits from the operation of airlines in international traffic, at the source country and taxation of profits from the operation of ships at the source country subject to a reduction by 50 per cent of the tax so charged.

Provision has also been made in the agreement to grant tax sparing credit for 10 years from the date of enforcement of the agreement, which period may be extended by mutual agreement of two competent authorities.

The agreement also provides for the exchange of information between Sri Lanka and China to facilitate the enforcement of the provisions of the agreement and also to assist in the prevention of fiscal evasion with respect to taxes on income.The following rates of tax on dividends, interest and royalties have been provided under this agreement.

Dividend - 10 per cent

Interest - 10 per cent (Interest derived by the Government, and by any resident as may be agreed upon by the two Governments with respect to debt-claims indirectly financed by the other Government or Government owned institutions is exempt.)

Royalties - 10 per cent