Lanka, Bahrain ink deal for prevention of double taxation

Nethali STRUYS

International Monetary Co-operation Senior Minister Dr Sarath Amunugama said that around one million Sri Lankans are working in Middle East and the annual income is US$ six billion.

"The unknown fact is that all this money is being pumped to rural areas and is circulating in those areas," he said. The minister said so at the signing of an agreement for the prevention of double taxation.

Dr Amunugama signed on behalf of the government while Bahrain Finance Minister Sheikh Ahmad bin Mahamed al Khalifa on behalf of the Kingdom of Bahrain government.

"The Sri Lankan government has signed similar agreements with 40 countries and discussions have been made with another three countries," the minister said.

This agreement is generally consistent with Sri Lanka's recently concluded double tax avoidance treaties. As in those treaties, income from debt claims and royalties are to be taxed at a rate not exceeding 10 percent. If the beneficial owner is an entity wholly owned by the government, dividends tax shall not exceed five percent of the gross amount, if the beneficial owner is a company 7.5 percent, and 10 percent in all other cases.

Regarding the shipping profits, the source principle of taxation has been retained with reduction of tax charge on such profits by 50 percent considering the future prospects for the industry.

Dr Amunugama pointed out that 40,000 Sri Lankans are working in Bahrain. "It is expected that with the conclusion of this agreement, not only bilateral and economic relationships between the two countries, but also the flow of investment into the country will be enhanced," he added.