CONVENTION
Between the Government of the Grand Duchy of Luxembourg and the Government of the
Democratic Socialist Republic of Srilanka for the avoidance of double taxation and the prevention of fiscal tax evasion
with respect to taxes on income and on capital and the Protocol thereto, signed in Luxembourg, January 31, 2013

 

The Government of the Grand Duchy of Luxembourg 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, 

Have agreed as follows

Article 1

Persons covered

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 a Contracting State, its political subdivisions or local authorities, irrespective of the system of collection.

 

2.   The term “tax on income and capital” shall mean any tax imposed on total income, on total capital, or on elements of income Taxes on total income, on total wealth, or on items of income or wealth, including taxes on gains from the alienation of movable or immovable property of movable or immovable property, taxes on the total amount of salaries paid by enterprises, as well as taxes on capital gains

 

3. The existing taxes to which the Convention shall apply are in particular

(a) in the Grand Duchy of Luxembourg:

(i) the personal income tax;

(ii) corporate income tax;

(iii) the wealth tax; and

(iv) the municipal business tax;

(hereinafter referred to as “Luxembourg tax”);

(b) in the Democratic Socialist Republic of Sri Lanka:

(i) income tax, including income tax calculated on the turnover of enterprises having entered into an agreement with the Ministry of Investment (Board of Investment);

(hereinafter referred to as “Sri Lankan tax”).

 

4. The Convention shall also apply to any identical or substantially similar taxes imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall inform each other of significant changes in their tax laws.

Article 3

General Definitions

1. For the purposes of this Convention, unless the context otherwise requires

 

(a) “Luxembourg” means the Grand Duchy of Luxembourg and, when used in a geographical sense, means the territory of the Grand Duchy of Luxembourg;

(b) “Sri Lanka” means the territory of the Democratic Socialist Republic of Sri Lanka, including the land territory, internal waters and territorial waters, the airspace above them, as well as the exclusive economic zone and the continental shelf over which the Democratic Socialist Republic of Sri Lanka exercises or may exercise sovereign rights and judicial authority in accordance with international law and its national legislation;

(c) the terms “a Contracting State” and “the other Contracting State” mean, as the context requires, Luxembourg or Sri Lanka;

(d) the term “person” includes an individual, a company and any other body of persons;

(e) “corporation” means any body corporate or any entity which is treated as a body corporate for tax purposes

(f) 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 a resident of the other Contracting State;

(g) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise having its place of effective management in a Contracting State, except where the ship or aircraft is not operated by a company having its place of effective management in a Contracting State.

(h) the term “competent authority” means:

(i) in Luxembourg, the Minister of Finance or his authorized representative;

(ii) in Sri Lanka, the Commissioner-General of Inland Revenue or an authorized representative of the Commissioner

 

(i) the term “national” means:

(i) any natural person who is a national 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;

(j) the term “tax” means Sri Lankan tax or Luxembourg tax, as the context requires, but does not include any amount that is payable in respect of any failure or omission in relation to the taxes to which this Convention applies or which represents a penalty or fine imposed in respect of such taxes.

 

2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the term has, unless the context otherwise requires, the meaning which it has at that time under the law of that State concerning the taxes of that State in relation to the taxes to which the Convention applies, the meaning of such term under the tax law of that State prevailing law of that State shall prevail over the meaning given to such term or expression under other laws of that State.

 

Article 4

Resident

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who under the laws of that State is liable to tax in that State by reason of his domicile, residence, place of registration, place of management or any other criterion of a similar nature and shall also apply to that State and to any of its State and any political subdivision or local authority thereof. However, this expression does not include persons who are subject to tax in that State in respect only of income from sources in that State or on capital situated therein.

 

2. Where, under the provisions of paragraph 1, an individual is a resident of both Contracting States his status shall be determined as follows

(a) he shall be deemed to be a resident only 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 only of the State with which he has a permanent home available to him resident only of the State with which his personal and economic relations are closer (center of vital interests);

(b) if the State in which such person has his center of vital interests cannot be determined, or if he has no permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he is the State in which he has a habitual abode

(c) if such person is ordinarily present in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national

(d) if such person is a national of both States or of neither, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both States, he shall be deemed to be a resident only of the State in which his 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 If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall endeavor to settle the question by mutual agreement.

Article 5

Permanent Establishment

1. For the purposes of this Convention, 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 in particular:

(a) a place of management,

(b) a branch office

(c) an office,

(d) a factory,

(e) a workshop, and

(f) a mine, oil or gas well, quarry or other places of extraction of natural resources.

 

3. The term “permanent establishment” also includes:

(a) a construction or assembly site, dredging, drilling rig or vessel used for the exploration or development of natural resources, including monitoring activities carried out thereon, but only where such site or activities continue for a period of more than 183 days within any twelve-month period;

(b) the supply of services, including consulting services, by an enterprise acting through employees or other personnel engaged by the enterprise for that purpose, but only where activities of that continue in the State for a period or periods totaling more than 183 days within any twelve-month period.

4. Notwithstanding the foregoing provisions of this Article, the term “permanent establishment” shall be deemed not to include

(a) use is made of facilities solely for the purpose of storing or displaying goods or merchandise belonging to the enterprise;

(b) goods or merchandise belonging to the enterprise are stored or displayed solely for the purpose of storage or display

(c) goods belonging to the business are stored solely for the purpose of processing by another business;

(d) a fixed place of business is used solely for the purpose of purchasing goods or gathering information for the enterprise;

(e) a fixed place of business is used solely for the purpose of carrying on any other activity of a preparatory or auxiliary character for the enterprise

(f) a fixed place of business is used solely for the purpose of carrying on the activities referred to in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from such combination remains of a preparatory or auxiliary character.

 

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person, other than an agent with independent status to whom paragraph 7 applies – acts in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise if that person

(a) has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless the activities of such persons are limited to those mentioned in paragraph 4 and which, if carried on through a fixed place of business, would not enable that place of business to be regarded as a permanent establishment under the provisions of that paragraph, or

(b) not having such power, it habitually keeps in the first-mentioned State a stock of goods or merchandise from which it regularly removes goods or merchandise for delivery on behalf of the enterprise.

 

6. Notwithstanding the foregoing provisions of this Article, an insurance enterprise of a Contracting State shall, except in the case of reinsurance, be deemed to have be deemed, except in the case of reinsurance, to have a permanent establishment in the other Contracting State, if it collects premiums in the territory of that other State or insures risks therein through a person other than an agent of an independent status to whom paragraph 7 applies.

 

7. 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 commission agent or any other agent of an independent status to whom paragraph 7 applies. agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, where the activities of such an agent are carried on exclusively or almost exclusively on behalf of the account of that enterprise, and where, in their commercial and financial relations, the conditions agreed upon or imposed between that enterprise and the agent differ from those which would be agreed upon between independent enterprises, he shall not be considered an independent agent within the meaning of this paragraph.

 

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is resident of the other Contracting State or carrying on business in that other State (whether through a permanent establishment The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise) shall not of itself constitute a permanent establishment of the other company.

 

Article 6

Income from Real Property

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other Contracting State.

 

2. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property concerned is situated. The term shall, in any case, include property accessory to immovable property, livestock and equipment used in agriculture and forestry rights to which the provisions of private law respecting landed property, the usufruct of immovable property and rights to payments for rights to variable or fixed payments for the exploitation or concession of the exploitation of mineral deposits, springs and mineral deposits, springs and other natural resources; ships, boats and aircraft are not considered to be ships, boats and aircraft are not considered as real estate.

 

3. The provisions of paragraph 1 shall apply to income derived from the direct operation, rental or leasing, and any other form of exploitation of real property.

 

4. The provisions of paragraphs 1 and 3 shall also apply to income from immovable property of an enterprise and to income from immovable property used for the exercise of a self-employed profession.

 

Article 7

Business profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business in such a manner, the profits of the enterprise may be taxed in the other State but only to the extent that they are attributable to that permanent establishment.

 

2. Subject 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 Contracting State, 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 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 part. The taxpayer shall be deemed to have paid the tax on the profits which it would have realized if it had constituted a 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 incurred for the purposes of a permanent establishment, including executive and general administrative expenses incurred, either in the State in which incurred either in the State in which such permanent establishment is situated or elsewhere. However, no deduction shall be allowed for sums that may be paid (other than as reimbursement for expenses incurred) by the permanent establishment to the head office of the enterprise or to any of its offices, as royalties or other similar payments, for the use of patents or other rights, or as a commission, for specific services rendered or for services rendered or for management activity or, except in the case of a banking enterprise, as interest on money lent to the enterprise. on sums lent to the permanent establishment. In the same way, sums (other than those of a banking enterprise) shall not be taken into account in computing the profits of a permanent establishment. (other than reimbursement of expenses incurred) charged by the permanent establishment to the head office of the taxpayer is entitled to the benefit of the taxpayer in respect of the taxable income of the taxpayer’s permanent establishment or other similar payments, for the use of patents or other rights, or as a commission for specific services rendered or for services rendered or for management activity or, except in the case of a banking enterprise, as interest  money loaned to the head office of the company or any of its other offices.

 

4. If it is customary in a Contracting State to determine the profits attributable to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall not prevent that Contracting State from determining the taxable profits according to the customary apportionment; the method of apportionment method of apportionment adopted shall, however, be such that the result is in accordance with the principles contained in this Article.

 

5. No profit shall be attributed to a permanent establishment by reason of its having merely purchased goods or merchandise for the enterprise.

 

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined annually using the same method, unless there is good and sufficient reason to the contrary.

 

7. Where profits include items of income which are dealt with separately in other Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

 

Article 8

Maritime and Air Navigation

1. Profits 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 from the operation of ships in international traffic may be taxed in the Contracting State in which such operations are carried on, but the tax so charged shall not exceed 50 percent of the tax otherwise imposed by the domestic law of that State.

 

3. If the place of effective management of a shipping enterprise is on board a ship, that place of effective management shall be deemed to be in the Contracting State in which the home port of that ship is situated, or in the absence of a homeport in the Contracting State of which the operator of the ship is a resident.

 

4. The provisions of paragraphs 1 and 2 shall also apply to profits derived from participation in a pool, a joint business or an international operating agency.

Article 9

Associated enterprises

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and of an enterprise of the other Contracting State,

and in either case the two enterprises are connected in their commercial or financial relations by conditions agreed upon or imposed which differ from those which would be agreed upon between independent profits which, but for those conditions, would have been earned by one of the enterprises but could not in fact have been earned by the other by reason of those conditions, may be included in the profits of that enterprise and taxed accordingly.

 

2. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has profits on which an enterprise of the other Contracting State has been taxed in that other State, and the profits so included are profits that included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions agreed upon between the two enterprises had been those which would have been agreed upon between independent enterprises, the other State shall make an appropriate adjustment to the amount of tax imposed therein on such profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and, if necessary, the competent authorities of the Contracting States shall consult each other.

 

Article 10

Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

 

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other the tax so charged shall not exceed

(a) 7.5 percent of the gross amount of the dividends, if the beneficial owner is a company (other than a partnership) that owns directly at least 25 percent of the capital of the company paying the dividends;

(b) 10 percent of the gross amount of the dividends, in all other cases.

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 beneficial interests shares, with the exception of debt claims, as well as income from other shares which is subject to the same tax regime 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, either a business activity through a permanent establishment situated therein, or by means of a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, 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 not impose any tax on dividends paid by the company except to the extent that such dividends are paid to a resident of the other State paid to a resident of that other State or to the extent that the holding in respect of which the dividends is effectively connected with a permanent establishment or a fixed base situated in that other State, or any tax on the undistributed profits of the company by way of taxation on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in of that other State.

 

Article 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the interest.

 

3. Notwithstanding the provisions of paragraph 2, the interest referred to in paragraph 1 shall be taxable only in the Contracting State of which the recipient of the interest is a resident if the beneficial owner of the interest is a resident of that State, and:

(a) is that State or its central bank, political subdivision or local authority;

(b) if the interest is paid on a loan, claim or credit that is due to or made, granted, guaranteed or insured by this State or by a political subdivision, local government or export financing agency of this State.

 

(4) The term “interest” as used in this section means income from debt obligations of every kind, whether or not secured by mortgage or otherwise, and includes income from public funds and bonds, including premiums and prizes attached thereto. Penalties for late payment shall not be penalties for late payment shall not be considered as interest within the meaning of this section.

 

5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, exercises of a Contracting State carries on business in the other Contracting State in which the interest arises through a business through a permanent establishment situated therein, or performs in the other Contracting State in which the interest arises independent personal services from a fixed base situated therein. a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such fixed base. In this 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 resident of that State. However, where the payer of the interest, whether he is a 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 who bears the expense of that interest, such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and persons, the amount of interest, having regard to the debt-claim for which it is paid, exceeds that which would the debtor and the beneficial owner would have agreed in the absence of such relationship, the provisions of this article shall apply only to the latter 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 State may be taxed in that other State.

 

2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of that State, the royalties may be taxed of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the shall not exceed 10 percent of the gross amount of such royalties.

 

3. The term “royalties” as used in this Article means payments of any kind received for the use of, or the right to use, any copyright in any literary, artistic or scientific work, including motion pictures or films or tapes for television or radio, a patent, a trademark, a design or copyright. design or model, computer software, a secret plan, formula or process, and for information relating to industrial, commercial or scientific experience.

 

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, either business activity through a permanent establishment situated therein, or performing independent personal services from a fixed base situated therein.

the right or property in respect of which the royalties are 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.

 

5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. However, where the person paying the royalties, whether he is a resident of a Contracting State a permanent establishment or a fixed base in connection with which the liability giving rise to the payment of the royalties was incurred and which bears the expense of such royalties, such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and  the amount of the royalties, taking into account the performance for which they are paid, exceeds the amount that would have been agreed upon by the obligor and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the latter amount. In such case, the excess part of the payments shall remain payments shall remain taxable according to the laws of each Contracting 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 real property referred to in 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, or movable property pertaining to a fixed base of which a resident of property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services including such gains from the alienation of that permanent establishment (alone or with the whole enterprise) or of that enterprise) or fixed base, may be taxed in that other State.

 

3. Gains derived by a resident of a Contracting State from the alienation of shares or other equity interests participating in profits of a company which derives more than 50 percent of its value directly or indirectly from real property situated in the other Contracting State may be taxed in that other State. However, this paragraph shall not apply to gains from the alienation of shares

(a) that are listed on a recognized stock exchange in one of the States; or

(b) that are disposed of or exchanged in connection with a corporate reorganization, merger, split-off or similar transaction; or

(c) at least 75 percent of the value of which is derived from real property in which the corporation conducts its business; or

(d) owned by a person who directly owns less than 75 per cent of the capital of the corporation whose shares were disposed of.

 

4. Gains from the alienation of ships or aircraft operated in international traffic or movable property 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 management of the enterprise is situated.

 

5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 4 shall be taxable only in the Contracting State of which the transferor is a 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 or other independent activities of a similar character shall be taxable only in that State; However, such income may also be taxed in the other Contracting State if

(a) if such resident has a fixed base regularly available in the other Contracting State for the purpose of performing his activities; in that case, only that part of the income which is attributable to that fixed base may be taxed in that other State; or

(b) if his stay in the other Contracting State extends over a period or periods equal to or exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the in which case only that part of the income derived from his activities carried on in that other State may be taxed In such case, only that portion of the income derived from his activities in that other State may be taxed in that other State.

 

2. The term “professional services” includes, in particular, independent activities of scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, architects, dentists and accountants.

Article 15

Dependent Professions

1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised in that State, remuneration received in respect thereof maybe taxed in that other State.

 

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if

(a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the taxable year year, and

(b) the remuneration is paid by or on behalf of an employer who is not a resident of the other Contracting State

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other Contracting State.

 

3. Notwithstanding the preceding provisions of this Article, remuneration received in respect of employment on board a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16

Directors’ Fees

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, supervisory board or any other similar organ of a company which\ is a resident of the other Contracting State, may be taxed in that other State.

Article 17

Artists and Athletes

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State from personal activities exercised in the other Contracting State as an entertainer, such as a theater, motion picture, radio or television artiste, or musician, or as an athlete, may be taxed in that other State.

 

2. Where income from activities which an entertainer or sportsperson performs personally and in that capacity is attributed not to the entertainer or athlete himself but to another person, such income may be taxed, notwithstanding the provisions of Articles 7, 14 and 15, such income may be taxed in the Contracting State in which the activities of the entertainer or sportsperson are carried on.

 

3. Notwithstanding the provisions of paragraphs 1 and 2, income derived from activities referred to in paragraph 1 which are under a cultural agreement or arrangement between the Contracting States shall be exempt from tax in the Contracting State in which the Contracting State in which the activities are carried on where the stay in that State is wholly or substantially by funds of either Contracting State, of one of their political subdivisions local authorities or public institutions.

 

Article 18

Pensions

1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.

 

2. Notwithstanding the provisions of paragraph 1, pensions and other amounts paid under the social security laws of a Contracting State shall be taxable only in that State.

 

3. Annuities arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State.

 

4. The term “annuity” means a fixed sum payable periodically at fixed times during life or during a specified period of time or the payment of which is period of time, the duration of which may be specified, pursuant to an undertaking to make payment thereof in return for a full and complete in consideration of a full and adequate benefit in money or money’s worth.

 

5. Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration (including lump-sum payments) arising in a Contracting State and paid to a resident of the other Contracting State shall not be taxable in the other taxable in the other Contracting State if such payments are derived from contributions, allowances or insurance premiums contributions, allowances or insurance premiums paid to a supplementary pension plan by or on behalf of the recipient, or contributions made by the contributions, allowances, insurance premiums or endowments made by the employer to a domestic plan, and if such contributions, allowances, insurance premiums or endowments have actually been the first-mentioned Contracting State under the ordinary rules of its tax law.

Article 19

Public Offices

(a) Salaries, wages and other similar remuneration paid by a Contracting State or a political subdivision or local authority thereof to an individual in respect of services rendered to tha or local authority shall be taxable only in that State.

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are performed in that State and the individual is a resident of that State who:

(i) is a national of that State, or

(ii) did not become a resident of that State solely for the purpose of rendering the services.

 

(a) Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid by a Contracting State or a political subdivision or local authority thereof, either directly or out of funds constituted by them, to an individual in respect of services rendered to that

 

(b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of that State and is a national of that State.

 

3. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages, pensions and other similar remuneration paid in respect of services rendered in the other Contracting State. remuneration paid in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or local authority thereof.

 

Article 20

Students and Trainees

Amounts paid to a student, trainee or apprentice who is, or was immediately before visiting in a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of education or training, receives to defray the expenses of his maintenance, education or training shall not be taxable in that State, provided that shall not be taxable in that State, provided that they arise from sources outside that State.

 

Article 21

Other Income

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this the preceding Articles of this Convention shall be taxable only in that State.

 

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performing independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case, the provisions of Article 7 or of Article 14, as the case may be, are applicable.

 

Article 22

Assets

1. Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

2. Capital represented by 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, or by movable property pertaining to a fixed base of which a resident of a Contracting State has in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

 

3. Capital represented by ships and aircraft operated in international traffic and by movable property used in 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. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

 

Article 23

Elimination of Double Taxation

1. Subject to the provisions of Luxembourg law concerning the elimination of double taxation which do not affect the general principle thereof, double taxation shall be eliminated as follows:

(a) Where a resident of Luxembourg derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Sri Lanka the amount of tax on the remaining income or capital of the resident, apply the same rates of tax as if the income or capital

(b) Where a resident of Luxembourg receives items of income which, in accordance with the provisions of Articles 8, 10, 11, 12, and 17, maybe taxed in Sri Lanka, Luxembourg shall charge to personal income tax or to tax on Luxembourg shall allow a deduction from the personal income tax or the corporate income tax of such resident in an amount equal to the tax paid in Sri Lanka. equal to the tax paid in Sri Lanka. This deduction may not, however, exceed the fraction of the tax, calculated before deduction, corresponding to these items of income. deduction, corresponding to such items of income received from Sri Lanka.

(c) Where a company which is a resident of Luxembourg receives dividends from Sri Lankan sources, Luxembourg shall exempt such dividends from tax in accordance with its tax laws, provided that such company which is a resident of Luxembourg, directly holds at least 10 per cent of the capital of the company paying the dividends since the beginning of the financial year and if that company is subject to income tax in Sri Lanka. The above-mentioned shares or units of the Sri Lankan company are, under the same conditions, exempt from the Luxembourg wealth tax. This exemption also applies even if the Sri Lankan company is exempt from tax or taxed at a reduced rate under the Sri Lankan legal provisions on tax incentives.

(d) The provisions of subparagraph (a) shall not apply to income received or capital owned by a resident of Luxembourg, where Sri Lanka applies the provisions of this Convention to exempt such income or capital from tax or applies the provisions of paragraph 2 of Article 10, 11 or 12 to such income.

2. In Sri Lanka, double taxation shall be eliminated in the following manner:

(a) The laws in force in Sri Lanka shall continue to govern the taxation of income or capital in Sri Lanka subject to the provisions of this Convention. Where the income or capital is subject to tax in Luxembourg, the elimination of double taxation shall be granted in accordance with the following subparagraph:

(b) Where a resident of Sri Lanka receives income from Luxembourg or has capital in Luxembourg which, in accordance with the provisions of this Convention, may be taxed in Luxembourg, the amount of Luxembourg tax paid in respect of such income or capital shall be credited against the Sri Lankan tax payable by that resident in Luxembourg. The credit shall not, however, exceed the amount of tax paid by the resident in respect of that income or capital. However, such credit shall not exceed the However, such credit shall not exceed the fraction of the Sri Lankan tax corresponding to such income or capital.

 

3. For the purposes of crediting in a Contracting State, the tax paid in the other Contracting State shall be deemed to include the tax normally payable in that other State but which has been reduced or waived by that State under its statutory provisions on tax incentives. The provision of this paragraph shall apply for a period of 10 years. This period may be extended by mutual agreement between the competent authorities.

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 those to which nationals of that other State are or may be subjected. or more burdensome than those to which nationals of that other State in the same circumstances are or may be subjected, including This provision shall apply to any person who is not a national of a Contracting State and is not a national of a Contracting State. This provision shall apply to notwithstanding the provisions of Article 1, to persons who are not residents of one or both of the Contracting States.

 

2. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably assessed in that other State than the taxation of enterprises of that other State carrying on the same business. carrying on the same activity. This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting State personal allowances, reliefs and reductions of tax on the basis of the This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting State the personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities that it grants to its own residents.

 

3. Unless the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11 or paragraph 6 of Article 12 shall apply, interest, royalties and other expenses 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 that enterprise under the same conditions as if they had been paid to a resident of the first-mentioned State. Likewise, debts of an enterprise of a Contracting State to a resident of the other Contracting State shall be deductible in determining the taxable capital of that enterprise, under the same conditions as if they had been contracted with a resident of the first-mentioned State.

 

4. Enterprises of a Contracting State, the capital of which is wholly or partly, directly or indirectly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. other similar enterprises of the first-mentioned State.

 

5. The provisions of this Article shall apply, notwithstanding the provisions of Article 2, to taxes of every kind and description.

 

Article 25

Mutual Agreement Procedure

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, submit his case to the competent authority of the Contracting State of which it is a resident or, if its case comes under paragraph 1 of Article 24, to that of the Contracting State of which it is a State of which it is a national. The case must be submitted within three years from the first notification of the measure that results in taxation not in accordance with the provisions of the Convention.

 

2. The competent authority shall endeavor, 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 matter to resolve the case by mutual agreement with the competent authority of the other Contracting State with a view to the avoidance of taxation not in accordance with the Convention. The agreement shall be applied irrespective of the time limits provided by the domestic law of the Contracting States.

 

3. The competent authorities of the Contracting States shall endeavor by mutual agreement to resolve any difficulties or doubts or to resolve any doubts as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

 

4. The competent authorities of the Contracting States may communicate directly with each other with a view to reaching an agreement as described in the preceding paragraphs. The competent authorities may have bilateral consultations for the implementation of the mutual agreement procedure provided for in this Article.

 

Article 26

Exchange of Information

1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant to carry out the provisions of this Convention or for the administration or enforcement of the domestic laws relating to taxes of any kind or nature taxes of every kind and description imposed on behalf of the Contracting States, their political subdivisions or their political subdivisions or local authorities thereof insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.

 

2. Information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of the taxes referred to in paragraph 1 in the assessment or collection of, proceedings or prosecutions in respect of, or appeals in relation to, the taxes referred to in paragraph 1. the assessment or collection of the taxes referred to in paragraph 1, the determination of appeals in relation to such taxes, or the oversight of any of the foregoing. Such persons or authorities shall use such information only for such purposes. They may disclose such information in public court hearings or in judgments.

 

3. In no case shall the provisions of paragraphs 1 and 2 be construed to require a Contracting State to

(a) to take administrative action at variance with the laws and administrative practice of that or of the other Contracting State

(b) to supply information that 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.

 

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use the powers at its disposal to obtain the information requested, even if it does not need the information for its own tax purposes. The obligation in the preceding sentence is subject to the limitations of paragraph 3 unless such limitations are likely to prevent a Contracting State from providing information solely because it has no domestic interest in the information.

 

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to refuse to supply requested information solely because it is held by a bank financial institution, nominee or person acting in an agency or fiduciary capacity or because the information relates to the property rights of a person.

 

Article 27

Members of Diplomatic Missions and Consular Posts

The provisions of this Convention shall not affect the fiscal privileges of members of diplomatic missions or consular posts members of diplomatic missions or consular posts under the general rules of international law or the provisions of special agreements.

Article 28

Entry into force

1. Each of the Contracting States shall notify the other in writing, through diplomatic channels, of the completion of the procedures required by its law for the entry into force of this Convention. procedures required by its law for the entry into force of this Convention. The Convention shall enter into force on the thirtieth day following the date of receipt of the last of these notifications.

 

2. The Convention shall apply

(a) in respect of taxes withheld at source, to income allocated on or after the first day of January in the calendar year immediately following the year in which the Convention enters into force

(b) in respect of other taxes on income and on capital, to the taxes payable in respect of any taxation year beginning on or after the first day of January in the calendar year immediately following the year in which the Convention enters into force

 

Article 29

Denunciation

1. This Convention shall remain in force until terminated by a Contracting State. Each Contracting State may denounce the Convention by diplomatic means with a minimum of six months’ notice before the end of each calendar year beginning after the expiration of five years from the date of its entry into force.

 

2. The Convention shall cease to have effect

(a) with respect to taxes withheld at source, to income allocated on or after January 1 of the calendar year immediately following the year in which notice is given

(b) in respect of other income and capital taxes, to taxes payable for any taxation year beginning on or after January 1 of the calendar year immediately following the year in which the notice is given.

 

IN WITNESS WHEREOF, the undersigned, duly authorized thereto, have executed this Agreement.

 

Done in duplicate at Luxembourg, this 31st day of January 2013, in the English, Sinhala and French languages, all texts being equally authentic. In the event of any discrepancy in the interpretation or application of the Convention, the English text prevails.