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CONVENTION BETWEEN THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA AND THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME.
S.R.O. 1096(I)/83, dated the 27th November, 1983. -
Whereas the annexed Convention between Government of Democratic Socialist Republic of Sri
Lanka and the Government of the Islamic Republic of Pakistan for the avoidance of double
taxation and the Prevention of Fiscal Evasion with respect to Taxes on income and property
has been made;
Now, Therefore, in exercise of the powers conferred by section 163 of the Income Tax
Ordinance, 1979 (XXXI of 1979), the Federal Government is pleased to direct 'that the said
Convention shall enter into force on 18th day of June, 1983 and the provisions of the said
Convention shall be given effect to in Pakistan in respect of taxes for any year of
assessment commencing on or after the first day of January, 1983.
Annexure
CONVENTION BETWEEN THE GOVERNMENT OF
THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA AND
THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF PAKISTAN FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF
FISCAL EVASION WITH RESPECT TO TAXES ON INCOME.
The Government of the Democratic Socialist Republic of Sri Lanka and the Government of the Islamic Republic of Pakistan, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, 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 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 all taxes imposed on total income or on
elements of income, including taxes on gains from the alienation of movable or immovable
property and taxes on the total amounts of wages or salaries paid by enterprises.
3. The existing taxes to which this Convention shall apply are:
(a) in Sri Lanka-
the income-tax, including the income-tax based on the turnover of enterprises licensed by
the Greater Colombo Economic Commission (hereinafter referred to as "Sri Lanka
tax").
(b) in Pakistan -
(i) the income-tax;
(ii) the super-tax; and
(iii) the surcharge.
(hereinafter referred to as "Pakistan tax").
4. This Convention shall also apply to any identical or substantially similar taxes which
are imposed after the date ({f signature of this Convention in addition to, or in place
of, the existing taxes. The competent authorities of the Contracting States shall notify
each other of any important changes which have been made in their respective taxation
laws.
ARTICLE 3
GENERAL DEFINITIONS
1. In this Convention; unless the context otherwise requires:
(a) the term "Sri Lanka" means the Democratic Socialist Republic of Sri Lanka,
including any area outside the territorial sea of Sri Lanka which in accordance with
international law has been or may hereafter be designated, under the laws of Sri Lanka
Concerning the Continental Shelf, as an area within which the rights of Sri Lanka with
respect to the seabed and sub-soil and the natural resources may be exercised;
(b) the term "Pakistan" used in a geographical sense means Pakistan as defined
in the Constitution of the Islamic Republic of Pakistan and also includes any area outside
the territorial waters of Pakistan which under the laws of Pakistan is an area within
which the rights of Pakistan with respect to seabed and sub-soil and their natural
resources may be exercised;
(c) the terms "a contracting State" and "the other Contracting State"
mean Sri Lanka or Pakistan as the context requires;
(d) the term "person" includes an individual, a company and any other body of
persons;
(e) the term "company" 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;
(g) the term "international traffic" means any transport by a ship of aircraft
operated by an enterprise which has its place of effective management in a Contracting
State, except when the ship or aircraft is operated solely between places in the other
Contracting State;
(h) the term "nationals" means ·
(i) all individuals possessing the nationality of a Contracting State;
(ii) all legal persons, partnerships and associations deriving their status as such from
the laws in force in a Contracting State;
(i) the term "competent authority" means:
(i) in the case of Sri Lanka, the Commissioner-General of Inland Revenue;
(ii) in the case of Pakistan, the Central Board of Revenue.
2. As regards the application of this Convention by a Contracting State any term not
defined therein shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the taxes which are 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.
2. Where by reason of the provisions of paragraph (1) of this Article any 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 Contracting State in which he has a
permanent home available to him. If he has a permanent home available to him in both
Contracting States, he shall be deemed to be a resident of the Contracting State with
which his personal and economic relations are closer (centre of vital interest);
(b) if the Contracting 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 Contracting
State, he shall be deemed to be a resident of the Contracting State in which he has an
habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall
be deemed to be a resident of the Contracting State of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent
authorities of the Contracting State shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph (1) of this Article a person other than
an individual is a resident of both Contracting States, then it shall be deemed to be a
resident of the State in which its place of effective management is situated.
ARTICLE 5
PERMANENT ESTABLISHMENT
1. For the purposes of this convention, the term "permanent
establishment" means a fixed place of business in which the business of the
enterprise is wholly or partly carried on.
2. The term "permanent establishment" shall include 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 other place of extraction of natural
resources;
(g) an agricultural or farming estate or plantation;
(h) a building site or construction or assembly project which exists for more than 183
days;
(i) the furnishing of services, including consultancy services, by an enterprise through
employees or other personnel, where activities of that nature continue within the Country
for a period or periods aggregating more than 183 days within any twelve-month period.
3. Notwithstanding the preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:
(a) the use of facilities solely for the purpose of storage or display of goods or
merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise or of collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of carrying on,
for the enterprise, any other activity of a preparatory or auxiliary character.
4. Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a
person - other than an agent of an independent status to whom paragraph (5) of this
Article applies - is acting 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 such a person:
(a) has and habitually exercises in that State an authority to conclude contracts in the
name of the enterprise, unless the activities of such person are limited to those
mentioned in paragraph (3) of this Article which, if exercised through a 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.
5. 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, there such persons are acting in the ordinary course of their business. However,
when the activities of such an agent are devoted wholly or almost wholly on behalf of that
enterprise, he will not be considered an agent of an independent status within the meaning
of this paragraph.
6. 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 State (whether through a permanent establishment or
otherwise) shall not of itself constitute either company a permanent establishment of the
other.
ARTICLE 6
INCOME FROM IMMOVABLE PROPERTY
1. Income from immovable property may be taxed in the Contracting
State in which such property is situated.
2. The term "immovable property" shall have the meaning which it has under the
law of the Contracting State in which the property in question 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 general law respecting
landed property apply, usufruct of immovable property and rights to variable or fixed
payments as consideration for the working, of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be regarded as
immovable property.
3. The provisions of paragraph (1) of this Article shall apply to income derived from the
direct use, letting or use in any other form of immovable property.
4. The provisions of paragraphs (1) and (3) of this Article shall also apply to the income
from immovable property of an enterprise and to income from immovable property used for
the performance of professional services.
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. If the enterprise
carries on business as aforesaid, the profits of the enterprise may be taxed in the other
State but only so much of them as is attributable to (a) that permanent establishment, (b)
sales in that other State of goods or merchandise 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.
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 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 and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated or
elsewhere. 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 offices, by way of royalties,
fees or other similar payments in return for the use of patents or other rights, or by way
of commission, for specific services performed or for management, or, except in the case
of a banking enterprise, by way of interest on moneys lent to the permanent establishment.
Likewise, no account shall be taken, in the determination of the profits of a permanent
establishment, for amounts charged (otherwise than towards reimbursement of actual
expenses), by the permanent establishment to the head office of the enterprise or any of
its other offices by way of royalties, fees or other similar payments in return for the
use of patents or other rights, or by way of commission for specific services performed or
for management, or, except in the case of a banking enterprise by way of interest on
moneys lent to the head office of the enterprise or any of its other offices.
4. Insofar as it has been customary in a Contracting State to determine the profits to be
attributed 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) of this Article
shall preclude that Contracting State from determining the profits to be taxed by such an
apportionment as may be customary; the method of apportionment shall, however, be such
that the result will be in accordance with the principles contained in this Article.
5. No profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of 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 by the same method year by year 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, then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8
SHIPPING AND AIR TRANSPORT
1. Profits derived 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 is situated.
2. Notwithstanding the provisions of paragraph (1) of this Article 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.
3. The provisions of paragraphs (1) and (2) of this Article shall likewise apply in
respect of participations in pools, in a joint business or in an international operations
agency of any kind by enterprises engaged in the operation of ships or aircraft in
international traffic.
4. 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 not such home harbour, in the Contracting State of
which the operator of the ship is a resident.
* The word "abroad" has wrongly appeared as "abroad" in
the Official Gazette.
ARTICLE 9
ASSOCIATED ENTERPRISES
1. Where:
(a) an enterprise of a Contacting 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 as enterprise of the other Contracting
State,
and in either case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those conditions, have
accrued to one of the enterprises but, by reason of those conditions have not so accrued,
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 been
charged to tax in that other State and the profits so included are profits which would
have accrued to the enterprise of the first-mentioned State if the conditions made between
the two enterprises had been those which would have been made between independent
enterprises, then that other State shall make an appropriate adjustment to the amount of
the tax charged therein on those profits. In determining such adjustment, due regard shall
be had to the other provisions of the Convention and the competent authorities of the
Contracting States shall, if necessary, 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 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
malang 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 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 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 the dividends
paid by the company, except insofar as such dividends are paid to a resident of that other
State or insofar as the holding in respect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed base situated in that other State, nor
subject the company's undistributed profits to a tax on the company's undistributed
profits, even if the dividends paid or the undistributed profits consist wholly or partly
of profits or income arising in such 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 recipient is the beneficial owner of
the interest the tax so charged shall not exceed 10 per cent of the gross amount of the
interest.
3. Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a
Contracting State shall be exempt from tax in that State if:
(a) the payer of the interest is the Government of that Contracting State or a local
authority thereof, or
(b) the interest is paid to the Government of the other Contracting State or local
authority thereof or any agency or instrumentality (including a financial institution)
wholly owned by that other Contracting State or local authority thereof, or
(c) the interest is paid to the State Bank of Pakistan or the Central Bank of Ceylon, or
(d) the interest is paid to any other agency or instrumentality (including a financial
institution) in relation to loans made in application of an agreement concluded between
the Governments of the Contracting States.
4. The term "interest" as used in this Article means income from Government
securities, bonds or debentures, whether or not secured by mortgage and whether or not
carrying a right to participate in profits, and debt-claims of every kind as well as all
other income assimilated to income from money lent by the taxation law of that State in
which the income arises.
5. The provisions of paragraphs (1), (2) and (3) of this Article 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 is paid is effectively connected with such permanent establishment or fixed base.
In such a 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 that State
itself, a political or administrative sub-division, a 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 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 Contracting 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 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 law 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 recipient is the beneficial owner of
the royalties the tax so charged shall not exceed 20 per cent of the gross amount of the
royalties.
3. The term "royalties" as used in this Article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright of
literary, artistic or scientific work including cinematograph films, or tapes for
television or broadcasting, any patent, trade mark, design or model, plan, secret formula
or process, or for the use of, or the right to use, industrial, commercial, or scientific
equipment, or for information concerning industrial, commercial or scientific experience.
4. The provisions of paragraphs (1) and (2) of this Article, shall not apply if 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, through a permanent
establishment situated therein, or performs in that other State independent personal
services from a fixed base situated therein, and the right or property in respect of which
the royalties are paid is effectively connected with such permanent establishment or fixed
base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall
apply.
5. 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 royalties paid, having
regard to use, right or information for which they are 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 law 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 immovable 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 including such gains from the alienation 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 and shares of a company representing a
participation of 20 per cent or more 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)
and (4) of this Article, shall be taxable only in the Contracting State of which the
alienator is a resident.
6. The term "alienation" means the sale, exchange, transfer, or relinquishment
of the property or the extinguishment of any rights therein or the compulsory acquisition
thereof under any law in force in the respective Contracting States.
ARTICLE 14
INDEPENDENT PERSONAL SERVICES
1. Income derived by a resident of a Contracting State in respect
of professional services or other activities of an independent 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 for
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 Contracting 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 the fiscal year concerned; in that case only so
much of the income as is derived from his activities performed in the other State maybe
taxed in that State.
2. The term "professional services" includes especially independent scientific,
literary, artistic, educational or teaching activities as well as the independent
activities of physicians, lawyers, engineers, architects, dentists and accountants.
ARTICLE 15
DEPENDENT PERSONAL SERVICES
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 so exercised, such
remuneration as is derived therefrom may be taxed in that other Contracting State.
2. Notwithstanding the provisions of paragraph (1) of this Article, 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 State for a period or periods not exceeding in
the aggregate 183 days within any 12-month period, and
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the
other State, and
(c) the remuneration is not borne by a permanent establishment or a fixed base which the
employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remuneration in respect of an
employment exercised aboard* a ship or aircraft in international traffic, may be taxed
only in the Contracting State in which the place of effective management of the enterprise
is situated.
* The word "abroad" has wrongly appeared as "abroad" in the
Official Gazette.
ARTICLE 16
DIRECTORS' FEES
1. 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.
2. Salaries, wages and other similar remuneration derived by a resident of a Contracting
State in his capacity as an official in a top-level managerial position 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 activities of the entertainer or athlete
are exercised.
3. For the purposes of this Article, the term "Government" includes a State
Government, a political sub-division or a local authority of either Contracting State.
ARTICLE 18
GOVERNMENT SERVICE
1. (a) Remuneration, other than a pension, paid by the Government
of a Contracting State to an individual in respect of services rendered to that State or a
local authority thereof shall be taxable only that State.
(b) However, such remuneration shall be taxable only in the other Contracting State if the
services are rendered 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.
2. Any pension paid by, or out of funds created by the Government of a Contracting State
to an individual in respect of services rendered to that State shall be taxable only in
that State.
3. The provisions of Articles 15, 16 and 19 shall apply to remuneration and pensions in
respect of services rendered in connection with a business carried on by a Contracting
State or a local authority thereof.
4. For the purposes of this Article, the term "Government" shall include any
State Government or local authority of either Contracting State, the State Bank of
Pakistan and the Central Bank of Ceylon.
ARTICLE 19
NON-GOVERNMENT PENSIONS AND ANNUITIES
1. Any pension (other than a pension referred to in Article 18)
or annuity derived by a resident of a Contracting State from sources within the other
Contracting State may be taxed only in that State.
2. The term "pension" means a periodic payment made in consideration of services
rendered in the past or by way of compensation for injuries received in the course of
performance of services.
3. The term "annuity" means a stated sum payable Periodically at stated times,
during life or during a specified or ascertainable period of time, under an obligation to
make the payments in return for adequate and full consideration in money or money's worth.
ARTICLE 20
PROFESSORS AND TEACHERS
A professor or teacher who makes a temporary visit to a Contracting State for a period not exceeding two years for the purpose of teaching or conducting research at a university, college, school or other educational institution, and who is, or 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. An individual who was resident of one of the Contracting
States and is temporarily present in the other Contracting State solely--
(a) as a student at a recognized university, college or school in that other territory; or
(b) as a business apprentice; or
(c) as the recipient of a grant, allowance or award for the primary purpose of study or
research from a religious, charitable, scientific, or educational organization,
shall be exempt from tax in that other State in respect of -
(i) the remittances from abroad for the purposes of his maintenance, education, study,
research or training;
(ii) the grant, allowance or award; and
(iii) the remuneration from employment in that other State.
2. A resident of one of the Contracting States who is temporarily present in the other
Contracting State for a period not exceeding one year, as an employee of, or under
contract with, an enterprise of the former State or an organization referred to in
sub-paragraph (c) of paragraph (1), solely to acquire technical, professional or business
experience from a person other than such enterprise or organization, shall be exempt from
tax in that other State in respect of remuneration for such period.
3. A resident of one of the Contracting States temporarily present in the other
Contracting State under arrangements with Government of that other State or any agency or
instrumentality thereof solely for the purpose of training, study or orientation shall be
exempt from tax in that other State in respect of remuneration received by him on account
of such training, research or study.
ARTICLE 22
OTHER INCOME
Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Agreement in respect of which he is subject to tax in that State shall be taxable only in that State.
ARTICLE 23
ELIMINATION OF DOUBLE TAXATION
1. The laws in force in either of the Contracting States shall
continue to govern the taxation of income in the respective Contracting States except when
express provision to the contrary is made in this Convention. When income is subject to
tax in both Contracting States, relief from double taxation shall be given in accordance
with the following paragraphs of this Article.
2. Subject to the provisions of the law of Pakistan regarding the allowances as a credit
against Pakistan tax or tax payable in a territory outside Pakistan (which shall not
affect the general principle thereof) Sri Lanka tax payable under the law of Sri Lanka and
in accordance with this Convention whether directly or by deduction, on profits, income or
chargeable gains from sources within Sri Lanka (excluding in the case of a dividend, tax
payable in respect of the profits out of which the dividend is paid) shall be allowed as
credit against any Pakistan tax computed by reference to the same items of income by
reference to which the Sri Lanka tax is computed:
Provided that such credit shall not exceed Pakistan tax (as computed before allowing any
such credit), which is appropriate to the income derived from sources within Sri Lanka.
3. Subject to the provisions of the law of Sri Lanka regarding the allowance as a credit
against Sri Lanka tax of tax payable in a territory outside Sri Lanka (which shall not
affect the general principle hereof) Pakistan tax payable under the law of Pakistan and in
accordance with the Convention, whether directly or by deduction, on profits, income or
chargeable gains from sources within Pakistan (excluding in the case of a dividend, tax
payable in respect of the profits out of which the dividend is paid) shall be allowed as a
credit against any Sri Lanka tax computed by reference to the same items of income by
reference to which the Sri Lanka tax is computed:
Provided that such credit shall not exceed Sri Lanka tax (as computed before allowing any
such credit), which is appropriate to the income derived from sources within Pakistan.
4. For the purposes of allowance as a credit the tax payable in Sri Lanka or Pakistan, as
the context requires, shall be deemed to include the tax which is otherwise payable in a
Contracting State but has been reduced or waived by that State in pursuance of its tax
incentive programmes.
ARTICLE 24
NON-DISCRIMINATION
1. The 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, higher or more burdensome than the taxation and connected requirements to which
the nationals of that other State in same circumstances are or may be subjected.
2. The enterprises of a Contracting State shall not be subjected in the other Contracting
State, in respect of profits attributable to their permanent establishments in that other
State, to any taxation which is other, higher or more burdensome than the taxation to
which the enterprises of that other State, are or may be subjected in respect of the like
profits.
3. In this Article the term "taxation" means taxes which are the subject of this
Convention.
4. Nothing in this Article shall be construed as obliging either Contracting State to
grant to residents of the other Contracting State, those personal allowances, reliefs and
reductions for tax purposes which it grants to its own residents.
ARTICLE 25
MUTUAL AGREEMENT PROCEDURE
1. Where a resident of Contracting State considers that the
actions of one or both of the Contracting States result or will result for him in taxation
not in accordance with this Convention, he may notwithstanding the remedies provided by
the national laws of those States, present his case to the competent authority of the
Contracting State of which he is a resident. 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 this Convention.
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 an appropriate 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 not in accordance with the Convention.
3. The competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubts arising 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 this Convention.
4. The competent authorities of the Contracting States may communicate with each other
directly for the purposes of reaching an agreement in the sense of the preceding
paragraphs.
ARTICLE 26
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
this Convention insofar as the taxation thereunder is not contrary to the Convention, as
well as to prevent fiscal evasion. 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 and shall be
disclosed only to persons on authorities (including Courts and administrative bodies)
involved in the assessment or collection of, the enforcement or prosecution in respect of,
or the determination of appeals in relation to, the taxes covered by the Convention. Such
persons or authorities shall use the information only for such purposes. They may disclose
the information in public court proceedings or in judicial decisions.
2. In no case shall the provisions of paragraph i be construed so as to impose on a
Contracting State the obligation:
(a) to carry out administrative measures at variance with the laws and administrative
practice of that or of the other Contracting State;
(b) to supply information 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 (order public).
ARTICLE 27
DIPLOMATIC AGENTS AND CONSULAR OFFICIALS
Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officials under the general rules of international law or under the provisions of special agreements.
ARTICLE 28
TERRITORIAL EXTENSION
1. The present Convention may be extended either in its entirety
or with modifications, to any territory for whose international relations the Government
of either Contracting State is responsible and which imposes taxes substantially similar
in character to those which are the subject of the present Convention and any such
extension shall take effect from such date and subject to such modifications and
conditions (including conditions as to termination) as may be specified and agreed to
between the Contracting Governments in notes to be exchanged for this purpose.
2. The termination in respect of Pakistan or Sri Lanka of the present Convention under
Article 30 shall, unless otherwise expressly agreed to by both Contracting Governments,
terminate the application of the present Convention to any territory to which the
Convention has been extended under this Article.
ARTICLE 29
ENTRY INTO FORCE
1. This Convention shall be ratified and the instruments of
ratification shall be exchanged at Islamabad/Colombo.
2. This Convention shall enter into force upon the exchange of instruments of ratification
and its provisions shall have effect in respect of taxes for any year of assessment
commencing on or after the first day of January of the calendar year in which the present
Convention enters into force.
3. The Convention between the Government of Ceylon and the Government of Pakistan for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and property, signed on 19th May, 1969, shall terminate and cease to have effect
with the coming into operation of this Convention.
ARTICLE 30
TERMINATION
This Convention shall continue in effect indefinitely but either
Contracting State may, on or before June 30 in any calendar year at least 5 years after
the year of the exchange of instruments of ratification, .give to the other Contracting
State notice of termination in writing through diplomatic channels; in such. event, this
Convention shall cease to be effective for any year of assessment commencing on or after
January in the calendar year next following that in which such notice is given.
IN WITNESS WHEREOF the undersigned duly authorized thereto have signed this Convention.
DONE in duplicate at Colombo the 5th day of October, 1981, in the Sinhala and English
languages, both texts being equally authentic. In the case of divergence of interpretation
the English text shall prevail.
| FOR THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA | FOR THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF PAKISTAN |
AHADULLAH AKMAL,
Additional Secretary.
[C. No. 2(16) TL/60.]
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