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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
Updated
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DT: Sri Lanka: double taxation agreement, Article 10: Dividends

(1) A dividend 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) A dividend derived and beneficially owned by a resident of Sri Lanka from a company which is a resident of the United Kingdom may also be taxed in the United Kingdom, and according to the laws of the United Kingdom, but the tax so charged shall not exceed 15 per cent of the gross amount of the dividend.
Article 10(3) was amended, as below, before the Covention entered into force

(3) A dividend derived and beneficially owned by a company which is a resident of the United Kingdom from a company which is a resident of Sri Lanka shall be exempt from Sri Lanka tax other than the Sri Lanka tax on the company which pays the dividend and also the additional tax imposed by Section 26(4) of the Sri Lanka Inland Revenue Act No. 4 of 1963 and by Section 37 of the Sri Lanka Inland Revenue Act No. 28 of 1979 insofar as these provisions are in force on the date of signature of this Convention or have been modified only in minor respects so as not to affect their general character.
(4) Notwithstanding the provisions of paragraph (3) of this Article, where any new contribution is made after the date of signature of this Convention by a company which is a resident of the United Kingdom to the capital of a company which is a resident of Sri Lanka, the amount of tax deducted at source in respect of a dividend paid by the last-mentioned company relating to the said `new contribution` including the additional tax referred to in paragraph (3) of this Article, shall not exceed 15 per cent of the gross amount of that dividend.
(5) The term `dividend` as used in this Article means any item which under the law of the Contracting State of which the company paying the dividend is a resident, is treated as a dividend or distribution of a company.
(6) The provisions of this Article shall not apply where a resident of a Contracting State has in the other Contracting State a permanent establishment and the holding by virtue of which the dividend is paid is effectively connected with the business carried on through that permanent establishment. In such a case, the provisions of Article 7 shall apply.
(7) 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 and beneficially owned by persons who are not residents of the other State, or subject the company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.