Sri Lanka, Bahrain sign double tax avoidance and fiscal evasion prevention agreement

An agreement between the Government and the Government of the Kingdom of Bahrain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income initialed on 10 December 2009 in Colombo was signed yesterday.

Senior Minister of International Monetary Cooperation and Senior Advisor to the President on Economic and Monetary Policy Dr. Sarath Amunugama on behalf of the Government and Minister of Finance of Bahrain Sheikh Ahmed Bin Mohammed Al Khalifa on behalf of the Government of the Kingdom of Bahrain signed the agreement in Colombo.

This double taxation avoidance agreement was negotiated and concluded in line with the Government policy to enhance the economic relations between Sri Lanka and Bahrain.

The agreement is generally consistent with Sri Lanka’s re-concluded double tax avoidance treaties and as in those treaties, income from debt claims (interest) and royalties are to be taxed at a rate not exceeding 10%.

In the case of dividends tax, it shall not exceed five per cent of the gross amount of dividends, if the beneficial owner is an entity wholly owned by the Government, 7.5 per cent if the beneficial owner is a company and 10 per cent in all other cases.

With regard to shipping profits, the source principle of taxation has been retained with reduction of tax chargeable on such profits by 50%, considering the future prospects for the industry.



This agreement will enter into force after completion of the rest of the steps of the procedure and it is expected that with the conclusion of this agreement, not only the bilateral economic relationship between the two countries but also the flow of investment into the country would be enhanced.