COLOMBO: Sri Lanka will sign six Avoidance of Double Taxation Agreements (ADTAs) which has been pending for some time, to facilitate and encourage trade and investments, Inland Revenue Department (IRD) Commissioner-General Nadun Guruge told the media last week.
The ADTAs will be signed with Ukraine, the Maldives, Hungary, Cyprus, Austria and the agreement with the UK will be renewed. “The preliminary work on the agreements will be finalised shortly and the DTAA will be signed thereafter,” he said, adding that such agreements are essential to promote trade and investments.
The Avoidance of Double Tax Avoidance Agreement is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income.
A DTAA becomes applicable in cases where an individual is a resident of one nation, but earns income in another. Sri Lanka signed a ADTA with Turkey in Ankara last week to improve transparency in tax matters and help curb tax evasion.“Such initiatives will help improve the flow of investment, trade activities and boost the tourism sector,” Guruge said. Turkey has a population of around 85 million and attracts around five million visitors each year. It also generates a tax revenue of around US$ 100 billion. Tax experts are of the view that double taxation treaties stimulate the flow of capital, technology and personnel from one country to another by eliminating the burden of taxation in both countries.
“ADTA will create a more attractive investment climate, giving an opportunity for foreign investors,” Guruge said, adding that since Sri Lanka signed the first such agreement with Britain in 1950, 46 such agreements have been signed with many other countries up to now. Some have also been updated to suit changes.
ADTAs can be either be comprehensive, encapsulating all income sources, or limited to certain areas, which means taxing of income from shipping, inheritance and air transport. India has ADTAs with over 80 countries, with plans to sign such treaties with more countries in the years to come. Some of the countries with which it has comprehensive agreements include Australia, Canada, the United Arab Emirates, Germany, Mauritius, Singapore, the United Kingdom and the United States of America.
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