Direct Tax Avoidance Agreements

Sri Lanka

Article 12

ROYALTIES AND FEES FOR TECHNICAL SERVICES

1. Royalties or fees for technical services arising in a Contracting State and paid to resident of the other Contracting State may be taxed in that other State.

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

3.  (a)  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 literary, artistic or scientific work including cinematograph films or films or tape or discs used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to us industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

(b) The term "fees for technical services" as used in this Article means payments any kind, other than those mentioned in Articles 14 and 15 of this Agreement consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel.

4. The provisions of paragraph 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services being a resident of a Contracting State, carried on business in the other Contracting State in which the royalties or fees for technic services arise, through a permanent establishment situated therein, or performs that other State independent personal services from a fixed base situated therein and the right or property in respect of which the royalties or fees for technical service( are paid is effectively connected with such permanent establishment or fixed base. such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5.  (a) Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties fees for technical services, whether he is a resident of a Contracting State or nc has in a Contracting State a permanent establishment or a fixed base connection with which the liability to pay the royalties or fees for technic services was incurred, and such royalties or fees for technical services are borrow by such permanent establishment or fixed base, then such royalties or fees f technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

(b) Where under sub-paragraph (a) royalties or fees for technical services do not arise in one of the Contracting States, and the royalties relate to the use of or the right to use, the right or property, or the fees for technical services relate services performed, in one of the Contracting States, the royalties or fees for technical services shall be deemed to arise in that Contracting State.

6. 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  or fees for technical services, having regard to the 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 laws of each Contracting State, due regard being had to the other provisions of this Agreement.