A Look at the New Poland-Sri Lanka Tax Treaty
The new Poland-Sri Lanka tax treaty signed on October 6, 2015, in Colombo will amend several rules imposed by the 1980 treaty . (Polish text of the 2015 treaty ; Polish text of the 1980 treaty.)
The first important change relates to the definition of a permanent establishment. Besides the typical OECD-model-treaty-based elements, it also includes a building site; a construction, assembly, or installation project; a drilling rig or ship used for the exploration or development of natural resources; and related supervisory activities. The site, project, or activities, as well as the furnishing of services, including consultancy services, must continue for more than six months, and the services and personnel must be provided by an enterprise through its own employees or other personnel engaged by the enterprise for such a purpose. The aforementioned activities must continue (for the same or a connected project) for a period or periods totaling more than 183 days in any 12-month period, commencing or ending in the fiscal year concerned (article 5.3).
For dividends, interest, and royalties, the new treaty provides for a uniform maximum withholding tax rate of 10 percent of the gross amounts (articles 10, 11, and 12), as opposed to the current 15 percent for dividends, and the full exemption for royalties. The maximum withholding tax rate for interest is currently 10 percent.
Another amendment replaces the definition of royalties with the fairly standard pre-1992 OECD model treaty language. The term ‘‘royalties’’ as used in this article means payments of any kind received as consideration for the use of, or right to use, any copyright, patent, trademark, design or model, plan, secret formula or process, industrial, commercial, or scientific equipment or information concerning industrial, commercial, or scientific experience (know-how) (article 12.3a).