The Indian Cabinet has approved the signing and ratification of a protocol amending the country’s tax treaty with Sri Lanka.
The protocol seeks to update the text of the treaty’s Preamble and to incorporate a principal purpose test to tackle tax avoidance and treaty shopping.
As members of the OECD’s Inclusive Framework on BEPS, both countries are committed to implementing the BEPS minimum standards on tackling treaty abuse.
A press release issued by the Indian Government states: “India is a signatory to the [BEPS] MLI. However, Sri Lanka is not a signatory to the MLI as of now. Therefore, amendment of the India-Sri Lanka tax treaty bilaterally is required to update the Preamble and also to insert principal purpose test to meet the minimum standards on treaty abuse under BEPS Action 6.”
The tax treaty was signed on January 22, 2013, and entered into force on October 22, 2013.