As per the Inland Revenue Act, profits and income of a non-resident person shall be taxed in Sri Lanka only to the extent that such profits and income arise in or derived from Sri Lanka. However, as per the law of the country in which such person is resident, such person may be required to pay income tax on such profits and income in that country too. Accordingly, such person is required to pay income tax on such profits and income both in Sri Lanka and in his country of resident. Therefore, in order to avoid this double tax situation, governments of both countries have entered in to an agreement for the purpose of relief from double taxation. Such agreements are called, Double Taxation Avoidance Agreements. Accordingly, at present, the Government of Sri Lanka has entered such agreements with 44 countries (except SARRC multinational treaty). Such counties are as follows.
Australia, Bangladesh, Bahrain, Belgium, Canada, China, Czech Republic, Denmark (Rev.), France, Finland, Germany, Hong Kong, India (Rev.), Indonesia, Iran, Italy, Japan, Korea, Kuwait, Malaysia (Rev.), Mauritius, Nepal, Netherlands, Norway (Rev.), Oman (Limited), Pakistan (Rev.), Philippines, Poland, Qatar, Romania, Russia, Saudi Arabia (Limited), Singapore, Sweden, Switzerland, Thailand, U.A.E. (Limited), U.A.E. (Comprehensive), U.K., Korea, U.S.A. Protocol, Kuwait, U.S.A, Malaysia (Rev.), Vietnam, Mauritius, Seychelles, Nepal, Belarus, Netherlands, Palestine & Luxembourg.