[Senate Treaty Document 108-9]
[From the U.S. Government Publishing Office]



108th Congress                                              Treaty Doc. 
                                 SENATE                     
 1st Session                                                      108-9
_______________________________________________________________________

                                     

 
            PROTOCOL AMENDING TAX CONVENTION WITH SRI LANKA

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED 
   STATES OF AMERICA AND THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST 
  REPUBLIC OF SRI LANKA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE 
PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT 
 COLOMBO ON MARCH 14, 1985, TOGETHER WITH AN EXCHANGE OF NOTES, SIGNED 
         AT WASHINGTON ON SEPTEMBER 20, 2002 (THE ``PROTOCOL'')




 October 28, 2003.--Treaty was read the first time, and together with 
the accompanying papers, referred to the Committee on Foreign Relations 
          and ordered to be printed for the use of the Senate
                         LETTER OF TRANSMITTAL

                              ----------                              

                                 The White House, October 28, 2003.
To the Senate of the United States:
    I transmit herewith, for Senate advice and consent to 
ratification, the Protocol Amending the Convention Between the 
Government of the United States of America and the Government 
of the Democratic Socialist Republic of Sri Lanka for the 
Avoidance of Double Taxation and the Prevention of Fiscal 
Evasion with Respect to Taxes on Income signed at Colombo on 
March 14, 1985, together with an exchange of notes, signed at 
Washington on September 20, 2002 (the ``Protocol''). I also 
transmit, for the information of the Senate, the report of the 
Department of State concerning the Protocol.
    The Protocol would amend the Convention to make it similar 
to tax treaties between the United States and other developing 
nations. The Convention would provide maximum rates of tax to 
be applied to various types of income and protection from 
double taxation of income. The Convention, as amended by the 
Protocol, also provides for resolution of disputes and sets 
forth rules making its benefits unavailable to residents that 
are engaged in treaty shopping.
    I recommend that the Senate give early and favorable 
consideration to this Protocol in conjunction with the 
Convention, and that the Senate give its advice and consent to 
ratification.

                                                    George W. Bush.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                       Washington, August 26, 2003.
The President,
The White House.
    The President: I have the honor to submit to you, with a 
view to its transmission to the Senate for advice and consent 
to ratification, the Protocol Amending the Convention Between 
the Government of the United States of America and the 
Government of the Democratic Socialist Republic of Sri Lanka 
for the Avoidance of Double Taxation and the Prevention of 
Fiscal Evasion with Respect to Taxes on Income Signed at 
Colombo on March 14, 1985, together with an exchange of notes, 
signed at Washington on September 20, 2002 (the ``Protocol'').
    The proposed Protocol updates the Income Tax Convention 
signed with Sri Lanka on March 14, 1985, which was transmitted 
to the Senate on October 2, 1985 (S. Treaty Doc. 99-10), to 
conform with the U.S. Model Income Tax Convention, as modified 
by certain provisions applicable to developing countries.
    Many provisions of the proposed Protocol relate to 
amendments to the U.S. Internal Revenue Code that have occurred 
since the Convention was signed in 1985. For example, Article 1 
of the proposed Protocol extends to former long-term residents 
the tax regime now applicable to former U.S. citizens who 
renounce their citizenship for tax-avoidance reasons. Most 
other provisions of the proposed Protocol update the language 
of the Convention to account for changes in U.S. treaty policy 
that have occurred since the Convention was signed. For 
example, Article 6 of the proposed Protocol provides a source-
country exemption for income from the use, maintenance, or 
rental of shipping containers.
    The exchange of notes resolves two important issues 
regarding interpretation of the Convention. First, Article 8 of 
the Convention, as amended by Article 6 of the Protocol, states 
that Sri Lanka will provide to the United States most-favored-
nation treatment with respect to shipping income. Sri Lanka has 
provided an exemption to the United Kingdom and Poland in Sri 
Lanka's existing income tax conventions with those countries. 
Sri Lanka has agreed in the notes to extend this exemption to 
the United States on a most-favored-nation basis.
    Second, Sri Lanka has agreed in the notes to exchange 
information from Sri Lankan financial institutions. The issue 
of information exchange was responsible for a ten-year delay in 
our concluding the Protocol. The repeal of Sri Lanka's bank 
secrecy legislation and Sri Lanka's agreement last year to 
provide tax information from financial institutions was 
critical to our ability to reach agreement on the Protocol.
    The proposed Protocol, like the 1985 Convention, is subject 
to ratification. It will enter into force upon the exchange of 
instruments of ratification. The 1985 Convention and the 
Protocol are expected to be brought into force at the same 
time. The Protocol will have effect in accordance with Article 
29 of the 1985 Convention. Thus, it will have effect with 
respect to taxes withheld at source on the first day of the 
second month next on which the Convention enters into force. 
The effective date for other types of taxes is for taxable 
periods beginning on or after the first day of January of the 
year in which the Convention enters into force.
    The Department of the Treasury and the Department of State 
cooperated in the negotiation of the Protocol and the exchange 
of notes. They have the full approval of both Departments.
    Respectfully submitted.
                                                   Colin L. Powell.


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