India-Sri Lanka Tax Treaty Amended: Focus Shifts to Modernising Treaty Network 📈

• Key Updates: The Protocol amending the India–Sri Lanka Double Taxation Avoidance Agreement (DTAA), signed on 16 Dec 2024, entered into force on 19 June 2026. Notified by India on 16 July 2026, amendments apply to fiscal years starting 1 April 2027. • Anti-Abuse Standards: Introduces the OECD/G20 BEPS Action 6 minimum standards, including an updated Preamble and the Principal Purpose Test (PPT). Treaty benefits will now be denied to arrangements set up primarily for tax advantages, protecting only genuine commercial investments. • National Policy Context: Since Sri Lanka has not joined the Multilateral Instrument (MLI), treaty updates must occur via bilateral negotiations. Deloitte Sri Lanka highlights that modernising the broader treaty network is essential to prevent treaty abuse, safeguard the national tax base, and support sustainable cross-border investments. • Impact on Businesses: Cross-border holding, financing, licensing, and intra-group service arrangements must demonstrate genuine economic substance. Non-compliant entities risk losing treaty concessions, falling under standard domestic tax rules.