Sri Lanka Cabinet Approves Amended Double Taxation Agreement with Luxembourg to Align with OECD BEPS Standards

Cabinet Greenlights Amended Tax Protocol

The Sri Lankan Cabinet of Ministers has granted approval for the signing of a protocol amending the existing Agreement on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with the Grand Duchy of Luxembourg. This decision, made on November 25, 2025, marks a significant step towards enhancing international tax cooperation and compliance for both nations.

Compliance with G-20 OECD BEPS Standards

The primary driver behind this amendment is the need to comply with the minimum standards outlined in the G-20 OECD Base Erosion and Profit Shifting (BEPS) Action Reports. Both Sri Lanka and Luxembourg are members of the Inclusive Framework of the BEPS Project, which mandates the implementation of these international standards to combat tax avoidance by multinational enterprises.

The BEPS project, initiated by the Organisation for Economic Co-operation and Development (OECD) and the G-20, aims to ensure that profits are taxed where economic activities generating those profits are performed and where value is created. It comprises 15 actions designed to equip governments with tools to address tax avoidance and improve the coherence of international tax rules.

Details of the Amendment Process

The original double taxation agreement between Sri Lanka and Luxembourg was signed on January 31, 2013. The recent amendments were proposed by Luxembourg's tax officers to meet the specified BEPS requirements. Following this, Sri Lanka's tax officers conducted a thorough review and provided their consent to the proposed changes.

The drafted amended agreement received clearance from the Attorney General and incorporated observations from the Ministry of Foreign Affairs, Foreign Employment, and Tourism. The proposal for approval was then presented by the President, acting in his capacity as the Minister of Finance, Planning, and Economic Development, to the Cabinet of Ministers.

Implications for Both Nations

This updated agreement is expected to foster greater transparency and fairness in tax matters between Sri Lanka and Luxembourg. By aligning with BEPS standards, both countries aim to prevent fiscal evasion and ensure a more stable and predictable tax environment for businesses and investors operating across their borders. The move underscores a commitment to international best practices in taxation and strengthens their positions within the global financial framework.