Artikel III

(a) Notwithstanding the provisions of paragraph (2) of Article 11 the tax charged on interest arising in one of the States and derived and beneficially owned by a bank or other financial institution, which is a resident of the other State, shall not exceed 5 per cent of the gross amount of the interest. If, however, after a period of three years after the entry into force of the Convention, under any convention for the avoidance of double taxation concluded between Sri Lanka and a third State being a member of the European Communities (other than the United Kingdom of Great Britain and Northern Ireland) the tax on such interest in Sri Lanka is levied at a rate, which is lower than 5 per cent, then, as from that date, the same rate shall apply under the present Convention.
(b) (i) The provisions of paragraph (3) of Article 23 shall apply accordingly to interest meant in paragraph (a).
(ii) Where, by reason of special incentive measures designed to promote economic development in Sri Lanka, the Sri Lanka tax actually levied on interest meant in paragraph (a) above is lower than the tax Sri Lanka may levy according to that paragraph, then, for the purpose of paragraph (3) of Article 23, the tax paid in Sri Lanka on such interest shall be deemed to have been paid at the rate of tax Sri Lanka may levy according to paragraph (a).
(i) The provisions of paragraph (3) of Article 23 shall apply accordingly to interest meant in paragraph (a).
(ii) Where, by reason of special incentive measures designed to promote economic development in Sri Lanka, the Sri Lanka tax actually levied on interest meant in paragraph (a) above is lower than the tax Sri Lanka may levy according to that paragraph, then, for the purpose of paragraph (3) of Article 23, the tax paid in Sri Lanka on such interest shall be deemed to have been paid at the rate of tax Sri Lanka may levy according to paragraph (a).