INCOME TAX
1 SHORT TITLE.
1. This Act may be cited
as the Inland Revenue Act, No. 10 of 2006.
CHAPTER I
2 IMPOSITION OF INCOME TAX.
2. (1) Income tax shall,
subject to the provisions of this Act, be charged at the appropriate rates
specified in the First, Second, Third, Fourth and Fifth Schedules to this Act,
for every year of assessment commencing on or after April 1, 2006 in respect of
the profits and income of every person for that year of assessment -
(a) wherever arising, in
the case of a person who is resident in Sri Lanka in that year of assessment;
and
(b) arising in or
derived from Sri Lanka, in the case of every other person.
(2) For the purposes of
this Act, "profits and income arising in or derived from Sri Lanka"
includes all profits and income derived from services rendered in Sri Lanka or
from property in Sri Lanka, or from business transacted in Sri Lanka, whether
directly or through an agent.
CHAPTER II
Income Chargeable With Tax
3 INCOME CHARGEABLE WITH TAX.
3. For the purpose of
this Act, "profits and income" or "profits" or
"income" means-
(a) the profits from any
trade, business, profession or vocation for however short a period carried on
or exercised;
(b) the profits from any
employment;
(c) the net annual value
of any land and improvements thereon occupied by or on behalf of the owner, in
so far as it is not so occupied for the purposes of a trade, business,
profession or vocation;
(d) the net annual value
of any land and improvements thereon used rent-free by the occupier, if such
net annual value is not taken into account in ascertaining profits and income
under paragraphs (a), (b) or (c) of this section, or where the rent paid for
such land and improvements is less than the net annual value, the excess of
such net annual value over the rent to be deemed in each case the income of the
occupier;
(e) dividends, interest
or discounts;
(f) charges or
annuities;
(g) rents, royalties or
premiums;
(h) winnings from a
lottery, betting or gambling;
(i) in the case of a non
governmental organization, any sum received by such organization by way of
grant, donation or contribution or any other manner ; and
(j) income from any
other source whatsoever, not including profits of a casual and non-recurring
nature.
4 PROFITS FROM EMPLOYMENT.
4. (1) Profits from any
employment include-
(a)
(i) any wages, salary,
allowance, leave pay, fee, pension, commission, bonus, gratuity, perquisite or
such other payment in money which an employee receives in the course of his
employment;
(ii) the value of any
benefits to the employee or to his spouse, child or parent, including the value
of any holiday warrant or passage;
(iii) any payment to any
other person for the benefit of the employee or of his spouse, child or parent,
whether received or
derived from the employer or others;
(b) the value of any
conveyance granted free of any charge by an employer to any employee, or any
sum so granted for the purchase of any conveyance;
(c)
(i) any retiring
gratuity or any sum received in commutation of pension;
(ii) any sum paid from a
provident fund approved by the Commissioner-General to any employee at the time
of his retirement from such fund, other than such part of that sum as
represents his contributions to that fund, where such retirement took place prior
to April 1, 2011;
(iii) any sum paid from
a regulated provident fund to an employee other than-
(A) such part of that
sum as represents his contributions to that fund; and
(B) such part of that
sum as represents the contributions made by the employer to that fund prior to
April 1, 1968, and the interest which accrued on such contributions, if tax at
the rate of fifteen per centum has been paid by such employer in respect of
such contribution and interest,
where such employee
retires from the employment prior to April 1, 2011;
(iv) any sum received as
compensation for loss of any office or employment;
(v) any sum paid from
the Employees Trust Fund established by the Employees' Trust Fund Act, No. 46
of 1980;
(d) the rental value of
any place of residence provided rent-free by the employer or where a place of
residence is provided by an employer at a rent less than the rental value, the
excess of the rental value over such rent.
For the purpose of this
paragraph the rental value of any place of residence shall be -
(i) the net annual value
as defined in section 5 with the addition of the rates paid by the owner and of
thirty three and one-third per centum of such net annual value on account of
repairs and other expenses; or
(ii) the gross rent paid
for such place of residence :
whichever is higher
Provided that for any
year of assessment, any excess of the rental value-
(A) over one hundred and
twenty thousand rupees, where the aggregate of the profits referred to in
paragraph (a) does not exceed one million and eight hundred thousand rupees ;
and
(B) over one hundred and
eighty thousand rupees, where the aggregate of the profits referred to in
paragraph (a) exceeds one million and eight hundred thousand rupees,
shall be disregarded ;
(e) the value at the
time of its disposal, where such disposal takes place prior to April 1, 2007,
of any share of a company received as a benefit from the employer or on behalf
of the employer at no cost or at a price which is less than the prevailing market
value of such share of that company, whether directly or through a share option
scheme.
The value at the time of
its disposal of such share shall be the surplus over the cost of acquisition of
such share -
(i) in the case of a
sale, the sale price or the market value of such share as at the date of sale,
whichever is higher;
(ii) in the case of
disposal otherwise than by way of sale, the market value of such share as at
the date of disposal;
(iii) in the case of an
employee ceasing to be in the employment of such employer without selling or
disposing of such share, the market value as at the last date of his employment
with such employer, which date shall be deemed to be the date of the disposal
of such share:
Provided however, in the
event of the death of such employee during his period of employment with such
employer, the value of such share shall be zero.
For the purpose of this
paragraph, the profits from employment arising in accordance with the preceding
provisions shall be charged with income tax in the year of assessment during
which such sale, disposal or cessation of employment took place, on the basis
that such profits form the sole taxable income within the meaning of Chapter
VII for that year of assessment, and such tax shall be recovered in accordance
with the provisions of Chapter XIV of this Act:
Provided that where the
employer was not instrumental in the disposal of such share, such employee
shall pay the tax due on such profit from employment in accordance with the
provisions of Chapter XIII of this Act.
(2)For the purposes of
this section, "the value of any benefit", in relation to an
individual who has received, or derived such benefit, means -
(a) where the market
value of such benefit can be readily ascertained, such market value; or
(b) where the market
value of such benefit cannot be readily ascertained or such benefit has no
market value, the cost that would have to be incurred by any other individual
to obtain such benefit:
Provided that the
Commissioner-General may, having regard to the market value of that benefit or
the cost that would have to be incurred by any other individual to obtain that
benefit, by Order published in the Gazette, specify the value to be placed on any
benefit, and where a value is so specified in respect of a benefit, such value
shall be deemed to be the value of such benefit.
5 NET ANNUAL VALUE OF LAND AND IMPROVEMENTS THEREON OR OF
ANY PLACE OF RESIDENCE.
5. (1) The net annual
value of any land and improvements thereon or of any place of residence shall
be determined on the basis of the rent which a tenant might reasonably be
expected, taking one year with another, to pay for such land and improvements
or for such place of residence (the tenant paying rates and the owner bearing
the cost of repairs) subject to a deduction of twenty-five per centum on
account of repairs and other expenses.
(2) Where the annual
value of any land and improvements thereon or of any place of residence has
been assessed for rating purposes by a local authority, such annual value less
a deduction of twenty-five per centum on account of repairs and other expenses,
shall be the net annual value, unless in the opinion of the
Commissioner-General the assessment made by the local authority does not
accurately represent the annual value of such land and improvements or place of
residence, in the year for which the net annual value is being determined.
6 PROFITS OR INCOME ARISING FROM RENTS OF LAND AND
IMPROVEMENTS THEREON.
6. The profits or income
arising from rents of land and improvements thereon, shall be the gross rent
which is receivable and can be recovered after deducting therefrom rates borne
by the owner and where the owner undertakes to bear the cost of repairs, twenty-five
per centum of the balance, but shall, where the rent recoverable in respect of
such land and improvements is not restricted by any law for the time being in
force, be not less than the net annual value after deducting therefrom any part
thereof which is the income of the occupier within the meaning of paragraph (d)
of section 3, due provision being made for any period in respect of which no
rent is receivable or can be recovered.
CHAPTER III
Exemption from Income Tax
7 EXEMPTIONS FROM INCOME TAX OF CERTAIN PERSONS (OTHER
THAN INDIVIDUALS) ON THE WHOLE OR ANY PART OF THEIR PROFITS AND INCOME.
7.There shall be exempt
from income tax -
(a) the profits and
income of -
(i) the World Tourism
Organization;
(ii) the United Nations
Organization, including the net annual value of any land and improvements
thereon in Sri Lanka owned by and occupied by or on behalf of the Organization;
(iii) the International
Development Association;
(iv) the Asian
Development Bank;
(v) the International
Finance Corporation;
(vi) the International
Bank for Reconstruction and Development or any other international or foreign
organization approved by the Minister, being profits and income attributable to
the interest and other charges on any loan granted to the Development Finance
Corporation;
(vii) the International
Irrigation Management Institute;
(viii) the Trust Fund
set up with European Economic Community Funds for the benefit of the settlers
in -
(i) Zones 2 and 3 of
System B area ; and
(ii) System G area ;
demarcated and
administered by the Mahaweli Authority of Sri Lanka, established by the
Mahaweli Authority Act, No. 23 of 1979;
(ix) the International
Committee of the Red Cross;
(x) the Overseas Private
Investment Corporation of the United States of America;
(xi) the Overseas
Economic Co-operation Fund of Japan;
(xii) the World
Conservation Union;
(xiii) the Commonwealth
Development Corporation;
(xiv) the India - Sri
Lanka Foundation incorporated under the Companies Act, No. 17 of 1982;
(xv) the European
Investment Bank;
(xvi) the Nordic
Development Fund established pursuant to the treaty entered between the
Governments of Denmark, Finland, Iceland, Norway and Sweden on November 2, 1988
;
(xvii) the Nordic
Investment Bank;
(b) Profits and income,
other than profits and income from dividends or interest of any person being -
(i) the Incorporated
Council of Legal Education, established by Council of Legal Education Act,
(Chapter 276) ;
(ii) the Institute of
Charted Accountants of Sri Lanka, established by the Institute of Chartered
Accountants of Sri Lanka Act, No. 23 of 1959 ;
(iii) the Sri Lanka Tea
Board, established by the Sri Lanka Tea Board Law, No. 14 of 1975;
(iv) the Ceylon National
Library Services Board, established by the Ceylon National Library Services
Board Act, No. 17 of 1970 ;
(v) any University which
is established or deemed to be established under the Universities Act, No. 16
of 1978;
(vi) the Coconut
Development Authority, the Coconut Research Board and the Coconut Cultivation
Board, established by or under the Coconut Development Act, No. 46 of 1971;
(vii) the Widows' and Orphans' Pension Fund for Public Officers of Sri Lanka
(Chapter 431) ;
(viii) any Widows' and
Orphans' Pension Fund or Scheme established for the Local Government Service ;
(ix) any institution or trust of a public character established by any written
law, solely for the purposes of scientific research;
(x) the S.W.R.D
Bandaranaike National Memorial Foundation, established by the S.W.R.D
Bandaranaike National Memorial Foundation Law, No. 2 of 1975;
(xi) the National
Science Foundation, established by the Science and Technology Development Act,
No. 11 of 1994 ;
(xii) the Industrial
Technology Institute, established by the Science and Technology Development
Act, No. 11 of 1994;
(xiii) the Sri Lanka
Standards Institution, established by the Sri Lanka Standards Institution Act,
No. 6 of 1984;
(xiv) any Resort
Authority, constituted under subsection (1) of section 57 of the Tourist
Development Act, No. 14 of 1968;
(xv) the Ceylon Tourist
Board, established by the Ceylon Tourist Board Act, No. 10 of 1966;
(xvi) the Monetary
Board, established by the Monetary Law Act (Chapter 422) being the profits and
income of the Central Bank of Sri Lanka;
(xvii) any registered
society within the meaning of the Co-operative Societies Law, No. 5 of 1972,
the majority of the members of which are resident in Sri Lanka, being profits
and income of that society for any year of assessment ending on or before March
31, 2008, arising out of business specified by the Minister by notice published
in the Gazette, having regard to Government policy in relation to the
Co-operative movement.
For the purpose of
ascertaining the membership of a registered society of which another registered
society is a member, each of the members of the second-mentioned society shall
be deemed to be a member of the first mentioned society;
(xviii) the Sri Lanka
Foundation Institute, established by the Sri Lanka Foundation Law, No. 31 of
1973;
(xix) the Sri Lanka
Inventors Commission, established by the Sri Lanka Inventors Incentives Act,
No. 53 of 1979;
(xx) the Ceylon Medical
Council, established by the Medical Ordinance (Chapter 105);
(xxi) Ayurvedic Medical
Council, established by the Ayurveda Act, No. 31 of 1961;
(xxii) the Homoeopathic
Council, established by Homoeopathy Act, No. 7 of 1970.
(xxiii) the Sri Lanka
College of Physicians established by the Sri Lanka College of Physicians
(Incorporation) Act, No. 9 of 1971;
(xxiv) the Institute of
Engineers, Ceylon, incorporated by the Institute of Engineers, Ceylon Act, No.
17 of 1968.
(xxv) the Sri Lanka
Export Credit Insurance Corporation, established by the Sri Lanka Export Credit
Insurance Corporation Act, No. 15 of 1978;
(xxvi) the Sri Lanka
Export Development Board, established by the Sri Lanka Export Development Board
Act, No. 40 of 1979.
(xxvii) the Sri Lanka
Ex-Servicemen's Association, established by the Sri Lanka Ex-Servicemen's
Association Law, No. 8 of 1976;
(xxviii) a company
registered under part XI of the Companies Act, No. 7 of 2007, being profits and
income arising to such company from a ship which is -
(i) engaged in
international operations;
(ii) owned or chartered
by such company; and
(iii) deemed to be a Sri
Lanka ship by reason of a determination made under paragraph (c) of section 30
of the Merchant Shipping Act, No. 52 of 1971,
other than profits and
income arising to such company from the carriage, by that ship, of passengers,
mails, livestock and goods, to or from a port in Sri Lanka;
(xxix) the Institute of
Fundamental Studies Sri Lanka, established by the Institute of Fundamental
Studies, Sri Lanka Act, No. 55 of 1981;
(xxx) the International
Winged Beans (Dambala) Institute, established by the International Winged Beans
(Dambala) Institute Act, No. 7 of 1982;
(xxxi) the Buddhist and
Pali University of Sri Lanka and any Higher Educational Institution,
established by or under, the Buddhist and Pali University of Sri Lanka Act, No.
74 of 1981;
(xxxii) the Sri Lanka
Institute of Printing, established by the Sri Lanka Institute of Printing Act,
No. 18 of 1984.
(xxxiii) the Energy
Conservation Fund, established by the Energy Conservation Fund Act, No. 2 of
1985;
(xxxiv) the Tea Small
Holdings Development Authority, established by the Tea Small Holdings
Development Law, No. 35 of 1975;
(xxxv) the Co-operative
Development Fund, established under the Finance Act, No. 11 of 1963;
(xxxvi) the Board of
Investment of Sri Lanka, established by the Board of Investment of Sri Lanka
Law, No. 4 of 1978;
(xxxvii) the National
Defence Fund, established by the National Defence Fund Act, No. 9 of 1985;
(xxxviii) the Sri Lanka
Institute of Architects, incorporated by the Sri Lanka Institute of Architects
Law, No. 1 of 1976;
(xxxix) the Surveyors'
Institute of Sri Lanka, incorporated by the Surveyors' Institute of Sri Lanka
Act, No. 22 of 1982;
(xl) the Institute of
Chemistry, Ceylon, incorporated by the Institute of Chemistry (Ceylon) Act, No.
15 of 1972;
(xli) the Sri Lanka
Institute of Development Administration, established by the Sri Lanka Institute
of Development Administration Act, No. 9 of 1982;
(xlii) the Agricultural
and Agrarian Insurance Board, established by the Agricultural and Agrarian
Insurance Law, No. 20 of 1999;
(xliii) the Superior
Courts Complex Board of Management, established by the Superior Courts Complex
Board of Management Act, No. 50 of 1987;
(xliv) the Institute of
Policy Studies of Sri Lanka, established by the Institute of Policy Studies of
Sri Lanka Act, No. 53 of 1988;
(xIv) the Credit
Information Bureau of Sri Lanka, established by the Credit Information Bureau
of Sri Lanka Act, No. 18 of 1990;
(xIvi) Rubber Research
Board, established under the Rubber Research Ordinance, (Chapter 439);
(xIvii) the Buddha
Sasana Fund, established by the Buddha Sasana Fund Act, No. 35 of 1990;
(xIviii) the J R
Jayawardena Centre, established by the J R Jayawardena Centre Act, No. 77 of
1988;
(xlix) the Institute of
Supply and Materials Management, Sri Lanka, established by the Institute of
Supply and Materials Management, Sri Lanka Act, No. 3 of 1981;
(I) the Stabilization
fund for Tea, Rubber and Coconut, established under Part IV of the Finance Act,
No. 38 of 1971;
(Ii) the Janasaviya
Trust Fund, incorporated under the Trust Ordinance (Chapter 96);
(Iii) the Institute of
Bankers of Sri Lanka, established by the Institute of Bankers of Sri Lanka Act,
No. 26 of 1979;
(Iiii) the Institute of
Personnel Management, Sri Lanka, incorporated by the Institute of Personnel
Management, Sri Lanka Law, No. 24 of 1976;
(Iiv) Public Enterprises
Reform Commission of Sri Lanka, established by the Public Enterprises Reform
Commission of Sri Lanka, Act, No. 1 of 1996;
(Iv) the Securities and
Exchange Commission of Sri Lanka, established by the Securities and Exchange
Commission of Sri Lanka Act, No. 36 of 1987;
(Ivi) the Bandaranaike
Museum Committee, incorporated under the Bandaranaike Museum Committee
(Incorporation) Act, No. 28 of 1997;
(Ivii) the Geological
Survey and Mines Bureau, established under the Mines and Minerals Act, No. 33
of 1992;
(Iviii) Management
Corporation, established under the Apartment Ownership Law, No. 11 of 1973 as
last amended by Act No. 39 of 2003 ;
(Iix) the Sri Lanka
Institute of Taxation, incorporated by the Sri Lanka Institute of Taxation
(Incorporation) Act, No. 21 of 2000.
(lx) the
Telecommunications Regulatory Commission of Sri Lanka, established by the Sri
Lanka Telecommunications Act, No. 25 of 1991;
"(lxi) the
Insurance Board of Sri Lanka, established by the Regulation of Insurance
Industry Act, No. 43 of 2000;
(lxii) the Institute of
Certified Management Accountants of Sri Lanka Act, No. 23 of 2009;
(lxiii) the Fund
established by the National Child Protection Authority Act, No. 50 of 1998;
(lxiv) College of
General Practitioners of Sri Lanka established by the College of General
Practitioners of Sri Lanka Act, No. 26 of 1974;
(lxv) Sri Lanka Social
Security Board established by the Sri Lanka Social Security Board Act, No. 17
of 1996;
(lxvi) any Public
Corporation to the extent of provision of services on behalf of the Government
of Sri Lanka, free of charge out of the funds voted by Parliament from the
Consolidated Fund or out of any loan arranged through the Government;
(lxvii) Sri Lanka
Savings Bank Limited incorporated under the Companies Act, No. 7 of 2007, which
is merged with the National Development Trust Fund (NDTF);
(lxviii) Lanka Puthra
Development Bank Limited incorporated under the Companies Act, No. 17 of 1982;
(lxix) any Government
assisted private school other than that incorporated under the Companies Act,
No.7 of 2007 which is registered with the Ministry of Education and mandated to
follow the Government curricula set by the Ministry of Education and the circulars
issued by such Ministry;
(lxx) the National
Enterprise Development Authority established under the National Enterprise
Development Authority Act, No. 17 of 2006;
(lxxi) the Sri Lanka
Institute of Marketing incorporated under the Sri Lanka Institute of Marketing
(Incorporation) Act,No.41 of 1980;
(lxxii) the Institute of
Physics, Sri Lanka incorporated under the Institute of Physics, Sri Lanka
(Incorporation) Act,No.12 of 1986;
(lxxiii) the Lionel
Wendt Memorial Fund incorporated under section 114 of the Trusts Ordinance
(Chapter 87); and
(Ixxiv) the Diabetes
Association of Sri Lanka incorporated by the Diabetes Association of Sri Lanka
(Incorporation) Act, No. 1 of 1992.
(c) the income of any
local authority or Government institution, exclusive of -
(i) the income of any
trust or other matter vested in or administered by such authority or
institution, being income to which such authority or institution is not
beneficially entitled; and
(ii) the profits and
income for any period commencing on the date of acquisition or vesting, as the
case may be, of any business undertaking acquired by or vested in the
Government, under the Business Undertakings (Acquisition) Act, No. 35 of 1971;
(d) the profits and
income of -
(i) the Government of
any foreign country, being profits and income derived by that Government either
directly or through any agency of that Government from aid granted in money,
goods, services or in any other form by that Government, to the Government of
Sri Lanka;
(ii) the Government of
the People's Republic of China, or of any agency of that Government, being
profits and income derived from the business of ship-owner or charterer, and
referred to in any agreement entered into between that Government and the Government
of Sri Lanka;
(e) the profits and
income of a charitable institution, being -
(i) the profits for any
year of assessment commencing prior to April 1, 2011, of a business carried on
by that institution, if such profits are applied solely to a charitable purpose
of that institution, and -
(A) either the business
is carried on in the course of the actual carrying out of a primary purpose of
that institution or the work in connection with the business is mainly
performed by the beneficiaries of that institution; or
(B) such institution
receives grants from the Government of Sri Lanka and is approved by the
Minister for the purposes of this paragraph, and the business is of a casual
nature;
(ii) the net annual
value of (A) any place of public worship and its premises administered by such
institution; (B) any place or premises owned and occupied by such institution
solely for any of the purposes of that institution;
(iii) the profits and
income from any property donated by royal or other grant before March 2, 1815,
to any place of public worship administered by such institution, in so far as
such profits and income are applied to the purposes for which such grant was
made;
(f) the profits and
income of any undertaking for operating yachts and pleasure crafts registered
with the Director of Merchant Shipping, if such undertaking is -
(i) carried on by
individuals who are not citizens of Sri Lanka or by a company the shares of
which are owned entirely by individuals who are not citizens of Sri Lanka or by
non-resident companies; and
(ii) approved by the
Minister;
(g) the profits and
income of -
(i) the Tower Hall
Theatre Foundation, established by the Tower Hall Theatre Foundation Act, No. 1
of 1978 ;
(ii) the Central
Cultural Fund, established by the Central Cultural Fund Act, No. 57 of 1960 ;
and
(iii) the Presidents
Fund, established by the Presidents Fund Act, No.7 of 1978;
"(h) the profits
and income of any registered society within the meaning of the Co-operative
Societies Law, No. 5 of 1972 or under the respective Statute enacted by a
Provincial Council providing for such registration and the profits and income
of Lak Sathoosa Limited registered under the Companies Act, No. 7 of
2007.";
(i) the profits and
income of the Api Wenuwen Api Fund established by the Api Wenuwen Api Fund Act,
No.6 of 2008;".
"(j) the profits
and income for every year of assessment within the period of ten years
commencing on April 1, 2011, of-
(i) Sri Lankan Airlines
Limited;
(ii) Mihin Lanka (Pvt.)
Limited;
(k) the profits and
income for every year of assessment within the period of five years commencing
on April 1, 2011, of -
(i) Ceylon Electricity
Board;
(ii) National Water
Supply and DrainageBoard;
(iii) Ceylon Petroleum
Corporation;
(iv) Sri Lanka Ports
Authority,
if, twenty five per
centum of the gross profits of such Board, Corporation or Authority, as the
case may be, for the year of assessment immediately preceding such year of
assessment is paid as dividend to the Government;
(l) the profits and
income for any year of assessment commencing on or after April 1, 2013, of Sri
Lanka Deposit Insurance heme established by regulation made under the Monetary
Law Act (Chapter 422);
(m) the profits and
income of any institution, established on or after April 1, 2013, by relocating
in Sri Lanka the headquarters or regional head offices of institutions in the
international network, as specified by the Commissioner-General by Notice published
in the Gazette.
8 EXEMPTION FROM INCOME TAX OF CERTAIN PROFITS AND INCOME
OF CERTAIN OFFICERS AND EMPLOYEES.
8. (1) There shall be
exempt from income tax -
(a) the emoluments,
pension and any other benefits arising to any person from the office of the
President of the Republic of Sri Lanka;
(b) one half of the
official emoluments for any year of assessment ending on or before March 31,
2008, paid to-
(i) any individual who
holds any paid office under the Republic, out of the Consolidated Fund;
(ii) any employee of any
public corporation, being a public corporation which pays such emoluments or
such pension or such profits from employment wholly or partly out of the sums
voted annually by Parliament to such corporation, from the Consolidated Fund;
(iii) the Governor of
any Province, appointed under Article 154B of the Constitution;
(iv) any member of any
Provincial Council;
(v) any employee of any
Provincial Council or to any officer of any Provincial Public Service;
(vi) any member of any
local authority;
(vii) any employee of
any local authority;
(viii) any employee of
any University which is established or deemed to be established, by the
Universities Act, No. 16 of 1978;
(ix) any employee of the
Institute of Policy Studies of Sri Lanka, established by the Institute of
Policy Studies of Sri Lanka Act, No. 53 of 1988;
(x) a member or employee
of any board or commission of inquiry established by or under any law, being a
board or commission all the members of which are appointed by the President or
by a Minister;
(c) such pension or any
such profits from employment referred to in paragraph (c) of subsection (1) of
section 4, as are received by any person in respect of past services performed
by such person or by any other person, whether before or after the commencement
of this Act, as an individual, an employee, the Governor, a member an officer
or an employee, as the case may be, referred to in paragraph(b) ;
(d) the emoluments
arising in Sri Lanka and any income not arising in Sri Lanka of any individual
who is a scientist, technician, expert or adviser, who is not a citizen of Sri
Lanka and who is brought to and employed in Sri Lanka by any undertaking, being
an enterprise with which an agreement has been entered into by the Board of
Investment under section 17 of the Board of Investment of Sri Lanka Law, No. 4
of 1978, for the purposes of that undertaking:
Provided that emoluments
of an individual shall not be exempt from income tax, after the date of the
cessation of employment of such individual in such undertaking or the date on
which the exemption from tax granted by such agreement ends, whichever is the
earlier;
"(dd) the
emoluments arising in Sri Lanka and any income not arising in Sri Lanka of any
individual who is an expert and who is not a citizen of Sri Lanka and is
employed in Sri Lanka by any undertaking which has entered into an agreement
with the Government of Sri Lanka, being an agreement which provides for the
exemption from income tax of such emoluments or by any Strategic Development
Project Gazette by the Board of Investment of Sri Lanka under subsection (4) of
section 3 of the Strategic Development Projects Act, No. 14 of 2008;
For the purpose of this
paragraph, "expert" means an individual who has expertise in such
field as may be determined by the Commissioner-General, as being a field in
which sufficient expertise is not available among the citizens of Sri Lanka;";
(ddd) the emoluments
arising in Sri Lanka of any individual who is an expert and who is not a
citizen and is brought to and employed in Sri Lanka by any undertaking for the
purposes of that undertaking, being an undertaking with which an agreement has
been entered into by the Board of Investment of Sri Lanka and invested more
than US $ 50 Million as direct foreign investment made on or after April 1,
2013, during the period of its tax holiday under section 17A or section 16D as
the case may be, and if it is confirmed by the Board of Investment of Sri Lanka
that the service rendered by him in carrying out activities of such undertaking
in Sri Lanka is essential and such service is not obtainable from Sri Lanka:
Provided that the number
of experts in an undertaking to whom this provision is applicable shall not
exceed five.
For the purpose of this
paragraph "expert" means an individual who has expertise in such
field as may be determined by the Commissioner - General on the recommendation
made by the Board of Investment of Sri Lanka, as being a field in which sufficient
expertise is not available among the citizens of Sri Lanka;
(e) the official
emoluments arising in Sri Lanka, and any income not arising in or derived from
Sri Lanka of-
(i) the Diplomatic
Representative in Sri Lanka (by whatever name or title designated) of the
Government of any other country;
(ii) any such member of
the staff of any Diplomatic Representative referred to in subparagraph (i), any
such Consul or Trade Senior Commissioner, and any such member of the staff of
such Consul or Trade Senior Commissioner, as is a citizen or subject of the
country represented by that Diplomatic Representative, Consul or Trade
Commissioner, if the Minister, on being satisfied that a corresponding official
of the Government of Sri Lanka resident in the country represented by that
person is or would be granted similar exemption from income tax by that
country, declares that the exemption shall apply in that case :
Provided that the
exemption shall not apply in the case of any person, if such person carries on
or exercises in Sri Lanka any other employment or any trade, business,
profession or vocation;
(iii) any expert,
adviser, technician or official who is brought to Sri Lanka by the Government
of Sri Lanka through any Specialized Agency of the United Nations Organisation,
or under the Point Four Assistance Programme of the Government of the United States
of America, or through the Colombo Plan Organisation (including its Technical
Assistance Bureau) or through the Asia Foundation or any other organization
approved by the Minister as being of a similar character, and whose salary or
principal emolument is -
(A) payable out of the
funds provided by way of a grant or other assistance to the Government of Sri
Lanka by any such Organisation, Programme or Foundation or any other
organization, as the case may be; or
(B) not payable by the
Government of Sri Lanka;
(iv) any trainee from
abroad who is sent to Sri Lanka under any of the Technical Co-operation
Programmes of the United Nations Organisation and its Specialized Agencies, or
of the Colombo Plan Organisation, or of any other organization approved by the
Minister as being of a similar character;
(v) any official of the
United Nations Organisation who is resident in Sri Lanka, and who is not a
citizen of Sri Lanka;
(vi) members of any
naval, military or air force of any country other than Sri Lanka, who are in
Sri Lanka at the request or with the concurrence, of the Government of Sri
Lanka;
(vii) persons employed
in any civil capacity by the Government of any country other than Sri Lanka
who, not being persons resident in Sri Lanka for a period exceeding three
months immediately prior to the date of commencement of such employment, are so
employed in or visit Sri Lanka for any purpose connected with the presence in
Sri Lanka, of such members of any naval, military or air forces, as are
referred to in sub-paragraph (vi); and
(viii) any person who is
not a citizen of Sri Lanka and who is employed in Sri Lanka, by the Asia
Foundation or by the Overseas Economic Co-operation Fund of Japan or the
Commonwealth Secretariat in any of its programmes for technical co-operation
with Sri Lanka or the Commonwealth Development Corporation :
Provided that the
liability to income tax of any person referred to in subparagraphs (i), (ii),
(iii), (iv) or (v) as regards other income arising in or derived from Sri
Lanka, shall be the same as though he was a non-resident person;
(f) the official
emoluments of any citizen of Sri Lanka who is employed as an expert, technician
or official by the United Nations Organisation or by any Specialized Agency of
that Organisation;
(g) the official
emoluments of any individual who is employed by the World Tourism Organisation,
the International Irrigation Management Institute, the Colombo Plan Bureau, the
Asian Development Bank, the World Bank, the International Committee of the Red
Cross, the World Conservation Union or the European Investment Bank;
(h) the value of any
travel warrant or passage granted to a person who is not a citizen of Sri Lanka
to enable him to come to Sri Lanka to assume duties or to visit his home
abroad, or to return from Sri Lanka on the termination of his services, whether
on retirement or otherwise , or of any travel warrant or passage granted to the
spouse or any son or daughter of such person to come to Sri Lanka or to visit
his or her home abroad or to return from Sri Lanka, on the termination of the
services of such person;
(i) any allowance
granted by an employer to his employee for travelling, subsistence and lodging,
in respect of travel by such employee outside Sri Lanka, in connection with his
employment;
(j) the emolument earned
or the pension arising in any year of assessment, in foreign currency, by or to
any individual resident in Sri Lanka in respect of -
(i) services rendered by
him in that year of assessment; or
(ii) past services
rendered by him or his spouse,
outside Sri Lanka in the
course of any employment carried on, or exercised by him or his spouse, if such
emoluments or pension are paid to him in Sri Lanka or such emoluments or
pension (less such amount expended by such individual outside Sri Lanka as is
considered by the Commissioner-General to be reasonable expenses) are remitted
by him to Sri Lanka;
(k) the value of any
free transport by motor coach provided by an employer to an employee for travel
by such employee, from his residence to his place of work or from his place of
work to his residence;
(l) such part of any sum
paid to an employee at the time of his retirement, from any provident or
pension fund or the Employees Trust Fund established by the Employees Trust
Fund Act, No. 46 of 1980, as represents income derived by that fund, for any
period commencing on or after April 1, 1987, from investments made by it;
(m) such part of any sum
referred to in paragraph (c) of subsection (1) of section 4, paid to any
employee at the time of his retirement from any employment in any company
formed under the Conversion of Public Corporations or Government Owned Business
Undertakings into Public companies Act. No, 23 of 1987, as is attributable to
his period of service ending before April 1, 1997, in any public corporation or
any Government Owned Business Undertaking, as the case may be;
(n) such part of any sum
referred to in paragraph (c) of subsection (1) of section 4, paid to any
employee at the time of his retirement from any employment in any public
corporation other than any public corporation referred to in sub-paragraph (ii)
of paragraph (b), or at any subsequent time, as is attributable to the period
of service of such employee prior to April 1, 1997, in such public corporation;
(o) such part of any sum
as does not exceed two million rupees, paid to any employee by the employer of
such employee, being a sum paid as compensation for loss of any office or
employment consequent to -
(i) the voluntary
retirement by such employee in accordance with a scheme which in the opinion of
the Commissioner- General, is uniformly applicable to all employees employed by
such employer; or
(ii) the retrenchment of
such employee by such employer in accordance with a scheme approved by the
Senior Commissioner of Labour;.
(p) value of any
benefits accruing before April 1, 2011, to an employee of any employer from the
allotment or the grant, as the case may be, to such employee or to any nominee
of such employee by or on behalf of such employer, of any share or any option to
buy any share in any company, in accordance with a scheme allotment of grant,
as the case may be; and which in the opinion of the Commissioner-General is
reasonable is uniformly applicable to all the employees of such employer.
In this paragraph, the
"value" in relation to any benefit accruing from the allotment of any
share or the option to buy any share, means the excess, if any, of the market
value of such share at the time of its allotment or at the time of the sale of
the option, as the case may be, over the price charged for such allotment or
grant, as the case may be ; and
(q) the emoluments
earned in any year of assessment commencing on or after April 1, 2007, by any
resident individual from employment on a ship which is-
(i) owned or chartered
by a company registered as an off-shore company under Part XI of the Companies
Act, No. 7 of 2007 ; or
(ii) deemed to be a Sri
Lanka ship by virtue of a determination made under paragraph (c) of section 30
of the Merchant Shipping Act, No. 52 of 1971;
(r) rental value of one
place of residence provided to any individual referred to in paragraph (b) of
subsection (1), rent free or at a rent less than the rental value of such
place;
(s) either the value of
benefit from private use of one motor vehicle provided by the employer or the
aggregate of any allowance paid in lieu of the provision of such vehicle and
the value of any transport facility as may be specified by the Commissioner-General
by Order published in the Gazette, subject to a maximum of fifty thousand
rupees for a calendar month;
(t) where the profits
from employment of any individual who is a citizen of Sri Lanka or resident in
Sri Lanka other than profits referred to in paragraph (c) of subsection (1) of
section 4, exceeds five hundred thousand rupees, for any year of assessment
commencing prior to April 1, 2013, then-
(i) such part of such
profits in excess of five hundred thousand rupees; or
(ii) one hundred
thousand rupees,
whichever is lower;
(u) any special payment
made to any individual or holder of office, referred to in paragraph (b) of
subsection (1) for emergency or priority services or for any special task
rendered or carried out by such individual;
(v) official emoluments
arising in Sri Lanka to any non-citizen individual from the participation in
any international event conducted in Sri Lanka;
(w) such part of
official emoluments as does not exceed one hundred thousand rupees, for any
year of assessment commencing prior to April 1, 2013, arising in Sri Lanka to
any individual who is not a citizen of Sri Lanka and not resident in Sri Lanka;
(x) the profits and
income not exceeding forty eight thousand rupees for any year of assessment, if
the aggregate of such profits and income is not more than forty eight thousand
rupees other than any employment income or any profits and income which is taxable
at source as final tax, of any individual who is an employee and who is not
engaged in any trade, business, profession or vocation, if tax is deducted from
his employment income for that year of assessment ; and:; and
(y) benefit from
provision of any loan by the employer free of interest or at a subsidised rate
of interest, if such loan is provided not out of funds borrowed for that
purpose.
(2)Nothing in paragraph
(d) of subsection (1) shall apply to or in relation to any individual who is
not a citizen of Sri Lanka, and who -
(a) has entered into a
contract of employment; or
(b) is brought to and
employed in Sri Lanka,
with or by any
undertaking, other than an undertaking being an enterprise with which an
agreement has been entered into prior to December 31, 1994, on an application
made in that behalf prior to November 11, 1993 by the Board of Investment of
Sri Lanka, under section 17 of the Board of Investment of Sri Lanka Law, No. 4
of 1978.
(3) Notwithstanding the
provisions of the proviso to paragraph (d) of subsection (1) and of subsection
(2), the emoluments of any individual who is not a citizen of Sri Lanka and who
is brought to and employed in Sri Lanka by an enterprise with which an agreement
has been entered into by the Board of Investment of Sri Lanka under section 17
of the Board of Investment of Sri Lanka Law, No. 4 of 1978, and which has opted
to be charged with income tax in lieu of the exemption from income tax granted
under such agreement, shall be exempt from income tax upto the date of
cessation of employment of such individual in such enterprise or the date on
which the exemption from income tax granted in respect of such enterprise
would, but for such option, have ended, whichever is earlier, but not later
than April 1, 2008.
9 EXEMPTION FROM INCOME TAX OF CERTAIN INTEREST RECEIVED.
9.There shall be exempt
from income tax -
(a) the interest
accruing to any company, partnership or other body of persons outside Sri
Lanka, from any loan granted by that company, partnership or body of persons to
any person or partnership in Sri Lanka, notwithstanding whether such company,
partnership or body of persons has a permanent establishment or any business
connection in Sri Lanka, if such loan is-
(i) granted prior to
April 1, 2012, and approved by the Minister as being essential for the economic
progress of Sri Lanka; or
(ii) granted on or after
April 1, 2012;".
(aa) the interest
accruing to any person or partnership or other body of persons outside Sri
Lanka from investment made out of foreign currency brought in to Sri Lanka on
or after April 1, 2012, in any security or bond issued by any person in Sri
Lanka;
(b) the interest
accruing to any person or partnership outside Sri Lanka, from any security,
note or coupon issued by the Government of Sri Lanka in respect of a loan
granted in foreign currency by that person or partnership to the Government of
Sri Lanka, if such loan is-
(i) granted prior to
April 1, 2012, and approved by the Minister as being essential for the economic
progress of Sri Lanka; or
(ii) granted on or after
April 1, 2012;"
(c) the interest
accruing to any person from moneys lying to his credit in a special account
opened by him or on his behalf in a commercial bank with the approval of the
Central Bank of Sri Lanka, for the deposit in accordance with the conditions
imposed by the Central Bank of Sri Lanka, of sums obtained by him by the
exchange of foreign currency held by him outside Sri Lanka;
(d) the interest
accruing to any person on moneys lying to his credit in foreign currency in any
account opened by him or on his behalf , in any commercial bank or in any
specialised bank, with the approval of the Central Bank of Sri Lanka;
(e) the interest
accruing to any person on moneys invested in Reconstruction Bonds issued by the
Government of Sri Lanka, denominated in United States Dollars;
(f) the interst accruing
on or before 31, March 2009, to any person on moneys invested in Sri Lanka
Development Bonds denominated in United States Dollars, issued by the Central
Bank of Sri Lanka;
(g) the interest
accruing to any person on moneys lying to his credit in foreign currency with
any foreign currency banking unit;
(h) such part of any
interest as does not exceed-
(i) two hundred thousand
rupees accruing for, or arising in, any year of assessment ending prior to
April 1, 2011; and
(ii) five hundred
thousand rupees accruing for, or arising in, any year of assessment commencing
on or after April 1, 2011,but prior to January 1, 2015, to any individual
to any individual who is
a citizen of Sri Lanka and resident in Sri Lanka and who is more than fifty
nine years old the first day of that year of assessment, from any deposit
maintained in the National Savings Bank established by the National Savings Bank
Act, No. 30 of 1971 or by the Bank of Ceylon established by the Bank of Ceylon
Ordinance (Chapter 397) or the People's Bank established by the People's Bank
Act, No. 29 of 1961 or the State Mortgage and Investment Bank established by
the State Mortgage and Investment Bank Law, No. 13 of 1975 or the Housing
Development Finance Corporation Bank of Sri Lanka established by the Housing
Development Finance Corporation of Sri Lanka Act, No. 7 of 1997 as amended by
Act, No. 15 of 2003 or the SME Bank Ltd. and Lanka Puthra Development Bank
Limited incorporated under the Companies Act, No. 17 of 1982 or any bank
established under the Regional Development Banks Act, No.6 of 1997 or any
registered society within the meaning of the Co-operative Societies Law, No.5 of
1972;
(hh) such part of any
interest accruing for, or arising in, for the period commencing on January 1,
2015 and ending on March 31, 2015, or for any year of assessment commencing on
or after April 1, 2015 to any individual who is a citizen of Sri Lanka and resident
in Sri Lanka and who is sixty years or more or reaching sixty years during the
period commencing from January 1, 2015 and ending on March 31, 2015 or who is
more than fifty nine years old on the first day of the year of assessment
commencing on or after April 1, 2015, from any deposit maintained in any bank
or financial institution authorized by the Central Bank of Sri Lanka to accept
deposits from the general public or any registered society within the meaning
of the Co-operative Societies Law, No. 5 of 1972;
(hhh) such part of any
interest accruing for, or arising in, any year of assessment commencing on or
after April 1, 2015, to any individual or charitable institution where such
individual or charitable institution maintains one savings account or more than
one savings account, where the interest paid for a month is less than five
thousand rupees. For the purpose of this paragraph, "savings account"
means an account, whether or not subject to any condition affecting the right
to withdraw money therefrom and which bears interest at a rate not dependent on
the period for which the deposit is maintained;"; and
(i) the interest or
discount accruing or arising to any individual from a Sri Lanka Nation Building
bond denominated in foreign currency and issued by or on behalf of the
Government of Sri Lanka, being a bond purchased by such individual ;
(j) the interest
accruing in any year of assessment to any charitable institution, where it is
proved to the satisfaction of the Commissioner-General in relation to that year
of assessment, that such interest is applied solely for the purpose of providing
care for the children, the elderly or the disabled, in a home maintained by
such charitable institution ;
(k) the interest
accruing to any person from any money deposited in any Securities Investment
Account;
"(l) the interest
or discount arising or accruing to any non-resident citizen of Sri Lanka, from
the purchase of any Motherland Development Bond denominated in foreign currency
and issued by or on behalf of the Government of Sri Lanka;
(m) the interest
accruing or arising on or after April 1, 2008, from any investment made outside
Sri Lanka to any person resident in Sri Lanka, where such interest is remitted
to Sri Lanka through a bank.".
(n) the interest
accruing to Lady Lochore Loan Fund on any loan granted by such Fund to any
employee, of any Government Institution as defined in section 132 of this Act.
(o) the interest or
discount accruing or arising to any person from any investment made on or after
January 1, 2013-
(i) in any Corporate
Debt Security, quoted in any Stock Exchange licensed by the Securities and
Exchange Commission; and
(ii) in any Municipal
Bond issued by any Municipal Council with the approval of the Secretary of the
Ministry of Finance.
(p) the interest or
discount accruing or arising to any person from any investment made on or after
January 1, 2015 in any Corporate Debt Security, issued by the Urban Development
Authority established by the Urban Development Authority Law, No. 41 of 1978;
and "
(q) the interest
accruing or arising to any individual who is Sri Lankan, living or employed
abroad from any investment made on or after January 1, 2015 in Nation
Development Bonds issued by the Central Bank of Sri Lanka on behalf of the
Government.
10 EXEMPTION FROM INCOME TAX OF CERTAIN DIVIDENDS.
10. (1)There shall be
exempt from income tax -
(a) any dividend paid by
a company with which an agreement has been entered into by the Board of
Investment of Sri Lanka under section 17 of the Board of Investment of Sri
Lanka Law, No. 4 of 1978, being an agreement which has been entered into prior
to December 31, 1994, on an application made in that behalf prior to November
11, 1993 -
(i) to any person,
during the period for which the profits and income of that company are exempt
from income tax under the terms of that agreement or within one year
thereafter; out of the profits and income of the company which are exempt from
income tax;
(ii) to any person, who
is not resident in Sri Lanka notwithstanding anything to the contrary in
subsection (1) of section 53;
(b) any dividend paid to
a unit holder by any unit trust or mutual fund;
(c) any dividend paid by
a flagship company with which an agreement has been entered into by the Board
of Investment of Sri Lanka, to any shareholder during the period for which the
profits and income of that company are exempt from income tax under the terms
of that agreement or within one year thereafter, out of the profits and income
of such company which are exempt from income tax.
In this paragraph,
"flagship company" means any company which has entered into an
agreement with the Board of Investment of Sri Lanka under section 17 of the
Board of Investment of Sri Lanka Law, No. 4 of 1978 and which has in accordance
with such agreement invested in Sri Lanka, within the period specified in such
agreement, not less than fifty million United State Dollars or its equivalent
in any other foreign currency : -
(i) in the purchase or
construction of any building or in the purchase of any land, plant, machinery
or furniture; and
(ii) in the acquisition
of any asset not included in sub-paragraph (i),
for the use of the
undertaking carried on by that company;
(d) any dividend paid by
a company with which an agreement has been entered into on or after November 8,
1995, by the Board of Investment of Sri Lanka under section 17 of the Board of
Investment of Sri Lanka Law, No. 4 of 1978, to any shareholder of that company
during the period for which the profits and income of that company are exempt
from income tax under the terms of that agreement or within one year
thereafter, out of the profits and income which are exempt from income tax;
(e) any dividend out of
the profits of any company with which an agreement has been entered into by the
Board of Investment of Sri Lanka under section 17 of the Board of Investment of
Sri Lanka Law, No.4 of 1978, from the operation by such company of a hospital
with facilities for paying and non-paying patients for indoor and outdoor
treatment, paid to any shareholder of such company during the peirod of five
years reckoned from the commencement of the year of assessment in which such
hospital commences operations;
(f) any dividend out of
the profits within the meaning of paragraph (a) of section 3 of a company -
(i) with which an
agreement has been entered into by the Board of Investment of Sri Lanka under
section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978; and
(ii) to which a mining
licence issued under the Mines and Minerals Act, No. 33 of 1992 has been
assigned,
paid to any share holder
of such company during the period for which the profits and income of that
company are chargeable with income tax, at such rate as is determined in
accordance with sub-paragraph (a) of the further proviso to paragraph (iv) of
regulation 2 of Regulation No. 1 of 1995, made under section 24 of the Board of
Investment of Sri Lanka Law, No. 4 of 1978, as last amended by Regulation
published in Gazette 1019/13 of March 19, 1998 and specified in such agreement
or within one year thereafter;
(g) any dividend paid to
a shareholder of a company out of such profits and income of that company
arising on or after April 01, 1977, which are exempt from income tax under
section 15, 17, 18, 18a, 19, 20, 20a, 21, 21a, 21b, 21c, 21d, 21e, 21f, 21g or
21h of the Inland Revenue Act, No. 38 of 2000 or section 8(a) (xxxviii), 15,
16a, 16b, 16c, 16d, 17a, 17c, 17d, 17j, 17jj, 17k, 17kk, 17l, 17m, 18, 19, 20,
20a 20b, 20c, 21, 22, 22a, 22b, 22c, 22d, 22ddd, or 22dddd of the Inland
Revenue Act, No. 28 of 1979 or under the Inland Revenue Act, No. 4 of 1963, if
such dividend is paid during the period for which such profits and income of
that company are exempt from income tax under any of those provisions or within
one year thereafter;
(h) any dividend paid to
a shareholder of a company out of any such dividend received by that company
during the period for which the dividends as is referred to in paragraphs (a),
(c), (d), (e), (f), or (g) respectively, are exempt from income tax, if the
first mentioned dividends is paid during any year of assessment in which the
second mentioned dividend was received by that company or within one year
thereafter;
(i) any dividend paid to
a shareholder of a company out of any such dividend as is referred to in
paragraphs (a), (c), (d), (e), (f) or (g) respectively, received by that
company through one or more intermediary companies during the period for which
the dividends referred to in paragraphs (a), (c), (d), (e), (f), (g) are exempt
from income tax, or within two years thereafter, if the first mentioned
dividend is paid during the year of assessment in which the second mentioned
dividend was received or within one year thereafter.
(j) any dividend paid on
or after April 1, 2008, by a company not resident in Sri Lanka to any
shareholder resident in Sri Lanka, where the amount of such dividend is
remitted to Sri Lanka through a bank;
(k) any dividend paid to
a shareholder of a company out of such profits and income of that company which
are exempt from income tax under section 16C or section 17A of this Act, if
such dividend is paid during the period for which such profits and income are
exempt from income tax:
Provided that where such
company is a resident company engaged in any construction project, then such
exemption shall be applicable to any dividend paid by such company during the
period for which such profits and income are exempt from income tax or within
one year thereafter;
(l) any dividend paid to
a shareholder of a company out of such dividend as is referred to in paragraph
(j), received by that company, if the first mentioned dividend is paid within
three months of the receipt of the second mentioned dividend by that company;
(m) any dividend paid to
a shareholder of any new undertaking commenced on or after April 1, 2015 for
manufacture of products for export, and which is not formed by splitting-up or
re-construction of an existing undertaking with an investment of not less than
two million US Dollars (or equivalent in any other currency) and for which
depreciation allowances are entitled to under paragraph (h) of the first
proviso to paragraph (a) of subsection (1) of section 25, where such dividends
are paid out of such profits and income of such new undertaking during the
period reckoned from the year of assessment in which such new undertaking
commences to carry on commercial operations and another four years of
assessment immediately succeeding that year of assessment.
(2)
(a) The provisions of
paragraphs (c), (d), (e), or (f) of subsection (1) shall not apply to any
dividend paid on or after April 1, 2004 in relation to any agreement deferred
to therein which has been entered into on or after November 6, 2002; or
(b) The provisions of
paragraphs (g) of subsection (1) shall not apply to any dividend paid on or
after April 1, 2004 by any company referred to in that paragraph which
qualified for an exemption on or after November 6, 2002.
11 EXEMPTION FROM INCOME TAX OF CERTAIN PROFITS AND
INCOME FROM LANDS AND IMPROVEMENTS THEREON.
11. (1)There shall be
exempt from income tax -
(a) the net annual value
of not more than one place of residence, owned by and occupied by or on behalf
of an individual;
(b) the income accruing
to the owner of a house which is converted into two or more places of
residence, each such place of residence being separately assessed for the
purpose of rates, such income accruing being the income from any such place of
residence for -
(i) the year of
assessment in which such conversion was effected and for the five years of
assessment immediately succeeding that year of assessment, if the floor area of
such place of residence does not exceed one thousand square feet; or
(ii) the year of
assessment in which such conversion was effected and for the three years of
assessment immediately succeeding that year of assessment, if the floor area of
such place of residence exceeds one thousand square feet but does not exceed
two thousand square feet;
(c) the net annual value
of any land and improvements thereon owned by a body of persons, the primary
object of which is the promotion of any sport which is recognized as a sport
for the purposes of the Sports Law, No. 25 of 1973 and used for that object by
that body.
"(2) There shall be
exempt from income tax-
(a) income accruing to
the owner of any house from such house, the construction of which is completed
prior to April 1, 2008, being income for that year of assessment in which such
construction was completed and for the four years of assessment immediately
succeeding that year of assessment, if such house is used solely for
residential purposes:
Provided that where the
floor area of the house is one thousand and five hundred square feet or less,
the income accruing to the owner shall be exempt from income tax for the year
of assessment in which the construction of that house is completed and for the
six years of assessment immediately succeeding that year of assessment; and
(b) income accruing to
the owner of any house from such house, the floor area of which is five hundred
square feet or less and the construction of which is completed on or after
April 1, 2008, being income for that year of assessment in which the construction
was completed and for the four years of assessment immediately succeeding that
year of assessment, if such house is used solely for residential
purposes.".
(3)For the purposes of
this section "owner" includes a co-owner.
12 EXEMPTION FROM INCOME TAX OF CERTAIN SUBSIDIES.
12.There shall be exempt
from income tax any sum paid to any person as a subsidy or grant -
(a) out of the Capital
Fund, established under the Sri Lanka Tea Board Law, No. 14 of 1975;
(b) out of the rubber
Replanting Subsidy Fund, established under the Rubber Replanting Subsidy Act,
(Chapter 437):
(c) by the Coconut
Cultivation Board, established under the Coconut Development Act, No. 46 of
1971;
(d) by the Ministry of
the Minister in charge of the subject of Fisheries , for the purchase by such
person of fishing boats, marine engines, fishing gear and other fishing
equipment;
(e) out of the Export
Development Fund, established by the Sri Lanka Export Development Act, No. 40
of 1979;
(f) under any other
scheme for the planting or replanting of any other agricultural plant ;
(g) out of the Mill
Development Fund, administered by the Coconut Development Authority established
under the Coconut Development Act, No. 46 of 1971, for the modernization of
machinery.
13 MISCELLANEOUS EXEMPTIONS FROM INCOME TAX.
13. There shall be
exempt from income tax -
(a) the emoluments
earned in any year of assessment prior to April 1, 2008, in foreign currency by
any individual resident in Sri Lanka, in respect of services rendered by him in
that year of assessment outside Sri Lanka in the course of any vocation carried
on or exercised by him, if such emoluments (less such amount expended by such
individual outside Sri Lanka as is considered by the Commissioner General to be
reasonable personal expenses) are remitted by him to Sri Lanka;
(b) the profits and
income earned in foreign currency by a resident company or partnership carrying
on or exercising any trade, business or vocation, in any year of assessment -
(i) in respect of
services rendered by that company or partnership in that year of assessment
outside Sri Lanka (including, in relation to the year of assessment commencing
on April 1, 2006, services relating to any construction project);
(ii) in respect of any
off-shore business which does not in any way involve any goods manufactured or
produced in Sri Lanka or any goods imported into Sri Lanka; and
(iii) in respect of any
business of exporting any goods, being goods which were brought to Sri Lanka on
a consignment basis, and re-exported without subjecting such goods to any
process or manufacture, other than the repacking or labeling of such goods in
the preparation to the market,'";
in the course of
carrying on or exercising such trade, business or vocation, if such profits and
income (less any such amount expended by that company or partnership outside
Sri Lanka as is considered by the Commissioner General to be reasonable
expenses) are remitted to Sri Lanka through a bank;
"(bb) the profits
and income earned in foreign currency by any manufacturer of textile, leather
products, footwear or bags, from supplies made to any foreign buyer who has
established his headquarters in Sri Lanka for management, finance, supply chain
and billing;”;
(bbb) the profits and
income earned in foreign currency by any person for any year of assessment
commencing on or after April 1, 2012, in respect of any business of procuring
goods from one country or manufacturing goods in one country and exporting to another
country, other than Sri Lanka;
(c) the profits and
income earned in foreign currency in any year of assessment ending on or before
March 31, 2008, in any year of assessment ending on or before March 31, 2008,
by any partnership in Sri Lanka or any individual from any services rendered in
or outside Sri Lanka, to any person or partnership outside Sri Lanka, being
services rendered in the course of any profession, carried on or exercised by
such individual or partnership, if such profits and income (less such
reasonable amount as may be determined by the Commissioner-General for personal
expenses incurred outside Sri Lanka, where the services are rendered outside
Sri Lanka by an individual) are remitted from outside Sri Lanka to such
individual or partnership through a bank in Sri Lanka ;
(d) the profits and
income earned in foreign currency in any year of assessment ending on or before
March 31, 2008, in any year of assessment ending on or before March 31, 2008,
by any company resident in Sri Lanka from services rendered outside Sri Lanka,
to any person or partnership outside Sri Lanka, in the course of carrying on or
exercising any profession, if such profits and income are remitted to such
company through a bank in Sri Lanka;
(dd) the profits and
income for any year of assessment earned in foreign currency by any resident
company, a resident individual or any partnership from services rendered
outside Sri Lanka in that year of assessment, in carrying out any construction
project in the course of any trade, business or vocation, if such profits and
income (less any such amount expended by that company, individual or
partnership outside Sri Lanka as is considered by the Commissioner-General to
be reasonable expenses) are remitted to Sri Lanka through a bank;
"(ddd)
(i) the profits and
income earned in foreign currency by any resident company, any resident
individual or any partnership in Sri Lanka, from any service rendered in or
outside Sri Lanka to any person or partnership outside Sri Lanka, other than
any commission, discount or similar receipt for any such service rendered in
Sri Lanka, if such profits and income (less such amount, if any, expended
outside Sri Lanka as is considered by the Commissioner-General to be reasonable
expenses) are remitted to Sri Lanka through a bank;";
(ii) the profits and
income within the meaning of paragraph (a) of section 3, arising from the
cutting and polishing of gems which are brought to Sri Lanka and exported after
such cutting and polishing;
"(dddd)
notwithstanding the provisions of paragraph (ddd) of this section, the profits
and income for the period commencing from April 1, 2009 and ending on March 31,
2011, earned in foreign currency by any resident company, any resident
individual or any partnership in Sri Lanka, from any serivce rendered in or
outside Sri Lanka to any person or partnership outside Sri Lanka, if such
profits and income (less such amount, if any, expended outside Sri Lanka as is
considered by the Commissioner-General to be reasonable expenses) are remitted
to Sri Lanka, through a bank;";
(ddddd) any profits and
income earned in foreign currency from outside Sri Lanka, by any resident
individual who is a citizen of Sri Lanka, if such profits and income (less
Amendment of section 13 of the principal enactment such amount, if any,
expended outside Sri Lanka as is considered by the Commissioner-General to be
reasonable expenses) are remitted to Sri Lanka through a bank;
(e) the income accruing
to a person receiving instruction at any university, college, school or other
educational establishment from a scholarship, exhibition, bursary, or similar
educational endowment;
(f) any capital sum
received by way of death gratuity or as compensation for death or injuries;
(g) wound and disability
pensions granted to members or ex-members of the Forces of Her Majesty, the
Queen of the United Kingdom;
(h) United States
Government disability pensions;
(i) the profits and
income within the meaning of paragraph (a) of section 3 arising to any person
from the export of gold, gems or jewellery ;
(j) such part of the
profits and income arising from the sale for payment in foreign currency, of
any gem or jewellery, being a sale made in Sri Lanka by any person authorized
by the Central Bank of Sri Lanka to accept payment for such sale in foreign currency;
(k) any prize received
by a person as an award made by the President of the Republic of Sri Lanka;
(l) any prize received
by a person as an award made by the Government in recognition of an invention
created, or any research undertaken, by such person;
(m) any sum received by
a person from the President's Fund established by the President's Fund Act, No.
7 of 1978;
(n) any sum received by
a person from the National Defence Fund established by the National Defence
Fund Act, No. 9 of 1985;
(o) such part of any sum
as does not exceed three thousand rupees paid by the Sri Lanka Bureau of
Foreign Employment, established by the Sri Lanka Bureau of Foreign Employment
Act, No. 21 of 1985, to any person or partnership licensed by such Bureau, to carry
on the business of a foreign employment agency, in respect of any Sri Lankan
for whom employment outside Sri Lanka has been provided or secured by such
person or partnership;
(p) such part of any sum
as does not exceed three thousand rupees received in any year of assessment by
the Sri Lanka Bureau of Foreign Employment, established by the Sri Lanka Bureau
of Foreign Employment Act, No. 21 of 1985, in respect of any Sri Lankan for
whom employment outside Sri Lanka has been provided or secured by such Bureau;
(q) such part of any sum
or the aggregate of sums as does not exceed one hundred thousand rupees
received by any individual, as an award or awards in recognition of his
excellence in the field of fine arts, literature or sports, being an award made
with the prior written approval of the Minister in charge of the subject of
fine arts, literature or sports, as the case may be;
(qq) one half of the
profits and income of any person for any year of assessment commencing on or
after April 1, 2009, derived from the sales or from any other means of any book
written by him and whether published by himself or by any other person, for a
period of one year commencing from the date of its first publication;
For the purpose of this
paragraph, "drama" means a theatrical presentation based on a text,
either written, oral or otherwise, which through dramatic performance by actors
on a stage or any other suitable space, conveys a story or any other narrative,
for a collective public audience;
(qqq) one half of the
profits and income of any person for any year of assessment commencing on or
after April 1, 2009, derived from the production of any drama, for a period of
one year commencing from the date of its first public performance.
(qqqq) any export
development rebate paid to an exporter by the Export Development Board,
established by the Sri Lanka Export Development Act, No. 40 of 1979, under the
Export Development Reward Scheme;
(qqqqq)one half of the
profits and income for any period on or after April 1, 2015 from the production
of films or dramas of any individual who produces an award winning cinema or a
drama at an international film or drama festival, for a period of five years of
assessment commencing from the year in which such award is received;
(r) any interest or
discount accruing to the "Sudu Nelum Movement", established by the
Government and registered under section 114 of the Trust Ordinance, being
interest or discount on any sum of money deposited by the Sudu Nelum Movement
with any commercial bank;
(s) any profits and
income within the meaning of paragraph (a) of section 3, derived by, arising
from or accruing to any person from the sale of any bond, debenture or other
debt instrument issued by a company and held by him, being a bond, debenture or
other debt instrument which at the time of such sale is quoted in any official
list published by any Stock Exchange, licensed by the Securities and Exchange
Commission of Sri Lanka;
"(t) any profits
and income-
(i) for the year of
assessment commencing on April 1, 2006, derived by or accruing to any person or
partnership other than any unit trust, mutual fund or venture capital company ;
and
(ii) for any year of
assessment commencing on or after April 1, 2007, derived by or accruing to any
person or partnership,
from the sale of any
share"; and
a right to any share, a
bonus share or a share warrant in respect of which the share transaction levy
under section 7 of the Finance Act, No, 5 of 2005, has been charged ;
(tt) the profits and
income accruing to any person from the redemption of a unit of a Unit Trust or
a Mutual Fund;
(ttt) the profits and
income arising or accruing to any Unit Trust from investments made on or after
January 1, 2015 in US Dollar deposits or US Dollar denominated securities
listed in any foreign stock exchange;
(u) the profits and
income earned in any year of assessment in foreign currency by any National
Association of Sports registered under the Sports Law, No. 25 of 1973, in
respect of services rendered by such Association, or in the course of taking
part in any sport within the meaning of the Sports Law, in that year of
assessment outside Sri Lanka, if such profits and income (less such amount as
the Commissioner _ General considers to be reasonable expenses incurred outside
Sri Lanka) are remitted by such Association to Sri Lanka ;
(v) the profits and
income of any person or any partnership derived from the participation as a
competitor, official or organizer of any sporting or athletic event held in Sri
Lanka and at which competitor from outside Sri Lanka participates.
For the purpose of this
paragraph : -
(i)
"organizer" means any body of persons, corporate or unincorporate,
established in accordance with any law for the time being in force in the
country represented at such event by such body of persons or by one or more
individuals or one or more teams nominated by or with the concurrence of such
body of persons, being a body of persons which governs the conduct of any
sporting or athletic event in the country so represented, and includes any body
of persons the rules made by which, govern the conduct of such event ; and
(ii)
"competitor" in relation to any sporting or athletic event, means any
team which participates in any such event or any individual who participates in
any such event either as an individual or as a member of such team;
(vv) the profits and
income of any individual who is not a citizen of Sri Lanka and who is brought
to Sri Lanka as a trainer of any sport, being profits and income derived by
such individual in the capacity of such trainer in Sri Lanka;
(w) any annuity accruing
in any year of assessment to any individual who reaches in that year of
assessment or had reached in any previous year of assessment the age of sixty
years, being an annuity for life or for a period of not less than ten years, purchased
from any bank or any insurance company registered under the Regulation of
Insurance Industry Act, No. 43 of 2000, and which accrues, in return for full
consideration in money or moneys worth paid for the purchase of such annuity ;
(x) an amount equal to
the interest payable to any bank in Sri Lanka, in respect of any loan granted
to a company, the full amount of which is invested :-
"(xx) an amount
equal to the interest payable to any bank in Sri Lanka in respect of any loan
granted, where the full amount of such loan is invested in any new undertaking
referred to in section 24c;";
(i) in any new
undertaking referred to in subsection (2) of section 20, where such company is
a company referred to in that section ; and
(ii) in any relocated
undertaking referred to in subsection (2) of section 21, where such company is
a company referred to in that section;
(xxx) an amount equal to
the interest or the discount paid or allowed, as the case may be, to any non
resident person or to any licensed commercial bank in Sri Lanka, by the issuer
of any sovereign bond denominated in foreign currency, issued on or after
October 21, 2008 by or on behalf of the Government of Sri Lanka;
(xxxx) an amount equal
to the interest or the discount paid or allowed, as the case may be, to any
person on or after April 1, 2009, on any Sri Lanka Development Bond denominated
in Untied States Dollars, issued by the Central Bank of Sri Lanka;
(xxxxx) the profits and
income derived by or accruing to :-
(i) any non resident
person or any licensed commercial bank from the sale of any sovereign bond
referred to in paragraph (xxx) ; or
(ii) any person from the
sale on or after April 1, 2009, of any Sri Lanka Development Bond referred to
in paragraph (xxxx);
"(xxxxxx)
(i) an amount equal to
the interest payable to any bank or other financial institution in Sri Lanka,
in respect of any loan granted out of the moneys lying into the credit of the
Investment Fund account of such bank or institution, maintained and operated in
accordance with the guidelines set by the Central Bank; or
(ii) an amount equal to
the interest payable to any bank or other financial institution in Sri Lanka,
in respect of any loan granted-
(A) to any company for
investing in full in an undertaking referred to in section 16C;
(B) to any person or
partnership for investing in full for the operation of re-opened abandoned
factory.
In this paragraph
"re-opened abandoned factory'" means a factory which was engaged in
the production or manufacture of any commodity or article but which had not
been so engaged for an unbroken period of not less than three years, preceding
November 22, 2010, and which commences the production or manufacture of such
commodity or article or any other commodity or article in commercial quantities
before April 1, 2012."';
(xxxxxxx) any profits
and income from any investment made on or after January 1, 2013 -
(i) in any Corporate
Debt Security, quoted in any Stock Exchange licensed by the Securities and
Exchange Commission;
(ii) in any Municipal
Bond issued by any Municipal Council with the approval of the Secretary of the
Ministry of Finance;
(xxxxxxxx) the interest
earned by the DFCC Bank established by the Development Finance Corporation of
Ceylon Act, No. 35 of 1955 and National Development Bank PLC incorporated under
the Compaines Act, No. 7 of 2007, from moneys lent out of funds raised from
outside Sri Lanka to Small and Medium enterprises, plantaions, construction
industry or other manufacturing industries.
(y) any royalty received
by a non-resident person from a company with which an agreement has been
entered into before April 1, 2004 by the Board of Investment of Sri Lanka under
section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, in respect
of any period during which the profits and income of that company are exempt
from income tax under the terms of that agreement :
"(yy). any profits
and income arising or accruing to any company, partnership or body of persons
outside Sri Lanka, from any payment made in respect of the use on or after
April 1, 2008, of any plant, machinery or equipment supplied by such company.
partnership or body of persons to the Government of Sri Lanka, any public
corporation, any Government Institution or to any other undertaking, for the
use in any project approved by the Minister as being essential for the economic
development of Sri Lanka;"; and
Provided that where such
company opts, in lieu of the exemption from income tax under the terms of such
agreement, to be charged with income tax, the exemption from income tax granted
by this paragraph shall apply to any royalty received by any non-resident
person from such company in respect of the period during which the profits and
income of such company would, but for such option, have been so exempt from
income tax.
(yyy) any profit or
income from any song or other musical composition, derived by or accruing to
the lyricist, the composer of the music or the singer, as the case may be, of
such song or musical composition, on or after April, 1, 2009;
"(yyyy) the profits
and income arising or accruing to any person from any undertaking for the
operation of any port terminal in Sri Lanka;
(yyyyy) the profits and
income from any service rendered by any person or partnership in any port in
Sri Lanka in the course of any business carried on within such port;"';
and
(yyyyyy) any royalty
received in foreign currency by any person resident in Sri Lanka from outside
Sri Lanka, if such royalty is remitted to Sri Lanka through a bank;
(yyyyyyy) any royalty,
franchising fee or any payment for designing received by any foreign
collaborator from a company registered with the Board of Investment, during the
period of tax holiday under section 17A or section 16D as the case may be,
where the investment made in Sri Lanka from foreign direct investment raised
outside Sri Lanka exceeds US $ 50 Million and if such services are considered
by the Director General of the Board of Investment to be essential in carrying
out activities in Sri Lanka and is not obtainable in Sri Lanka;
(yyyyyyyy) the profits
and income of any person resident in Sri Lanka who acquires any internationally
recognized intellectual property on or after April 1, 2014 and who earns
profits and income by way of royalty out of such intellectual property, if such
royalty is received in foreign currency and remitted to Sri Lanka through a
bank;
(yyyyyyyyy)the profits
and income arising or accruing to any company, partnership or body of persons
outside Sri Lanka for any year of assessment commencing on or after April 1,
2015, from any payment made by way of royalty as a specific requirement of any
information technology or business process outsourcing company in Sri Lanka,
for the year of assessment in which such company in Sri Lanka commences such
operations and for another year of assessment immediately succeeding that year
of assessment;
(z) any winning from a
lottery, the gross amount of which does not exceed five hundred thousand
rupees.
"(zz) the profits
and income of any individual who is not a citizen of Sri Lanka and who is
employed in Sri Lanka in any undertaking, being profits and income arising or
derived from outside Sri Lanka during the period commencing from April 1,2008, and
ending on the date of cessation of such employment;
(zzz) the profits and
income within the meaning of paragraph (a) of section 3, of any undertaking for
the construction and sale of houses for low income families under a scheme
approved by the Urban Development Authority or the National Housing Authority,
being houses the floor area of which does not exceed five hundred square feet,
if the sale of any. such house takes place before April 1, 2013.".
(zzzz) the profits and
income derived by or accruing to any person or partnership from investment in
Economic Resurgence Certificates, utilizing money lying to credit of any
account referred to in paragraph (d) of section 9 of this Act, from and out of
monies deposited in such account on or after February 1, 2009 :
Provided that where
investment in Economic Resurgence Certificates is made by utilizing money
partly from money deposited on or after February 1, 2009 and partly from money
which was already lying to the credit of the account as of that date, the
exemption from income tax granted by this paragraph shall apply only to such
part of the profits and income which is attributable to the money out of the
deposits made on or after February 1, 2009.
(zzzzz) the profits and
income arising or accruing to any person from any undertaking for the
construction of any Port in Sri Lanka.
(zzzzzz) the profits and
income arising or accruing to any person from the administration of any sports
ground, stadium or sports complex.
(zzzzzzz) where an
individual who is a citizen of Sri Lanka, employed abroad returns to the
country on or after January 1, 2013 and invests his earnings from employment
abroad to commence any business of manufacture of any article, other than
liquor or tobacco products, or provision of any service, the profits and income
of such person from such business for a period of five years commencing from
the beginning of the year of assessment in which the commercial operations of
such business commenced.
(zzzzzzzz) the profits
and income arising or accruing to any company, partnership or body of persons
in a country outside Sri Lanka, from any payment made for the use of any
computer software, by Sri Lankan Air Lines Ltd or Mihin Lanka (Pvt) Ltd, as a
special equirement of such Airlines, if a Double Taxation Avoidance Agreement
providing relief for double taxation of such profits and income is not in force
between Sri Lanka and that country or tax is not payable in such country on
such profits and income.
14 EXEMPTION OF CERTAIN PROFITS AND INCOME OF ANY
RESIDENT GUEST.
14. (1) The profits and
income of any resident guest -
(a) not being profits
and income arising in or, derived from Sri Lanka; and
(b) accruing from moneys
lying to his credit in any account opened by him in a commercial bank, for the
deposit of sums remitted to him in foreign currency from any country outside
Sri Lanka,
shall be exempt from
income tax.
(2) For the purpose of
this section "resident guest" means a person to whom a tax exemption
has been granted under the Resident Guest (Tax Exemption) Act, No. 6 of 1979.
15 EXEMPTIONS OF PROFITS AND INCOME DERIVED FROM OUTSIDE
SRI LANKA.
15. Notwithstanding
anything to the contrary in any other provision of this Act, the profits and
income derived from outside Sri Lanka by any individual who has been a non
resident of Sri Lanka and who arrives and stays in Sri Lanka, shall be exempt
from income tax-
(i) for any year of
assessment commencing prior to April 1, 2013, if such individual is a citizen
of both Sri Lanka and any other country;
(ii) for any year of
assessment commencing on or after April 1, 2013, if such individual is a
citizen of Sri Lanka and-
(a) citizen of any other
country; or
(b) has obtained
permanent resident status or similar status in any other country under which
such individual may obtain citizenship in such country, at the time of such
arrival and during the whole of such stay.
16 EXEMPTION FROM INCOME TAX OF PROFITS AND INCOME FROM
AGRICULTURAL UNDERTAKING.
16. (1) The profits and
income within the meaning of paragraph (a) of section 3, other than any profits
and income from the disposal of any capital asset, of any person or partnership
from any agricultural undertaking carried on in Sri Lanka, shall be exempt from
income tax for each year of assessment within the period of five years,
commencing on April 1, 2006.
(2) In this section
"agricultural undertaking" means -
(a) an undertaking for
the purpose of the production of any agricultural, horticultural or any dairy
produce;
(b) an undertaking for
the cleaning, sizing, sorting, grading, chilling, dehydrating, packaging,
cutting, canning for the purpose of changing the form, contour or physical
appearance of any produce referred to in paragraph (a), in preparation of such
produce for the market; or
(c) any undertaking for
the conversion of any produce referred to in paragraph (a) into such product as
may be specified by the Commissioner-General, by Order published in the
Gazette.
(3) In relation to an
undertaking which consists of the production of any agricultural, horticultural
or dairy produce and utilizing such produce to manufacture any product (other
than any product specified under paragraph (c) of subsection (2) ), such produce
shall be deemed to have been sold for the manufacture of such product at the
open market price prevailing at the time of such deemed sale, and the exemption
granted under subsection (1) shall be applicable to that undertaking, on the
profits and income computed on the basis of such deemed sale.
16A EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
OF ANY UNDERTAKING FOR FISHING.
16A. (1) The profits and
income within the meaning of paragraph (a) of section 3, other than any profits
and income from the disposal of any capital asset, of any person or partnership
from any undertaking for fishing carried on in Sri Lanka, shall be exempted
from income tax for each year of assessment within the period of five years
commencing on April 1, 2011.
(2) In this section
"undertaking for fishing" includes any undertaking for the cleaning,
sizing, sorting, grading, chilling, dehydrating, packaging, cutting or canning
of fish in preparation of such produce for the market.
(3) In relation to an
undertaking which consists of fishing and utilizing such fish for manufacturing
of any product, such fish shall be deemed to have been sold for the manufacture
of such product at the open market price prevailing at the time of such deemed
sale, and the exemption granted under subsection (1) shall be applicable to
that undertaking, on the profits and income computed on the basis of such
deemed sale.
16B EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
OF ANY UNDERTAKING FOR PRODUCING AGRICULTURAL SEEDS OR PLANTING MATERIALS.
16B. (1) The profits and
income within the meaning of paragraph (a) of section 3, other than any profits
and income from the disposal of any capital asset, of any person or partnership
from any undertaking for producing of agricultural seeds or planting materials,
or primary processing of such seeds or materials, shall be exempted from income
tax for each year of assessment within the period of five years, commencing on
April 1, 2011.
(2) In this section
"primary processing"' means cleaning, sizing, sorting, grading,
chilling, dehydrating, cutting, canning or packaging for the purpose of
preparation of such produce for the market.
(3) In relation to an
undertaking which consists of producing of agricultural seeds or planting
materials and utilizing such seeds or materials in the agriculture or
horticulture, such produce shall be deemed to have been sold for such purpose
at the open market price prevailing at the time of such deemed sale, and the
exemption granted under subsection (1) shall be applicable to that undertaking,
on the profits and income computed on the basis of such deemed sale.
16C EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
OF ANY NEW UNDERTAKING INVESTING NOT LESS THAN FIFTY MILLION RUPEES.
16C. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of any capital asset) of any new undertaking referred
to in subsection (2), and carried on by any person or partnership on or after
April 1, 2011, shall be exempt from income tax for the period specified in
Column III as corresponding to the investment specified in Column II and the
types of activities specified in Column I of the Schedule hereto reckoned from,
the commencement of the year of assessment in which such undertaking commences
to make profits from transactions entered into in that year of assessment, or
from the commencement of the year of assessment immediately succeeding the year
of assessment in which the undertaking completes a period of two years reckoned
from the date on which the undertaking commences to carry on commercial
operations, whichever occurs earlier.
Schedules
(2) For the purposes of
subsection (1), "new undertaking" means an undertaking -
(a) which is engaged in
-
(i) agriculture, animal
husbandry or fishing;
(ii) the manufacture of
any article (including the processing of such article), other than any liquor
or any tobacco product;
(iii) the provision of
services of Information Technology;
(iv) software
development;
(v) business process
outsourcing;
(vi) knowledge process
outsourcing;
(vii) the provision of
healthcare services;
(viii) the provision of
educational services;
(ix) the provision of
beautycare services;
(x) the provision of
cold room and storage facilities;
(xi) tourism;
(xii) fitness centre
services or providing facilities for sports;
(xiii) creative work
including work of an artist;
(xiv) mini hydro power
projects;
(b) in which the sum
invested in the acquisition of fixed assets after March 31, 2011 but prior to
April 1, 2015 is not less than the corresponding sum specified in Column II of
the Schedule to subsection (1);
(c) which commences
commercial operations on or after April 1, 2011; and
(d) which is not formed
by the splitting up or reconstruction or acquisition of any business which was
previously in existence.
For the purposes of this
section "the amount of investment" means the cost of any land, plant,
machinery, equipment and other fixed assets.
16D EXEMPTION FOR FIVE YEARS,OF PROFITS AND INCOME OF
STRATEGIC IMPORT REPLACEMENT UNDERTAKINGS ENGAGED IN THE MANUFACTURE OF
SPECIFIED PRODUCTS.
16D. The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of any capital asset) of any new undertaking
established on or after April ,2012, but prior to April 1, 2015 and engaged in
the manufacture of any of the products referred to in Column I of the Schedule
hereto with an amount not less than the corresponding minimum investment
referred to in Column II thereof, shall be exempt from income tax for a period
of five years reckoned from the commencement of the year of assessment in which
such undertaking commences to make profits from transactions entered into in
that year of assessment or from the commencement of the year of assessment
immediately succeeding the year of assessment in which such undertaking
completes a period of two years from the date on which such undertaking
commences to carry on commercial operations; whichever occurs earlier where
such undertaking is not formed by the splitting up or reconstruction or
acquisition of any business which was previously in existence.
For the purposes of this
section "the investment" means the cost of any land, plant,
machinery, equipment and other fixed assets.
"SCHEDULE
Column I (Product)
Column II (Minimum Investment in USD Million)
Fabric 5
Pharmaceutical 10
Milk Powder 30
Cement 50
16E EXEMPTION OF PROFITS AND INCOME FROM CULTIVATION OF
ANY RENEWABLE ENERGY CROPS AND TRANSACTIONS CONNECTED WITH MANUFACTURING,
DISTRIBUTION AND MARKETING OF ORGANIC FERTILIZER.
16E. The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the disposal of any capital asset) of any person or
partnership-
(i) from any undertaking
of cultivating any renewable energy crop in Sri Lanka, for a period of ten
years;
(ii) from all
transactions connected with manufacturing, distribution and marketing of
organic fertilizers or biological fertilizers,
commencing on or after
April 1, 2013, shall be exempt from income tax.
17 EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME OF
ANY COMPANY FROM ANY SPECIFIED UNDERTAKING.
17. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of capital assets) of any company from any specified
undertaking referred to in subsection (2), and carried on by such company on or
after April 1, 2006, shall be exempt from income tax for a period of five years
reckoned from the commencement of the year of assessment in which the
undertaking commences to make profits from transactions entered into in that
year of assessment or from the commencement of the year of assessment
immediately succeeding the year of assessment in which the undertaking
completes a period of two years reckoned from the date on which the undertaking
commences to carryon commercial operations, whichever occurs earlier:
Provided that where the
period for which the profits and income are exempt from income tax commences
after March 31, 2008, the period for which such profits and income are exempt,
shall be three years.".
(2)For the purposes of
subsection (1) "specified undertaking" means -
(a) an undertaking
carried on by a company -
(i) incorporated before
April 1, 2002, with a minimum investment of rupees fifty million invested in
such undertaking ; or
(ii) incorporated on or
after April 1, 2002, but prior to April 1, 2011, with a minimum investment of
rupees ten million invested not later than March 31, 2012, in such undertaking,
and which is engaged in
agriculture, agro processing, industrial and machine tool manufacturing,
machinery manufacturing, electronics, export of non-traditional products, or
information technology and allied services;
(b) any designated
project carried on by a company which qualify under the same investment
criteria and incorporated prior to April 1, 2002 as referred to in sub
paragraph (i) of paragraph (a) of this subsection and which conforms to the
prescribed guidelines ; and
(c) an undertaking of a
pioneering nature as determined by the Minister by Order published in the
Gazette not later than March 31, 2012, carried on by a company with an
investment in excess of rupees two hundred and fifty million.
(3)
(a) Notwithstanding the
provisions of sub section (1), for any company having an investment not less
than rupees one thousand million in any pioneering undertaking as determined by
the Minister, the period of exemption shall be the corresponding period referred
to in Column II below, provided the corresponding minimum investment as given
in Column I has been made - Column I Column II (Rs. Million) (Years) 1000 -
2499 08 2500 and above 10
(b) The amount of
investment referred to in paragraph (b) of subsection (2), shall not be
applicable to any Export Production Village Company ;
(c) In case of a company
receiving income from any other trade or business in addition to the income
from any specified undertaking referred to in subsection (2), the exemption
provided under this section shall be applicable only in respect of the profits
and income from the relevant specified undertaking as referred to in that
subsection.
(4) For the purposes of
this section -
(a)
"agriculture" means the cultivation of land with plants of any
description, rearing of fish or animal husbandry, including poultry farms,
veterinary and artificial insemination services and other support services ;
(b) "agro
processing" means the processing of any agricultural product or fishing
product including deep sea fishing, but excludes the processing of black tea in
bulk and the manufacture of liquor ;
(c)
"non-traditional products" means any goods (other than black tea not
in packet or package form and each packet or package weighing not more than one
kilogram, crepe rubber, sheet rubber, scrap rubber, latex and fresh coconuts),
including deemed export of such goods, where not less than eighty per centum of
the total turnover of such undertaking is from export or deemed export of such
non traditional goods, for any year of assessment ;
(d) "deemed
export" means the production or manufacture and supply by any person or
partnership, of any commodity (other than black tea not in packet or package
form and each packet or package weighing not more than one kilogram, crepe
rubber, sheet rubber, scrap rubber, latex and fresh coconuts) to any exporter
of such goods without further production or manufacture by such exporter or the
production or manufacture and supply of any goods to any exporter for the
production, manufacture or packaging for export of any commodity which is a non
traditional product.
17A EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
FROM ANY NEW UNDERTAKING ENGAGED IN ANY SPECIFIED ACTIVITIES.
17A. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of any capital asset) of any company from any new
undertaking referred to in subsection (2), and carried on by such company on or
after April 1, 2011, shall be exempt from income tax for the period specified
in Column II of the Schedule hereto as corresponding to the investment
specified in Column I of that Schedule, reckoned from the commencement of the
year of assessment in which such undertaking commences to make profits from
transactions entered into in that year of assessment or from the commencement
of the year of assessment immediately succeeding the year of assessment in
which such undertaking completes a period of two years reckoned from the date
on which such undertaking commences to carry on commercial operations,
whichever occurs earlier:
"SCHEDULE
Column I (Investment in
Rupees Million) Column II (Exemption period)
More than 300 and not
more than 500 6 years
More than 500 and not
more than 700 7 years
More than 700 and not
more than 1,000 8 years
More than 1,000 and not
more than 1,500 9 years
More than 1,500 and not
more than 2,500 10 years
More than 2,500 12 years
(2) For the purposes of
subsection (1), "new undertaking" means any undertaking-
(a) which is engaged in
any of the activities specified below:-
(i) manufacture of
boats, pharmaceuticals, tyres and tubes, motor spare parts, furniture,
ceramics, glass ware or other mineral based products, rubber based products,
cosmetic products, edible products manufactured out of locally cultivated
agricultural products, construction materials or electrical or electronic
goods;
(ii) manufacture,
production or processing of non-traditional goods for export, including deemed
exports which shall constitute not less than ninety per centum of the total
production and in the case of apparels and textile, seventy five per centum of
the total production ;
(iii) cultivation of
food crops or industrial crops;
(iv) horticulture;
(v) forestry;
(vi) animal husbandry in
relation to dairy, poultry, swine, goat etc;
(vii) provision of
services to a person or partnership outside Sri Lanka, for payment where the
total amount of such payment shall not be less than seventy per centum in
convertible foreign currency;
(viii) tourism or
tourism related projects;
(ix) hotels, guest
houses or similar services;
(x) infrastructure
projects including construction of commercial buildings;
(xi) development of any
warehousing or storage facility;
(xii) power generation
using renewable resources;
(xiii) establishment of
industrial estates, special economic zones or knowledge cities;
(xiv) urban housing or
town centre development;
(xv) provision of any
sanitation facility or waste management systems;
(xvi) development of
water services;
(xvii) development of
internal water ways, or related transport (goods or passengers);
(xviii) construction of
hospitals and provision of health care services;
(xix) repair of
aircrafts or maritime vessels or ship breaking;
(xx) sporting services
(e.g. motor racing or golf course);
(xxi) information
technology;
(xxii) software
development;
(xxiii) business or
knowledge process outsourcing;
(xxiv) any project in
light or heavy engineering industry;
(xxv) artificial
insemination for cattle (dairy development);
(xxvi) provision of
educational services;or
(xxvii) any other
activity, as may be prescribed by the Minister taking into consideration the
development of national economy ;
(b) in which the sum
invested in the acquisition of fixed assets after March 31, 2011 but prior to
April 1, 2015 is not less than the corresponding sum specified in Column I of
the Schedule to subsection (1);
(c) which commences
commercial operations on or after April 1, 2011, but prior to April 1, 2016;
and
(d) which is not formed
by the splitting up or reconstruction or acquisition of any business which was
previously in existence.
For the purpose of this
section "the investment" means the cost of any land, plant,
machinery, equipment and other fixed assets.".
18 EXEMPTION FROM INCOME TAX OF CERTAIN UNDERTAKINGS FOR
INFRASTRUCTURE DEVELOPMENT.
18. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of capital assets) of any company from any specified
undertaking referred to in subsection (2), shall be exempt from income tax for
a period not less than six years but not more than twelve years commencing from
not later than March 31. 2009, as may be determined by the Minister by Order
published in the Gazette, if the amount of the investment made by such company
in such undertaking is not less than one thousand million rupees. Such period
shall be reckoned, from commencement of the year of assessment in which the
undertaking commences to make profits or any year of assessment not later than
two years reckoned from the date on which the undertaking commences to carry on
commercial operations, whichever is earlier.
(2) For the purposes of
subsection (1) "specified undertaking" in relation to a company means
an undertaking carried on by such company and which is engaged in any such
activity relating to infrastructure development as may be determined by the
Minister by Order published in the Gazette, having regard to the interests of
the national economy.
19 EXEMPTION FROM INCOME TAX OF SMALL SCALE
INFRASTRUCTURE UNDERTAKINGS.
19. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of capital assets) of any company from any specified
undertaking referred to in subsection (2), shall be exempt from income tax for
a period of five years, reckoned from the year of assessment.In which the
undertaking commences to make profits from transactions entered into in that
year of assessment or from the commencement of the year of assessment
immediately succeeding the year of assessment in which the undertaking
completes a period of two years reckoned from the date on which the undertaking
commences to carryon commercial operations, whichever occurs earlier:
Provided that where the
period for which the profits and income are exempt from income tax commences
after April 1, 2008, the period for which such profits and income are exempt,
shall be three years.
(2)For the purpose of
subsection (1) "specified undertaking" in relation to a company means
an undertaking carried on by such company and which is engaged in
infrastructure development for the generation of power, tourism, recreation,
warehousing and cold storage, garbage collection or disposal, construction of
houses or construction of hospitals, and the total amount invested within one
year from the commencement of the undertaking, but not later than March 31,
2012 is not less than ten million rupees but not exceeding fifty million
rupees.
20 EXEMPTION OF THE PROFIT AND INCOME OF ANY NEW
INDUSTRIAL UNDERTAKING.
20. (1)The profits and
income within the meaning of paragraph (a) of section 3, (other than any
profits and income from the sale of any capital asset,) of any company, form
any new undertaking referred to in subsection (2), shall be exempt from income
tax for every year of assessment falling within the period determined in
accordance with subsection (3) and subsection (4).
(2) For the purpose of
subsection (1), a "new undertaking" in relation to any company and to
any year of assessment, means an undertaking -
(a) carried on by such
company ;
(b) located in any area
outside the administrative districts of Colombo and Gampaha and specified in
part A or Part B of the Second Schedule to this section ;
(c) in which the sum
invested before April 1, 2010 -
(i) in any plant,
machinery, furniture, building or land used in such undertaking, where such
undertaking is an agricultural undertaking ; or
(ii) in any plant,
machinery, furniture or building used in such undertaking, where such
undertaking is an undertaking other than an agricultural undertaking, is not
less than thirty million rupees ;
(d) not formed by the
splitting up or reconstruction or acquisition of any undertaking which was
previously in existence ;
(e) in which the number
of employees employed at any time prior to April 1, 2010 and thereafter
throughout that year of assessment, is not less than -
(i) fifty, where such
undertaking is an undertaking for the provision of information technology
enabling services or printing on paper or the manufacture of any packing
materials ; or
(ii) two hundred, where
such undertaking is an undertaking other than an undertaking referred to in
subparagraph (i).
(3)Where the sum
invested in accordance with paragraph (c) of subsection (2) falls within the
range specified in any entry in Column I of the First Schedule hereto, the
period for which the profits and income are exempt from income tax, shall be
the period specified in the corresponding entry - (a) in sub Column A of Column
II, where the undertaking referred to in that subsection is located within any
administrative district referred to in Part A of the Second Schedule hereto ;
and (b) in sub Column B of Column II, where the undertaking referred to in that
subsection is located within any administrative district referred to in Part B
of the Second Schedule hereto. First Schedule Column I Column II Sum invested
in rupees million Period in years Sub Column A Sub Column B More than 30 but
not more than 50 5 7 More than 50 but not more than 100 6 8 More than 100 8 10
Second Schedule Part A Part B.
(4)The period specified
in each entry in sub-Column A or sub-Column B of Column II of the First
Schedule to subsection (3), shall commence from the commencement of the year of
assessment -(a) in which the new undertaking referred to in subsection (1) commences
to make profits from the transactions entered into in that year of assessment;
or (b) which occurs not later than three years reckoned from the commencement
of the year of assessment in which such undertaking commences commercial
operations, whichever occurs earlier. Any administrative district, part of the
boundary of which overlaps with part of the boundary of the administrative
district of Colombo or of Gampaha. Any administrative district other than _ -
any administrative district specified in part A and - administrative districts
of Colombo and Gampaha
21 EXEMPTION OF PROFITS AND INCOME OF ANY RELOCATED
UNDERTAKING.
21. (1)The profits and
income, within the meaning of paragraph (a) of section 3, (other than any
profits and income from the sale of any capital asset) of any company, from any
relocated undertaking referred to in subsection (2), shall be exempt from income
tax for each year of assessment within the period of five years determined in
accordance with subsection (3).
(2)For the purposes of
subsection (1), a "relocated undertaking" in relation to any company
and to any year of assessment referred to in subsection (1), means an
undertaking -
(a) which prior to
November 1, 2005, was being carried on by that company in a location within the
administrative district of Colombo or of Gampaha, with not less than one
hundred individuals employed therein ;
(b) which is relocated
in any location outside the administrative districts of Colombo and Gampaha and
commencing from a date not later than March 31,2010., continues :-
(i) to carry its
commercial operations ; and
(ii) to employ such
number of individuals as is not less than the number employed as at November 1,
2005, throughout that year of assessment ; and
(c) in respect of which
the expenditure incurred in the relocation, is not less than one hundred
million rupees.
(3) The period of five
years referred to in subsection (1), shall commence from the commencement of
the year of assessment in which the relocated undertaking commences commercial
operations.
21A "EXEMPTION OF PROFITS AND INCOME OF UNDERTAKINGS
RELOCATED FROM CERTAIN DISTRICTS.
21A. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of any capital asset) of any company, from any
relocated undertaking referred to, in subsection (2), shall be exempt from income
tax for each year of assessment within a period of five years, commencing on
April 1, 2009.
(2) For the purpose of
subsection (1), a "relocated undertaking" in relation to any company
and to any year of assessment referred to in subsection (1), means an
undertaking-
(a) which prior to
November 1, 2007, was being carried on by that company in any location within
the administrative district of Colombo or Gampaha, with not less than one
hundred individuals employed therein:
(b) which is relocated
in any location outside the administrative district of Colombo and Gampaha and
commencing from a date not later than March 31,2010, continues to-
(i) carry on commercial
operations; and
(ii) employ such number
of individuals as is not less than the number employed as at November 1,2007,
throughout that year
of-assessment;
(c) in respect of which
the expenditure incurred in the relocation is not less than one hundred million
rupees ; and
(d) of which the profits
and income within the meaning of paragraph (a) of section 3 (other than any
profits and income from the sale of any capital asset) are exempt from income
tax under any other provision of this Act or under any agreement entered into
with the Board of Investment of Sri Lanka under section 17 of the Board of
Investment of Sri Lanka Law: No. 4 of 1978, for a period extending beyond April
1, 2009.".
22 EXEMPTION FROM INCOME TAX OF ANY COMPANY ENGAGED IN
RESEARCH AND DEVELOPMENT.
22. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of capital assets) of any new undertaking of a company
which is engaged solely in research and development, with an investment of not
less than two million rupees, made within one year from the commencement of
such undertaking, but prior to April 1, 2014, shall be exempt from income tax
for a period of five years, reckoned from the year of assessment in which the
undertaking commences to make profits from transactions entered into in that
year of assessment or from the commencement of the year of assessment
immediately succeeding the year of assessment in which the undertaking
completes a period of two years reckoned from the date on which the undertaking
'commences to carryon commercial operations. whichever occurs earlier:
Provided that where the
period for which the profits and income are exempt from income tax commences
after April 1, 2008, the period for which such profits and income are exempt,
shall be three years.".
(2)For the purpose
subsection (1) "research and development" means any systematic or
intensive study carried out in the field of science or technology with the
object of using the results thereof for the production or improvement of
materials, devices, products, produce or process (other than quality control of
products or routine testing materials, devices, research in social science or
humanities, routine data collection, efficiency surveys or management studies
and market research or sales promotion).
23 EXEMPTION FROM INCOME TAX OF ANY VENTURE CAPITAL
COMPANY.
23. (1)The profits and
income within the meaning of paragraph (a) of section 3 (other than profits and
income from the sale of any capital asset within the meaning of paragraph (b)
of subsection (7) of section 25) of any venture capital company, derived from
any specified investment in any project referred to in paragraph (a), (b) or
(c) hereafter, shall be exempt from income tax, for a period of five years
commencing from the year of assessment in which the company commences to carry
on commercial operations, where such company invests a sum of money as
specified in subsection (2), which investment shall be identified as a specific
investment, for the purchase of ordinary shares in a company engaged in -
(a) a project which is
of a pioneering nature and the operation of which results in value addition and
the promotion of economic development;
(b) a project which is
engaged in the business of information technology;
(c) any other project as
may be specified by the Minister by Order published in the Gazette,
and such investment
shall be for the financing of seed capital or start up or early stage financing
of the investee company :
Provided however -
"Provided further
that, where the venture capital company commences commercial operations on or
after April 1, 2008, the period for which the profits and income are exempt
from income tax, be three years.
Provided further that
where any venture capital company had not made any investment prior to April 1,
2011 for the purchase of ordinary shares in any project referred to in
paragraph (a), (b) or (c) of this subsection, such company shall not be
entitled to any tax exemption under this section.
(i) the venture capital
company shall not have commenced commercial operations prior to April 1, 2003;
and
(ii) the specific
investment shall not be made in relation to a company which is at the time of
making the first investment, an associate company.
(2) In order to qualify
for the tax exemption provided for in subsection (1), the venture capital
company shall have invested a sum -
(a) not less than forty
per centum of the total equity capital of such company, during the second year
from the year in which such company commenced its commercial operations, on or
before the end of that second year;
(b) not less than eighty
per centum of the total equity capital of such company, during the third year
from the year in which such company commenced its commercial operations, on or
before the end of that third year;
(c) not less than eighty
per centum of the total equity capital of such company, during the fourth and
fifth years from the year of commencement of commercial operations, on or
before the end of such fourth and fifth years respectively,
in any project specified
in subsection (1) :
Provided that if a
company which has claimed exemption under this section fails to comply with the
provisions of this subsection, or any dividends have been declared during the
first two years from the year of assessment in which the company commences to
carry on commercial operations or more than twenty per centum of the total
specific investment made in any year has been made in one or more associate
companies of such venture capital company, the exemption afforded to such
company shall be withdrawn and the assessment shall be issued for the relevant
years.
(3)Investment may be
made in foreign companies, and such investments shall be considered as a
specific investment for the purpose of this section in the second year and
thereafter, where such investment is not more than ten per centum of equity
capital of such company during the second year and not more than twenty per
centum of equity capital of such company during the third year and subsequent
years respectively, from the year in which such company commences its
commercial operations.
(4) During the first
three years including the year in which such company commences its commercial
operations, any equity capital in excess of the minimum investments required by
subsection (2) may be invested in Government Securities and such investment
shall be considered as a specific investment.
(5) The year of
commencement of commercial operations for the purpose of this section, shall be
the year in which the issued equity capital of the venture capital company has
reached one hundred million rupees and shall not apply in respect of commercial
operations commencing on or after April 1, 2008.
(6) For the purposes of
this section :-
"associate
company" means any company within a group of companies which includes a
parent company and all its subsidiaries where the parent company has one or
more subsidiaries and such subsidiaries are controlled by the parent company
either by appointing a majority of the Board of Directors of such subsidiary or
by holding more than one half in nominal value of the equity share capital of
such subsidiary ;
means the failure to
carry out commercial operations ;
means incurring of
operational losses for a period not less than two consecutive years of
assessment ; and
"venture capital
company" means any company registered under the Companies Act, No. 7 of
2007 with a minimum issued share capital of rupees one hundred million and
which is engaged in the business of providing equity investment in relation to
any project as is specified in subsections (1), (2), (3) and (4), and-
(a) which has entered
into a Technical Service Agreement with a management company possessing the
required experience in the relevant area of investment; or
(b) which has in its
employment, professional staff who have been trained by foreign venture capital
companies and other local staff possessing the required professional venture
capital management experience.
24 EXEMPTION FROM INCOME TAX OF ANY PERSON ENGAGED IN THE
BUSINESS OF PROVIDING MANOR HOUSES OR THEMATIC BUNGALOWS TO TOURISTS.
24. (1) The profits and
income within the meaning of paragraph (a) of section (3) (other than any
profits and income from the sale of capital assets) of any person engaged in
business as specified in subsection (2), shall be exempt from income tax for a period
of three years commencing from the year of assessment in which such business
commences to make profits from transactions entered into in that year of
assessment or from the commencement of the year of assessment immediately
succeeding the year of assessment in which such business completes a period of
two years reckoned from the date on which the business commences to carryon
commercial operations, whichever earlier.
"(2) The provisions
of subsection (1) shall apply in respect of any business of providing
accommodation to tourists in Manor Houses or Thematic Bungalows, carried on by
a person registered on or after April 1, 2003 with the Ceylon Tourist Board and
for a period of ten years from the date of such registration.".
24A EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
FROM ANY NEW OR UPGRADED CINEMA.
24A. (1) The profits and
income within the meaning of paragraph (a) of section 3, (other than any
profits and income from the disposal of any capital asset) from the exhibition
on or after April 1, 2007 of any cinematographic film in any new cinema or any
upgraded cinema referred to in subsection (3), shall be exempt from income tax
for a period of :-
(a) ten years, where the
cinema is a new cinema ; or
(b) seven years, where
the cinema is an upgraded cinema.
(2) The period of ten
years or the period of seven years, as the case may be, referred to in
subsection (1) shall, in relation to any cinema, commence from the commencement
of the year of assessment in which the exhibition of cinematographic films in
such new cinema or upgraded cinema, as the case may be, commenced.
(3) For the purposes of
this section :-
(a) "new
cinema" means a cinema-
(i) in which the
exhibition of cinematographic films commences on or after April 1, 2007 ; and
(ii) which is certified
by the National Film Corporation of Sri Lanka established by the National Film
Corporation of Sri Lanka Act, No. 47 of 1971 as being equipped with digital
technology and Digital Theatre Systems and Dolby Sound Systems ; and
(b) "upgraded
cinema" means a cinema-
(i) in which the
exhibition of cinematographic films had commenced prior to April 1, 2007 ;
(ii) which was not
equipped with digital technology and Digital Theatre Systems and Dolby Sound
Systems prior to April 1, 2007 ; and
(iii) which is certified
by the National Film Corporation of Sri Lanka, established by the National Film
Corporation of Sri Lanka Act, No. 47 of 1971 as being equipped on or after
April 1, 2007, with digital technology and Digital Theatre Systems and Dolby
Sound Systems.
24B EXEMPTION FROM INCOME TAX OF THE PROFITS AND INCOME
FROM THE OPERATION OF ANY REOPENED ABANDONED FACTORY.
24B. (1) The profits and
income within the meaning of paragraph (a) of section 3, (other than any
profits from the disposal of any capital asset) of any person from the
operation of any reopened abandoned factory referred to in subsection (2),
shall be exempt from income tax for the period ending on March 31, 2011.
(2) For the purpose of
subsection (1), "reopened abandoned factory" means a factory which :-
(a) was engaged in the
production or manufacture of any commodity or article but which had not been so
engaged for an unbroken period of not less than three years, preceding November
16, 2006; and
(b) commences to produce
or manufacture such commodity or article or any other commodity or article in
commercial quantities before April 1, 2008.
24C "EXEMPTION FROM INCOME TAX OF THE PROFITS AND
INCOME OF ANY NEW UNDERTAKINGS LOCATED WITHIN THE EASTERN PROVINCE.
24C. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the disposal of any capital asset) from the operation of any
new undertaking referred to in subsection (2), shall be exempt from income tax
for a period of five years commencing from the year of assessment in which such
undertaking commences to make profits from transactions entered into in that
year of assessment or from the commencement of the year of assessment
immediately succeeding the year of assessment in which such undertaking
completes two years reckoned from the date on which the undertaking commences
to carryon commercial operations, whichever occurs earlier.
(2) For the purpose of
subsection (1), "new undertaking" means an undertaking which-
(a) is not formed by the
splitting up, reconstruction or the acquisition of an undertaking which was in
existence before November 7, 2007 ;
(b) commences commercial
operations on or after November 7, 2007 ; and
(c) is located within
the Eastern Province,
and the sum invested in
the undertaking before April 1, 2010 (other than in land), is not less than
thirty million rupees.
24D EXEMPTION OF THE PROFITS AND INCOME OF ANY NEW
UNDERTAKING LOCATED IN ANY LAGGING REGION.
24D. (1) The profits and
income within the meaning of paragraph (a) of section 3 (other than any profits
and income from the sale of any capital asset) of any new undertaking (other
than any specified undertaking) located in any lagging region and referred to
in subsection (2), shall be exempt from income tax for a period of five years
commencing from the year of assessment in which such undertaking commences to
make profits from transactions entered into in that year of assessment or from
the commencement of the year of assessment immediately succeeding the year of
assessment in which the undertaking completes two years reckoned from the date
on which the undertaking commences to carry on commercial operations, whichever
occurs earlier.
(2) For the purpose of
subsection (1) :-
"lagging
region" in relation to any year of assessment means any Divisional
Secretary's Division determined by the Minister in consultation with any
appropriate authority and specified by Order published in the Gazette as being
in a state of economic backwardness in the year of assessment immediately
preceding that year of assessment;
"new
undertaking" means an undertaking-
(a) which commences
commercial operations on or after April 1, 2008 ; and
(b) in which the sum
invested in the acquisition of capital assets (other than land), after November
7, 2007 but before March 31, 2010, is not less than thirty million rupees; and
"specified
undertaking" means an undertaking engaged in the sale of any article not
produced or manufactured by such undertaking.".
CHAPTER IV
Ascertainment of Profits or Income
25 DEDUCTIONS ALLOWED IN ASCERTAINING PROFITS AND INCOME.
25. (1) Subject to the
provisions of subsections (2) and (4), there shall be deducted for the purpose
of ascertaining the profits or income of any person from any source, all
outgoings and expenses incurred by such person in the production thereof, including
-
(a) an allowance for
depreciation by wear and tear of the following assets acquired, constructed or
assembled and arising out of their use by such person in any trade, business,
profession or vocation carried on by him -
(i) information
technology equipments and calculating equipment including accessories and
software, acquired by such person, at the rate of twenty five per centum per
annum on the cost of acquisition of such equipments, accessories and software,
as the case may be;
(ii) any motor vehicle
or furniture acquired by such person, at the rate of twenty per centum per
annum, on the cost of acquisition;
(iii) any other
machinery or equipment not referred to in sub-paragraphs (i) and (ii) above and
any plant, other than any plant referred to in sub-paragraph (iv)-
(A) acquired or
assembled prior to April 1, 2011 by such person, at the rate of twelve and one
half per centum per annum; or
(B) acquired or
assembled on or after April 1, 2011 by such person, at the rate of thirty three
and one third per centum per annum,
on the cost of
acquistition or assembly;";
(iv) any bridge, railway
track, reservoir, electricity or water distribution line and toll roads
constructed by such person or acquired from a person who has constructed such
assets, at the rate of six and two third per centum per annum, on the cost of construction
or cost of acquisition, as the case may be;
(v)any qualified
building constructed or any unit of a condominium property acquired and which
is approved by the Urban Development Authority established by the Urban
Development Authority Law, No. 41 of 1978 and constructed to be used as a
commercial unit or any hotel building (including a hotel building complex) or
any industrial building (including any industrial building complex) acquired
from a person who had used such building in any trade or business-
(A) prior to April 1,
2015 at the rate of six and two third per centum per annum, on the cost of
construction or cost of acquisition of such building or unit; or
(B) on or after April 1,
2015 at the rate of ten per centum per annum on the cost of construction or the
cost of acquisition of such building or unit;
Provided that -
(a) where any software
acquired is software developed in Sri Lanka, the rate shall be one hundred per
centum on the cost of acquisition ;
(b) where:-
(i) any plant or
machinery acquired prior to April 1, 2011, is used in any business of providing
health care, printing on paper, gem cutting and polishing, packaging of any
commodity for commercial purposes, rice milling or such other business as may
be prescribed by the Commissioner-General by Order published in the Gazette; or
(ii) the asset consists
of a ship acquired on or after April 1, 2007, but prior to April 1, 2011, being
a ship which is owned by a company registered under Part XI of the Companies
Act, No.7 of 2007 or is deemed to be a Sri Lanka ship by virtue of a determination
made under paragraph (c) of section 30 of the Merchant Shipping Act, No. 52 of
1971,
the rate shall be 33 1/3
per centum of the cost of acquisition;
(c) where any plant or
machinery is acquired on or after April 1, 2007 but prior to April 1, 2011 is
used in any business of carrying out construction work, the rate shall be
twenty five per centum of the cost of acquisition;
(d) where for energy
efficiency purposes, any high tech plant, machinery or equipment is acquired on
or after April 1, 2012, the rate shall be fifty per centum of the cost of
acquisition:
Provided that where such
high tech plant, machinery or equipment acquired on or after April 1, 2013 and
used in any trade or business meets more than thirty per centum of the total
requirement of the power generation of that trade or business out of alternative
energy sources, the rate shall be one hundred per centum on the cost of
acquisition;
For the purpose of this
proviso "alternative energy source" means any source other than the
National Grid, that generates power.
Provided further, that
no deduction under the preceding provisions of this paragraph shall be allowed
to a person in respect of any capital asset referred to in sub-paragraph (i),
(ii), (iii), (iv) or (v) of this paragraph in respect of which the total of the
allowances granted for depreciation in the preceding years of assessment, is
equal to the cost of acquisition or cost of construction or assembling, as the
case may be, of such capital asset by such person;
(e) where any plant or
machinery or equipment is acquired and used in any business on or after April
1, 2013 for technology upgrading purposes or introducing any new technology,
the rate shall be fifty per centum of the cost of acquisition;
(f) where any plant,
machinery or equipment is acquired and used on or after April 1, 2013 in any
Stock Broker Company for the upgrading of information technology infrastructure
to be in compliance with the requirements of the Colombo Stock Exchange licensed
by the Securities and Exchange Commission, in relation to the Risk Management
System,the rate shall be one hundred per centum of the cost of acquisition;
(g) where any plant,
machinery or equipment acquired and used on or after April 1, 2013, in any
trade or business and where at least sixty per centum of the turnover of such
trade or business is from export, the rate shall be fifty per centum of the
cost of acquisition;
(h)where any plant,
machinery or equipment acquired and used on or after April 1, 2015, in any new
undertaking commenced on or after April 1, 2015 for the manufacture of products
for exports with an investment of not less than two million US Dollars or its
equivalent in other currency and which is not formed by splitting up or
re-construction of an existing undertaking, the rate of depreciation shall be
hundred per centum of the cost of acquisition;
"(vi) any qualified
building constructed or any unit of a condominium property acquired and which
is approved by the Urban Development Authority established by the Urban
Development Authority Law, No. 41 of 1978 and constructed to be used as a commercial
unit or any hotel building (including a hotel building complex) or any
industrial building (including any industrial building complex) acquired from a
person who had used such building in any trade or business-
(A) prior to April 1,
2015 at the rate of six and two third per centum per annum, on the cost of
construction or cost of acquisition of such building or unit; or
(B) on or after April 1,
2015 at the rate of ten per centum per annum on the cost of construction or the
cost of acquisition of such building or unit;
(b)
(i) a sum equal to one
fourth of any payment made by such person as consideration for obtaining a
licence in his favour of any manufacturing process used by such person in any
trade or business carried on by such person;
(ii) a sum equal to one
tenth of the cost of acquisition of any intangible asset, other than goodwill,
acquired by such person:
Provided that no
deduction under the provisions of this paragraph shall be allowed to any person
in respect of any such payment if the total of the sums deducted in the
preceding years of assessment is equal to the amount of such payment;
(c) any sum expended by
such person for the renewal of any capital asset employed by such person for
producing such profits or income, if no allowance for the depreciation thereof
is deductible in respect of that asset;
(d) any sum expended by
such person for the repair (not renewal) of any plant, machinery, fixtures,
building, implement, utensil or article employed for producing such profits and
income:
Provided that, in the
case of a company carrying on the business of letting premises, the sum
deductible under this paragraph shall, in so far as such sum relates to the
repairs of such premises, not exceed twenty five per centum of the gross rent
receivable by such company for such premises ;
(e) for the year of
assessment commencing on April 1, 2006, a sum equal to the bad debts incurred
by such person in any trade, business, profession, vocation or employment which
have become bad debts during the period for which the profits are being ascertained,
and such sum as the Commissioner-General considers reasonable for doubtful
debts to the extent that they are estimated to have become bad during the
period, notwithstanding that such bad or doubtful debts were due and payable
prior to the commencement of that period:
Provided that all sums
recovered during that period on account of the amounts previously written off
or allowed in respect of bad or doubtful debts shall for the purposes of this
Act, be treated as receipts of that period of that trade, business, profession,
vocation or employment and for the purpose of this proviso, sums recovered
shall be deemed to include any reductions as at the last date of such period in
any estimated amount of a doubtful debt previously allowed as a deduction;
(ee) for any year of
assessment commencing on or after April 1, 2007, a sum equal to the bad debts
incurred by such person in any trade, business, profession, vocation or
employment which have become bad debts during the period for which the profits
are being ascertained :
Provided that, all sums
recovered during such period on account of the amounts previously written off
or allowed in respect of bad debts shall, for the purposes of this Act, be
treated as receipts of that trade, business, profession, vocation or employment,
for such period ;
(eee) for any year of
assessment commencing on or after April 1, 2007, where such person is a bank or
a financial institution, such sum as the Commissioner-General considers
reasonable for doubtful debts, to the extent that they are estimated to have
become bad during the period for which the profits are being ascertained, and
notwithstanding that such debts were due and payable prior to the commencement
of that period :
Provided that :-
(i) such sum so
considered reasonable shall not exceed one per centum of the aggregate debts
outstanding at the end of that period ;
(ii) where the doubtful
debts estimated by such person as having become bad during the period for which
the profits are being ascertained exceeds the sum deducted under this
paragraph, the excess shall be deemed to be doubtful debts estimated by such
person as having become bad during the period immediately succeeding the period
hereinbefore referred to ; and
(iii) where the
estimated amount of any doubtful debt previously allowed as a deduction has
been reduced or such amount or any part thereof has been paid during such
period, the sum by which such amount has been so reduced or the sum so paid
shall for the purposes of this Act, be treated as a receipt of such bank or
financial institution for that period.
For the purposes of this
paragraph, "financial institution" shall have the same meaning as
given for that expression in section 147 ;
(eeee) for any year of
assessment commencing on or after April 1, 2007, where such person is not a
bank or a financial institution, such sum as the Commissioner-General considers
reasonable for doubtful debts, to the extent that they are estimated to have
become bad during the period for which the profits are being ascertained :
Provided that, where the
estimated amount of any doubtful debt previously allowed as a deduction has
been reduced or such amount or any part thereof has been paid during such
period, the sum by which such amount has been so reduced or the sum so paid shall,
for the purposes of this Act, be treated as a receipt of such person for such
period.
For the purposes of this
paragraph "financial institution" shall have the same meaning as
given for that expression in section 147;
(f) interest paid or
payable by such person;
(g) any contribution by
an employer to a pension, provident or savings fund or to a provident or
savings society, which is approved by the Commissioner-General subject to such
conditions as he may specify;
(h) tax payable under
any Statute enacted by a Provincial Council which such person is liable to pay
for the period for which the profits and income are being ascertained in
respect of any trade, business, profession or vocation carried on or exercised
by him :
(i) for any year of
assessment-
(i) commencing prior to
April 1, 2011, the expenditure including capital expenditure; or
(ii) commencing on or
after April 1, 2011, an amount equal to two hundred per centum of the
expenditure, including capital expenditure
incurred by such person
in carrying on any scientific, industrial, agricultural or any other research
for the upgrading of any trade or business carried on by such person:
Provided that-
(A) where such
expenditure is incurred on or after April 1, 2012 but prior to April 1, 2013
and such research is carried out through any Government institution;
(B) where such
expenditure is incurred on or after April 1, 2013 and such research is carried
out through any institution in Sri Lanka,
(C) where such
expenditure on research is incurred on or after April 1, 2015 , for any
innovation or research relating to high value agricultural products and such
research is carried out by such person himself or through any research
institution, in Sri Lanka
the deduction shall be
an amount equal to three hundred per centum of such expenditure incurred by
such person
For the purposes of this
paragraph-
(i) "Government
institution" includes any company, where fifty per centum or more of the
shares are held by the Government; and
(ii) "scientific,
industrial, agricultural or any other research" means any such research
which is carried out for product or produce innovation, or improving the
quality or character of any product, produce or service but does not include
any market research or feasibility studies.
For the purpose of this
paragraph the Commissioner-General shall issue guidelines in order to ensure
the uniform application of deduction;
(j) any expenses
incurred by such person in -
(i) opening up any land
for cultivation or for animal husbandry;
(ii) cultivating such
land with plants of whatever description;
(iii) the purchase of
livestock or poultry to be reared on such land; or
(iv) the construction of
tanks or ponds or the clearing or preparation of any inland waters for the
rearing of fish and the purchase of fish to be reared in such tank, pond or
inland waters, as the case may be;
(k) the actual expenses
incurred by such person or any other person in his employment in travelling
within Sri Lanka in connection with the trade, business, profession or vocation
of the first-mentioned person:
Provided that no
deduction under the preceding provisions of this paragraph shall be allowed to
any person -
(i) in respect of
expenses incurred in relation to a vehicle used partly for the purposes of his
trade, business, profession or vocation and partly for the domestic or private
purposes of an executive officer being employed by him or a non executive director
of such organisation, unless the value of the benefit as specified under the
proviso to paragraph (b) of subsection (2) of section 4 of this Act, has been
included in the remuneration of such officer, for the purposes of deduction of
income tax under Chapter XIV of this Act, where such benefit is not exempt
under paragraph (s) of subsection (1) of section 8 of this Act;
(ii) in respect of
expenses incurred in relation to a vehicle, where more than one vehicle is
provided to any employee of such person or to any non-executive director or to
any other individual who is not an employee but rendering services in the
trade, business profession or vocation carried on by such person, if such
vehicle is not the first vehicle provided to such employee or non-executive
director or such other individual, as the case may be;
(iii) in respect of
expenses incurred in relation to a vehicle where such vehicle is provided to
any other person who is not an employee of such person and who does not render
any services to the trade, business, profession or vocation carried on by such
person;
(iv) in respect of
expenses incurred in relation to the reimbursement of any expenditure on a
vehicle belonging to an employee of such person who has been allowed by the
employer to claim such expenses, unless the value of benefit of using such
vehicle for non-business purposes by such employee as determined by the
Commissioner-General, has been included in the remuneration of such employee
for the purposes of deduction of income tax under Chapter XIV of this Act where
such benefit is not exempt under paragraph (s) of subsection (1) of section 8
of this Act, or in the opinion of the Commissioner-General such amount that is
reimbursed represents only expenses on allowable travelling expenses in
relation to the trade, business, profession or vocation carried on by such
employer ; and
(v) in respect of any
expenses incurred by such person by reason of any travelling done by any other
person in his employment between the residence of such other person and his
place of employment or vice versa.
For the purpose of this
proviso, "expenses incurred", shall include any lease rental or other
rental payment in respect of such vehicle or the cost of acquisition of such
vehicle;
(l) in the case of a
company, expenditure incurred in the formation or liquidation of that company;
(m) the expenditure
incurred by such person in operating a motor coach used for transporting
employees of such person to and from their place of work;
(n) the expenditure
incurred by such person in the payment of gratuity to an employee on the
termination of employment of such employee, due to cessation of the trade,
business, profession or vocation carried on by such person;
(o) any annual payment
made by such person to any fund, approved for the purposes of this paragraph by
the Commissioner-General and maintained for the purposes of payment under the
Payment of Gratuity Act, No.12 of 1983, of gratuities to employees on the
termination of their services;
(p) such part of the
lump sum payment which not being an advance payment made by such person to any
other person in connection with the letting or lease, to the first-mentioned
person, of any commercial premises, as bears to the total lump sum payment the
same proportion as the number of months in the year for which lease rent is
payable bears to the total number of months comprised in the lease;
(q) expenditure incurred
by any person in the training, in any recognized institution of any employee
employed by such person in any trade or business carried on by such person, if
it is proved to the satisfaction of the Commissioner-General that such training
is
(i) directly relevant to
the duties performed by such employee before the commencement of such training;
(ii) essential for
upgrading the skills or performance of such employee, in such trade or
business; and
(iii) necessary for
improving the efficiency and performance of such trade or business.
For the purpose of this
paragraph-
"training"
includes participation in any seminar or workshop;
"employee"
includes any partner of any partnership carrying on a profession.
(r) the accreditation
expenses, where such person is a person carrying on any profession;
(s) any expenditure
incurred in any year of assessement in quoting any shares of a company in any
official list of any stock exchange licensed by the Securities and Exchange
Commission of Sri Lanka, provided that the aggregate of such expenditure
incurred in that year of assessment and in any previous year of assessment
shall not exceed one per centum of the value of the Initial Public Offering of
such company;
(t) any expenditure
incurred by any person in the maintenance or management of any sports ground,
stadium or sports complex.
(u) any sum paid by a
Public Corporation or Government Owned Business Undertaking as a special levy,
to the Government.
(v) the cost of
acquisition of any internationally recognized intellectual property used for
producing such profits and income;
(w) for any year of
assessment commencing on or after April 1, 2014 any royalty or ground rent
payable for the relevant year of assessment and paid by such person if such
amount was not allowed to be deducted prior to April 1, 2014, under paragraph
(a) of subsection (5) of section 32;
(x) for any year of
assessment commencing on or after April 1, 2015, an amount equal to three
hundred per centum of the expenditure incurred by any person registered with
the Tertiary and Vocational Education Commission established under the Tertiary
and Vocational Educational Act, No. 20 of 1990 on standard skill development
training by any institution recommended by such Commission to be provided to
trainees;
(y)for any year of
assessment commencing on or after April 1, 2015, an amount equal to three
hundred per centum of the expenditure incurred by any person for brand
promotion for the export of products manufactured by such persons. For the
purpose of this paragraph "brand promotion" means, creating an
internationally recognized brand name for a local value added product or
produce.
(2) Where any person is
entitled to a deduction in respect of any outgoing or expense under two or more
paragraphs of subsection (1), in ascertaining the profits and income of such
person from any source, such person shall be allowed a deduction only under one
such paragraph.
(3)
(a) Where any person
disposes of any capital asset used by him in producing the profits and income
of any trade, business, profession or vocation and a total amount equal to the
cost of acquisition or the cost of construction, as the case may be, of such
capital asset has been granted as allowance for depreciation of such capital
asset, the full amount of the proceeds of such disposal, whether such disposal
takes place while such trade, business, profession or vocation continues or on
or after its cessation, shall be treated as a receipt of such trade, business,
profession or vocation in ascertaining the profits and income within the
meaning of paragraph (a) of section 3.
(b) Where any person
disposes of any capital asset used by him in producing the profits and income
of any trade, business, profession or vocation carried on or exercised by him
and an allowance for depreciation has been granted in respect of that capital
asset but the total amount of such allowance is less than the cost of
acquisition or the cost of construction, as the case may be, of such capital
asset, the excess of the proceeds of such disposal over the difference between
the cost of acquisition or the cost of construction of such capital asset, and
the total allowance for depreciation granted in respect of such capital asset,
shall, whether such disposal takes place while such trade, business, profession
or vocation continues or after its cessation, be treated as a receipt of such
trade, business, profession or vocation, in ascertaining the profits and income
of such trade, business, profession or vocation, within the meaning of
paragraph (a) of section 3 :
Provided that where such
difference exceeds the proceeds of such disposal, the excess shall be treated
for the purposes of subsection (1), as an expense incurred in the production of
income:
Provided further that
nothing in paragraph (a) or (b) shall apply to -
(i) the transfer of any
such capital asset to a company formed by the conversion of a business carried
on by an individual either solely or in partnership ;
(ii) the disposal by any
person of any such capital asset, if the full proceeds of disposal are used by
such person, within one year of the disposal for the replacement of such
capital asset to be used by him for producing income in any trade, business, profession
or vocation carried on or exercised by him; or
(c) Where a person
carrying on any undertaking, the profit and income of which are wholly or
partly exempt from income tax under this Act, disposes of any capital asset
used for the purposes of that undertaking, such person shall be liable to
income tax on an amount equal to the amount ascertained under paragraph (a) or
paragraph (b).
(4) Subject to as
hereinafter provided, income arising from interest shall be the full amount of
interest falling due, whether received or not, without any deduction for
outgoing or expenses:
Provided that -
(a) where it appears to
an Assessor or Assistant Commissioner that any interest is unpaid and cannot be
recovered, any assessment which includes such interest shall, notwithstanding
the provisions of section 171, be reduced by the amount of the interest included
which has been shown to be unpaid and irrecoverable or, if income tax has been
paid in respect of such interest, such tax may be refunded on a claim in
writing made within three years of the end of the year of assessment in respect
of which such tax was paid;
(b) where any interest
falling due in any year of assessment in respect of a loan has not been
received and is likely to be irrecoverable, the person to whom such interest is
due may exclude such interest from the profits and income chargeable with income
tax for that year of assessment;
(c) where it appears to
an Assessor or Assistant Commissioner that any interest which has been excluded
from an assessment under paragraph (b) has subsequently been received and that
income tax has not been paid in respect of such interest, he shall, notwithstanding
anything in subsection (5) of section 163 limiting the period within which an
assessment or additional assessment may be made, make an assessment or
additional assessment including such interest.
(5)No deduction under
paragraph (a) or paragraph (b) or paragraph (c), or paragraph (d) of subsection
(1) in respect of any capital asset, shall be allowed to any person if -
(a) such person has let
on hire such capital asset -
(i) to any undertaking
the whole or any part of the profits and income within the meaning of paragraph
(a) of section 3, of which are exempt from income tax; or
(ii) for the use in any
undertaking carried on by the person from whom it was acquired or by any member
of the family of that person or any member of his family in partnership with
any other person or persons; or
(b) such person uses
such capital asset in any undertaking carried on by him in partnership with the
person from whom it was acquired or with any member of the family of the person
from whom it was acquired:
Provided that the
provisions of sub paragraph (i) of paragraph (a) shall not apply in respect of
any capital asset let on hire by any person, if such person is a company
engaged in the business of letting capital assets on hire.
For the purpose of this
subsection "person" includes a partnership.
(6) The profits and
income received by one spouse for services rendered in any trade, business,
profession or vocation carried on or exercised -
(a) by the other spouse;
or
(b) by a partnership of
which that other spouse is a partner,
shall be deemed to be
the profits and income of that other spouse.
(7)For the purpose of
this section -
(a) "allowance for
depreciation", in relation to any capital asset, means any allowance which
is deductible in respect of that asset under -
(i) paragraph (a) of
subsection (1) of this section;
(ii) paragraphs (a),
(b), (bb) or (d) of subsection (1) of section 23 of the Inland Revenue Act; No.
38 of 2000 ; or
(iii) paragraphs (a),
(b), (c), (d), (e), (ee), (eee) or (eeeee) of subsection (1) of section 23 of
the Inland Revenue Act, No. 28 of 1979;
(b) "capital
assets" in relation to a trade, business, profession or vocation means any
plant, machinery, fixture, fitting, utensils, articles or equipment, including
computer software or intangible assets other than goodwill,used for the purpose
of producing the income in such trade, business, profession or vocation or
building constructed for the purposes of such trade, business, profession or
vocation;
(c) "proceeds"
in relation to the disposal of any capital asset means -
(i) the sale price of
such asset, where the disposal is by sale; or
(ii) the market value of
such asset at the time of disposal, where the disposal is otherwise than by
sale, after deducting from such sale price or market value, as the case may be,
the amount of value added tax chargeable under the Value Added Tax Act, No. 14
of 2002, on the disposal of such capital asset, if such tax is included in such
sale price or market value, as the case may be;
(d)
"disposal", in relation to the disposal of any capital asset by any
person includes -
(i) sale, exchange, or
other transfer in any manner whatsoever of such asset by such person;
(ii) discard of such
asset by such person;
(iii) cessation of the
use of such asset by such person in any undertaking carried on by him in
ascertaining the profits and income of which, an allowance for depreciation
could be deducted;
(e) "qualified
building" means a building constructed to be used for the purpose of a
trade, business, profession or vocation, other than to be used as a dwelling
house by an executive officer employed in that trade, business, profession or
vocation;
(f)
(i) where any capital
asset which is used in any trade, business, profession or vocation carried on
or exercised by any person and in respect of which an allowance for
depreciation has been granted is sold, and the full proceeds of sale used
within one year of the sale for the acquisition of another capital asset to
replace the capital asset so sold, and to be used in such trade, business,
profession or vocation, the cost of acquisition of such other capital asset
shall be deemed to be the difference between the actual cost of acquisition of
such other capital asset and the profits from the sale of the capital asset
sold. For the purposes of this sub-paragraph the profits from the sale, in
relation to any capital asset, shall be the excess of the proceeds of sale of
such asset over the difference between -
(A) the cost of
acquisition or the cost of construction, as the case may be, of such asset; and
(B) the total allowance
for depreciation granted in respect of such capital asset;
(ii) where any plant,
machinery or fixtures is acquired otherwise than by way of purchase by any
person to be used in any trade, business, profession or vocation carried on or
exercised by him, the cost of acquisition of such plant, machinery or fixtures
shall be the market value of such plant, machinery or fixtures on the date of
such acquisition;
(iii) where a company is
incorporated (hereinafter referred to as the "first mentioned
company") to - (a) take over the business (including the capital assets)
carried on by an individual either solely or in partnership with others, and
acquires the capital assets of such business being carried on by such
individual or partnership; or (b) segregate the business of long term insurance
and general insurance as separate businesses as required in terms of Regulation
of Insurance Industry (Amendment) Act, No. 3 of 2011 or to consolidate, acquire
or merge of any bank, financial institution or leasing company under the
guidance of the Central Bank of Sri Lanka subject to conditions specified in
the Guidelines issued by the Commissioner General where such businesses are
carried out separately prior to such segregation, consolidation, acquisition or
merger, by each such company (hereinafter referred to as the "second
mentioned company"), . the cost of acquisition of each capital asset by
the first mentioned company shall be deemed to be the cost of acquisition of
such capital asset by such individual or partnership or the second mentioned
company, reduced by the amount of any allowance for depreciation granted in
respect of such asset to such individual or partnership or second mentioned
company, and the date of acquisition of such capital assets by the first
mentioned company, shall be deemed to be the date of acquisition of such
capital asset by such individual, partnership or second mentioned company
(iv) where any person is
entitled under the Value Added Tax Act, No. 14 of 2002, to claim credit for
input tax paid in relation to the acquisition or the construction of any
capital asset, the cost of acquisition or the cost of construction, as the case
may be, of such capital asset shall not include such input tax.
(v) where any asset used
in the business of leasing as part of the leasing stock is disposed of either
by transferring such assets out of the leasing stock or by transferring such
asset to the lessee of such asset, the market value as at the time of such
transfer of such asset shall be deemed to be a receipt from such trade or
business of the lessor, unless such lessor proves to the satisfaction of the
Assessor or Assistant Commissioner that all sums due from the lessee under the
agreement relating to such lease have been treated as taxable receipts, in
computing profits or income from such business;
(vi) where any person
has obtained an asset under a lease agreement and the relevant lease rentals
have been allowed to such person as expenditure incurred in any trade, business
profession or vocation, either fully or partly, the proceeds of disposal of
such assets, less any cost of acquisition other than lease rental paid on such
assets by such person acquiring it directly or through a nominee, shall be
treated as a receipt from such trade, business, profession or vocation of such
lessee;
(vii) where any lessee
has acquired any asset used by him in any trade, business, profession or
vocation, upon the termination of a lease agreement, such acquisition shall not
be considered as an acquisition which qualifies for any depreciation allowance
under this section, and such asset shall be treated as an asset on which
depreciation has been granted to such lessee to the extent of the repayment of
the capital value of such asset under such lease agreement by such lessee.
26 DEDUCTIONS NOT ALLOWED IN ASCERTAINING PROFITS AND
INCOME.
26. (1) For the purpose
of ascertaining the profits or income of any person from any source, no
deduction shall be allowed in respect of -
(a) domestic or private
expenses, including the cost of travelling between the residence of such person
and his place of business or employment;
(b) expenses incurred in
connection with his employment, other than the expenses referred to in
paragraph (e) and paragraph (g) of subsection (l) of section 25;
(c) any expenditure
incurred in travelling outside Sri Lanka in connection with any trade,
business, not being a business referred to in paragraph (d), profession or
vocation carried on or exercised in Sri Lanka by such person, other than the
expenses incurred in travelling outside Sri Lanka, solely in connection with
the -
(i) promotion of the
export trade of any article or goods; or
(ii) provisions of any
services for payment in foreign currency; or
(iii) services relating
to design development, product development or product innovation by such person
being a company engaged exclusively in the provision of such services:"
Provided that for any
year of assessment commencing on or after April 1, 2011-
(A) such part of
expenditure incurred in travelling outside Sri Lanka in the production of
profits or income from any trade or business carried on or exercised in Sri
Lanka by any person, after deducting therefrom-
(i) such expenses
incurred in travelling outside Sri Lanka solely in connection with the
promotion of export trade of any article or goods or the provision of any
service for payment in foreign currency; or
(ii) such expenditure
incurred in travelling outside Sri Lanka in carrying out an approved programme
as referred to in paragraph (d); or
(iii) for any year of
assessment commencing on or after April 1, 2012, such expenditure incurred in
travelling outside Sri Lanka, by any company engaged exclusively in the
provision of services relating to design development, product development or
product innovation;
(B) an amount equal to
two per centum of the profits and income of such trade or business in the
immediately preceding year of assessment, whichever is lower, shall be
deductible in ascertaining the profits and income from such trade or business
for that year of assessment;
(d) any expenditure
incurred in travelling outside Sri Lanka in connection with the business of any
undertaking of operating any hotel for tourists, carried on by such person,
other than the expenditure incurred in travelling outside Sri Lanka solely in carrying
out a programme approved by the Ceylon Tourist Board for the promotion of
tourism;
(e) entertainment
expenses incurred by such person or his employee or on his behalf in connection
with any trade, business, profession or vocation carried on or exercised by
him;
(f) entertainment
allowances paid by such person to his executive officer ;
(g) any disbursements or
expenses of such person, not being money expended for the purpose of producing
such profits or income;
(h) any expenditure of a
capital nature or any loss of capital incurred by such person;
(i) the cost of any
improvements effected by such person;
(j) any sum recoverable
under a contract of insurance or indemnity, if the amount received under such
contract is not treated as a receipt from such trade, business, profession or
vocation under section 89 of the Inland Revenue Act, No. 28 of 1979 or under
section 95 of the Inland Revenue Act, No. 38 of 2000 or section 100 of this Act
;
(k) rent of, or expenses
in connection with, any premises or part of a premises not occupied or used for
the purposes of producing such profits and income;
(l) any amount paid or
payable by such person by way of -
(i) income tax, or super
tax or surtax or any other tax of a similar character in any country with which
an agreement made by the Government of Sri Lanka for the avoidance of double
taxation is in force (other than the excess of any such income tax, or super
tax or surtax or any other tax of a similar character over such maximum amount
of the credit in respect of Sri Lanka income tax as is allowed by paragraph (c)
of subsection (1) of section 97 ; or
(ii) Sri Lanka income
tax; or
(iii) any prescribed tax
or levy; or
(iv) any Economic
Service Charge levied under Economic Service Charge Act, No. 13 of 2006 ; or
(v) any Value Added Tax
on Financial Services levied under Chapter IIIA of the Value Added Tax Act, No.
14 of 2002 and any Nation Building Tax on Financial Services within the
provisions of the Nation Building Tax Act, No. 9 of 2009; or
(vi) any Social
Responsibility Levy levied under item 4 of the First Schedule to the Finance
Act, No. 5 of 2005; or
(vii) any Crop Insurance
Levy levied under section 14 of PART IV of the Finance Act, No. 12 of 2013; or
(viii) Super Gain Tax,
Bars and Taverns Levy, Casino Industry Levy, Mobile Telephone Operator Levy,
Satellite Location Levy, Dedicated Sports Channel Levy and Mansion Tax imposed
and levied under the provisions of the Finance Act, No. 10 of 2015,
Any regulation
prescribing a tax or levy for the purpose of this paragraph may be declared to
take effect from a date earlier than the date on which such regulation is made;
(m) any ground rent or
royalty payable for any period prior to April 1, 2014 and paid after April 1,
2014 which is deductible under paragraph (a) of subsection (5) of section 32 or
annuity paid by such person;
(n) any payment by such
person to any pension, provident, savings, widows' and orphans' pension, or
other society or fund, except such payments as are allowed under paragraph (g)
of subsection (l) of section 25;
(o)
(i) one half of the
excess of any expenditure in relation to any employee where profits from
employment under paragraph (a) of subsection (1) of section 4, does not exceed
six hundred thousand rupees per year ; and
(ii) three fourths of
the excess of any expenditure in relation to any employee whose profits from
employment under paragraph (a) of subsection (1) of section 4 exceeds six
hundred thousand rupees per year, incurred by such person in providing any
place of residence to any employee of such person or to the spouse, child or
parent of such employee over the rental value of such place of residence which
is included in the profits from employment of such employee within the meaning
of section 4.
For the purposes of this
paragraph "expenditure" shall include rent, lease rent, rates,
repairs and maintenance or other expenses directly and specifically related to
such place of residence borne by the employer;
(p) such part of the
rental paid by him under any finance leasing agreement entered into by him in
respect of -
(i) any motor vehicle,
furniture, plant, machinery or equipment other than information technology
equipment and calculating equipment including accessories and computer software
and other computing or calculating machine referred to in paragraph (a) of subsection
(l) of section 25, as is in excess of one-fifth of the total rental payable
under such agreement; and
(ii) any information
technology equipment and calculating equipment including accessories and
computer software as referred to in paragraph (a) of subsection (l) of section
25, as is in excess of one-fourth of the total rental payable under such
agreement;
(q) any sum transferred
to any reserve or provision (other than any annual payment referred to in
paragraph (o) of subsection (1) of section 25, for the payment of any sum
referred to in subsection (2) of section35;
(r) such part of any sum
paid or payable by such person, not being any venture capital company, any unit
trust or any mutual fund, as consideration for the management of any trade,
business, profession or vocation carried on or exercised by him, as exceeds -
(i) two million rupees
or one per centum of the turnover of such trade, business, profession or
vocation during the period for which profits and income are being ascertained,
whichever is lower or;
(ii) such amount as may
be determined by the Commissioner-General having regard to all the
circumstances of the case, as being reasonable and commercially justifiable as
such consideration, whichever is higher.
For the purposes of this
paragraph, the term "turnover" in relation to any trade, business,
profession or vocation and to any period, means the total amount received or
receivable from transactions entered into or for services performed in that
period, in carrying on or exercising such trade, business, profession or
vocation, excluding any amount received or receivable from the sale of capital
assets;
(s) any expenditure or
outgoing in relation to any asset provided by such person to any employee to be
used in the residence of such employee;
(t) any expenditure or
outgoing in relation to any movable or immovable property given by such person
to any employee at a price, less than market value at the time of giving such
property ;
(u) any expenditure or
outgoing in relation to any loan, other advance or credit granted to any
employee which is subsequently written off as a bad debt by such person ;
"For the purposes
of paragraphs (s), (t) and (u), of this subsection, the term
"employee" shall have the same meaning as given to such term in
section 131 of this Act; and
(v) for any year of
assessment-
(i) commencing prior the
April 1, 2011, one half; and
(ii) commencing on or
after April 1, 2011, one fourth,
of such person's cost of
advertisement in connection with any trade, business, profession or vocation
carried on or exercised by him other than the cost of advertisement incurred on
or after August 1, 2012, on sponsorship of international sport events approved
by the Minister to whom the subject of Sports has been assigned; or the cost of
advertisement outside Sri Lanka incurred solely in connection with the export
trade of any article or goods or the provisions of any services for payment in
foreign currency ;
(w) any expenditure
incurred in any trade or business carried on in Sri Lanka by any non resident
company being expenditure in the nature of head office expenditure, incurred in
any period by reference to the profits and income of which the statutory income
from such trade or business is computed.
For the purpose of this
paragraph, the expression "head office expenditure" shall have the
same meaning as given in section 27 of this Act ;
(x) the excess, if any,
of the aggregate amount of the interest payable for any year of assessment by
any subsidiary company (hereinafter referred to as the first mentioned
subsidiary company) of any holding company, in respect of any loan obtained
from such holding company or any other subsidiary company or subsidiary
companies (hereinafter referred to as the second mentioned subsidiary company
or subsidiary companies), over such part of the interest so payable, as is
attributable to such part of such loan, as is equal to thrice the aggregate of
the issued share capital and reserves at the end of that year of assessment of
the first mentioned subsidiary company, where such first mentioned subsidiary
company is a manufacturer:
Provided that where such
first mentioned subsidiary company is not a manufacturer the provisions of the
preceding paragraph shall apply as if for the reference in that paragraph to
the words "thrice the aggregate of the issued share capital and reserves",
there were substituted a reference to the words "four times the aggregate
of the issued share capital and reserves".
In this paragraph -
(i) the expressions
"subsidiary company" and "holding company" shall have the
same respective meanings assigned to them in the Companies Act, No. 7 of 2007;
(ii) the first mentioned
subsidiary company shall, in relation to any year of assessment, be deemed to
be "a manufacturer", if more than fifty per centum of the turnover
for that year of assessment of such subsidiary company, is from the sale of
products manufactured by such subsidiary company ;
(iii)
"reserves" do not include reserves arising from the revaluation of
any asset ; and
(iv)
"turnover" in relation to any year of assessment of a subsidiary
company, means the total amount receivable, whether actually received or not,
from every sale made in that year of assessment, of products manufactured by
such subsidiary company :-
(A) after deducting
therefrom -
(i) any sum included in
such total amount, being the proceeds from the disposal of any capital asset ;
(ii) the amount of any
bad debt incurred during that year of assessment, being an amount which had
been included in the relevant turnover of such company for that or any previous
year of assessment; and
(iii) any sum included
in such total amount, being a sum which represents the value added tax ; and
(B) after adding thereto
any sum received during that year of assessment on account of any bad debt
written off or allowed in any previous year ; and
(v) "loan"
includes the collection of funds from the issue of any debt instrument.
(y) the excess, if any,
of the aggregate amount of the interest payable for any year of assessment by
any holding company to any subsidiary company of such holding company, in
respect of any loan obtained from such subsidiary company, over such part of the
interest so payable as is attributable to such part of such loan as is equal to
thrice the aggregate of the issued share capital and reserves of such holding
company, at the end of that year of assessment, where such holding company is a
manufacturer :
Provided that, where
such holding company is not a manufacturer, the provisions of the preceding
paragraph shall apply as if for the reference in that paragraph to the words
"thrice the aggregate of the issued share capital and reserves",
there were substituted the words "four times the aggregate of the share
capital and reserves.
In this paragraph-
(i) the expressions
"subsidiary company" and "holding company" shall have the
same respective meanings assigned to them in the Companies Act, No. 7 of 2007;
(ii) any holding company
shall, in relation to any year of assessment, be deemed to be "a
manufacturer", if more than fifty per centum of the turnover for that year
of assessment of such holding company, is from the sale of products manufactured
by such holding company ;
(iii)
"reserves" do not include reserves created for the purpose of
accounting for any surplus from the revaluation of any asset ; and
(iv)
"turnover" in relation to any year of assessment of any holding
company, means the total amount receivable, whether actually received or not,
from every sale made in that year of assessment of products manufactured by
such holding company :-
(A) after deducting
therefrom:-
(i) any sum included in
such total amount, being proceeds from the disposal of any capital asset ;
(ii) the amount of any
bad debt incurred during that year of assessment, being an amount which had
been included in the turnover of such holding company for that or any previous
year of assessment ; and
(iii) any sum included
in such total amount, being a sum which represents the value added tax ; and
(B) after adding thereto
any sum received during that year of assessment on account of any bad debt,
written off or allowed in any previous year ; and
(v) "loan"
includes the collection of funds from the issue of any debt instruments;
"(z) the income tax
paid by any employer in respect of the employment income of any individual
employed by such employer.".
(2) No person carrying
on any trade, business, profession or vocation shall be entitled to any sum for
depreciation by wear and tear, or for renewal, or to any allowance under
paragraph (a) or paragraph (c) of subsection (1) of section 25 :-.
(a) for any year of
assessment, in respect of any vehicle used for travelling for the purpose of
his trade, business, profession or vocation, except in respect of -
(i) a motor cycle or
bicycle used for such purpose by an officer, who is not an executive officer,
in the employment of such person; and
(ii) a motor coach used
for transporting employees of such person to or from their place of work; and
(b) in respect of any
plant, machinery, fixtures, equipment or articles provided for the use of any
officer or employee of such person, in the place of residence of such officer
or employee,
or for any deduction for
any rental or annual payment in respect of any such vehicle, plant, machinery,
fixtures, equipment or articles as are referred to in paragraphs (a) and (b).
(3) In ascertaining the
profits or income arising from the annual value or rent of land and
improvements thereon, no deduction shall be made for outgoing and expenses
except those authorized in section 5 or section 6, as the case may be, except
in the case of a company carrying on the business of letting premises.
(4) In computing the
statutory income for any year of assessment of any person from any trade,
business, profession or vocation carried on or exercised by such person, no
deduction shall be allowed under section 25 or this section or section 27, in
respect of any expenditure or any part thereof, and an assessment shall be made
disallowing the entirety or any part of such expenditure notwithstanding
anything to the contrary in any other provisions of this Act, if it appears to
the Assessor that the debt or such part thereof attributable to such
expenditure or any part thereof, remains unpaid at the time such assessment for
that year of assessment is made:
Provided that, if it is
proved to the satisfaction of the Assessor or Assistant Commissioner within
three years from the end of that year of assessment, that such debt or such
part thereof has been paid within two years from the end of that year of assessment,
the Assessor or Assistant Commissioner shall, notwithstanding the provisions of
section 171, revise the assessment allowing the deduction of the sum so paid
and any tax found to have been paid consequent to such disallowance of such
deduction, shall notwithstanding anything to the contrary in any other
provision of this Act, be refunded.
27 DEDUCTION OF HEAD OFFICE EXPENSES INCURRED BY ANY NON
RESIDENT COMPANY.
27. (1) Where any non
resident company carrying on in Sri Lanka any trade or business incurs any
expenditure in the nature of head office expenditure , there shall be deducted
from the profits and income of such company for such year of assessment from such
trade or business, a sum equal to the lesser of -
(a) the amount of such
expenditure; or
(b) the amount equal to
ten per centum of such profits or income.
(2)For the purpose of
this section "head office expenditure" in relation to a non resident
company and to any year of assessment, means the executive and general
administration expenditure incurred by or on behalf of such company outside Sri
Lanka, including expenditure -
(a) comprising the
aggregate of the total profits from employment of and the total cost of
travelling undertaken by every employee and every other person employed in or
managing the affairs of any office of such company outside Sri Lanka ; and
(b) in respect of -
(i) any premises outside
Sri Lanka ; and
(ii) such other matters
connected with the executive and general administration as the case may be,
determined by the Commissioner-General having regard to all the circumstances
of the case, as being reasonable and commercially justifiable.
CHAPTER V
Ascertainment of Total Statutory Income
28 BASIS FOR COMPUTING STATUTORY INCOME.
28. (1) The statutory
income of every person for each year of assessment from every source of his
profits or income in respect of which tax is chargeable, shall be the full
amount of the profits or income which was derived by him or arose or accrued to
his benefit from such source during that year of assessment, notwithstanding
that he may have ceased to possess such source or that such source may have
ceased to produce income.
(2) Where the
Commissioner-General directs under the provisions of subsection (4) that the
accounts in respect of any trade, business, profession or vocation be made up
for such periods as may be specified in that direction, he may further direct
that the statutory income from that source for any year of assessment be
computed on the amount of the profits of the period ending in that year of
assessment. Where however, the statutory income of any person from a trade,
business, profession or vocation has been computed by reference to an account
made up for a certain period and such person fails to make up an account for
the corresponding period in the year following, the statutory income from that
source, both of the year of assessment for which such failure occurs and of the
two years of assessment following, shall be computed on such basis as the
Commissioner-General shall consider just and equitable in the circumstances of
the case:
Provided that the
Commissioner-General may at any time vary or revoke a direction given under the
preceding provisions of this subsection:
Provided further, that
where any such direction is varied or revoked by the Commissioner-General, he
may order that the statutory income for any year of assessment from the source
in respect of which such direction was given, be computed as if the accounts
were made up to the thirty-first day of March in that year of assessment.
(3) Every person who
carries on or exercises any trade, business, profession or vocation shall,
subject to the provisions of subsection (4), make up the accounts of that
trade, business, profession or vocation for each successive period of twelve
months ending on the thirty-first day of March of each year:
Provided that where a
person -
(a) commences to carry
on or exercise a trade, business, profession or vocation in any year of
assessment, such person shall make up the accounts of such trade, business,
profession or vocation for the period beginning from the date of commencement
of such trade, business, profession or vocation and ending on the thirty-first
day of March of that year of assessment; and
(b) ceases to carry on
or exercise a trade, business, profession or vocation in any year of
assessment, such person shall make up the accounts of such trade, business,
profession or vocation for the period beginning from the first day of April of
that year of assessment and ending on the date of such cessation.
(4) Where any person is
unable to comply with the provisions of subsection (3) in relation to any
trade, business, profession or vocation carried on or exercised by him, he
shall give notice in writing or electronic means to the Commissioner-General
setting out the reasons for his inability to comply with such provisions. The
Commissioner-General may, if satisfied with the reason set out in such notice,
direct such person to makeup the accounts of that trade, business, profession
or vocation for such periods as may be specified in that direction, and it
shall be the duty of such person to comply with the direction:
Provided however that
the Commissioner-General may at any time vary or revoke any direction given by
him under the preceding provisions of this subsection.
29 APPORTION MENT OF PROFITS.
29. Where in order to
ascertain the profits or losses of any trade, business, profession, vocation or
employment for any year of assessment or other period, it is necessary to
divide and apportion in relation to specific periods the profits or losses for
any period for which accounts have been made up, or to aggregate any such
profits or losses or any apportioned parts thereof, it shall be lawful to make
such division, apportionment or aggregation, as the case may be.
Any apportionment of the
profits or losses for any period for which accounts have been made up, shall be
on the basis that such profits or losses accrued evenly over that period.
30 TOTAL STATUTORY INCOME.
30.The total statutory
income of a person for any year of assessment shall be the aggregate of his
statutory income for that year of assessment from every source of his profits
or income in respect of which tax is charged.
31 AGGREGATION OF THE TOTAL STATUTORY INCOME OF A CHILD
WITH THAT OF HIS PARENT.
31.The total statutory
income for any year of assessment of a child of a resident individual, shall be
aggregated with and deemed to form part of the total statutory income of -
(a) his father, if the
marriage of his parents subsists in that year of assessment; or
(b) the parent who
maintains him and with whom he lives in that year of assessment, if the
marriage of his parents does not subsist in that year of assessment.
For the purposes of this
section, a marriage shall be deemed not to subsists if the wife is living apart
from her husband under a decree of a competent court or duly executed deed of
separation or if the husband and wife are in fact separated in such circumstances
that the separation is likely to be permanent.
CHAPTER VI
Ascertainment of Assesable Income
32 DEDUCTIONS FROM TOTAL STATUTORY INCOME IN ARRIVING AT
ASSESSABLE INCOME.
32. (1) The assessable
income of a person (other than a company) for any year of assessment shall be
his total statutory income for the year other than the-
(a) statutory income
from interest from which income tax has been deducted under section 133 or
section 135;
(b) statutory income
from dividends from which income tax has been deducted under subsection (1) of
section 65, whether received directly from such company which distributes the
dividend or through any other company; and
(c) statutory income
from interest arising or accruing to any individual, being interest from which
income tax has been deducted under section 134;
(d) interest accruing to
such person from any Rupee Denominated Treasury Bond, purchased out of funds
drawn from any Treasury Bond Investment External Rupee Account.
subject to the
deductions specified in this section:
Provided however, where
such income from interest or dividends from which income tax has been deducted
under section 133 or subsection (1) of section 65, as the case may be, have
been received by a person in the course of carrying on any trade or business as
a receipt from such trade or business, such income from interest or dividends
shall form part of the total statutory income of such person :
(2) The assessable
income of any primary dealer, shall not include any interest income received or
accruing where -
(a) tax on the total
amount of such interest has been deducted under section 134; and
(b) such interest income
has been accrued or arisen to such primary dealer in respect of a primary
market transaction on any Security or Treasury Bonds issued under the
Registered Stocks and Securities Ordinance (Chapter 420), or Treasury Bill
issued under the Local Treasury Bills Ordinance (Chapter 417), or Central Bank
Security issued under the Monetary Law Act (Chapter 422), referred to in
section 134 as the case may be.
For the purposes of
subsection (1) and of this subsection-
"interest
income" means the proportionate amount of interest or discount allowed by
the issuer of any security or instrument referred to in sub-paragraph (b) of
this subsection, in proportion to the holding period of such security or other
instrument by any holder over the period of maturity of such security or other
instrument ;
"primary market
transaction" means the purchase of any Security or Treasury Bond issued
under the Registered stock and Security Ordinance (Chapter 420), or Treasury
Bill issued under the Local Treasury Bills Ordinance (Chapter 417), or Central Bank
Security issued under the Monetary Law Act (Chapter 422), at the time of the
original issue of such Security, Bill or Bond by any primary dealer, subject to
any discount or payment of interest by the issuer; and
"secondary market
transaction" means the sale of a security or other instruments referred to
in sub-paragraph (b) of sub section (2) of this section or re-purchase or
reverse re-purchase of such security or other instruments after the original issue
of such security or holding of any such security or instrument for a period
longer than one day from the date of acquisition, by any primary dealer who has
acquired such security or other instruments.
(3)The assessable income
of any person shall not include-
(a) (i) any reward
received by such person as an informer under any scheme for the payment of such
rewards; or (ii) a share of fine received by such person under any scheme for
the distribution of such share of fine, from any Government Institution, from
which income tax has been deducted in accordance with Chapter XIX ;
(b) the receipt of any
lottery prize or winnings from gambling or betting from which tax has been
deducted under section 157; and
(c) interest received on
the compensation payable in respect of any immovable or movable property vested
in the Government or in the Land Reform Commission or in a Public Corporation
from which the income tax has been deducted under section 36.
(d) interest accruing to
such person from any Rupee Denominated Treasury Bond, purchased out of funds
drawn from any Treasury Bond Investment External Rupee Account.
"(e) the profits
and income of such person from the sale of any Rupee Denominated Treasury Bond,
purchased out of funds drawn from any Treasury Bond Investment External Rupee
Account;
(f) where such person is
the Credit Guarantee Fund of the Central Bank of Sri Lanka, the interest
accruing to such Fund from any Treasury Bond issued under the Registered Stocks
and Securities Ordinance (Chapter 420) or from any Treasury Bill issued under
the Local Treasury Bills Ordinance (Chapter 417) ;
(g) interest on which
income tax has been deducted under section 95 and accruing to any person or
partnership out side Sri Lanka, on any corporate debt security within the
meaning of section 135, issued by or on behalf of any company in Sri Lanka and
purchased by such person or partnership out of foreign currency brought into
Sri Lanka and converted into Sri Lanka currency for such purchase;
(h) the profits and
income from the sale of any gem on which tax has been deducted by the National
Gem and Jewellery Authority established by the National Gem and Jewellery
Authority Act, No. 50 of 1993, under subsection (1) of section 161A of this
Act; and
"(i) profits from
any employment, other than profits referred to in paragraph (c) of subsection
(1) section 4, from which income tax is deducted by the employer under section
114 and such person being an individual has no other income other than any
income referred to in this section as not forming part of assessable income of
such individual.".
(4) The assessable
income of any person referred to in paragraph (b) of section 7 (other than any
registered society referred to in sub-paragraph (xvii) of that paragraph, shall
not include :-
(a) any interest from
which tax has been deducted under section 133 or section 134; or
(b) any dividend from
which tax has been deducted under subsection (1) of section 65.
(5) There shall be
deducted from the total statutory income of a person for any year of assessment
-
(a) sums paid by such
person for any year of assessment by way of:
(i) any ground rent or
royalty payable for any period prior to April 1, 2014 and which is paid after
April 1, 2014; or
(ii) annuity or
interest, which he is not entitled to deduct under section 25.
For the purpose of this
paragraph interest does not include the excess referred to in paragraph (x) or
paragraph (y) of subsection (1) of section 26:
Provided that -
(i) no deduction shall
be allowed in respect of any such sum paid, unless the Assessor or Assistant
Commissioner is satisfied that the recipient of such payment has issued a valid
receipt for such payment, containing name, address and the income tax file
number (if any) of such person in Sri Lanka or that the tax has been deducted
under this Act before or at the time such payment is made;
(ii) where for any year
of assessment any such sum paid and deductible under this subsection exceeds
the total statutory income for that year, the excess shall be treated for the
purposes of this section, in the same manner as a loss incurred in a trade during
that year;
(iii) where any sum is
paid by such person by way of an annuity, no deduction shall be allowed in
respect of such annuity, unless such annuity is paid -
(A) under an order of
court by way of payment of alimony or maintenance;
(B) to his spouse under
a duly executed deed of separation; or
(C) in return for full
consideration in money or money's worth.
(iv) where any sum is
paid by such person by way of interest, no deduction shall be allowed in
respect of such interest, unless such interest is paid under any legal or
contractual obligation -
(A) to any bank licensed
under the Banking Act, No. 30 of 1988 or any finance company registered under
the Finance Company Act, No. 78 of 1988; or
(B) to any other person
recognized by the Commissioner-General for the purposes of this paragraph :
Provided however, where
the Commissioner-General is satisfied that such recipient of interest has
declared such interest as income under this Act, such person may be deemed to
be a recognized person.
For the purposes of this
paragraph the term "interest" means any interest paid on a loan the
proceeds of which are utilized-
(i) for the construction
or purchase of any building or for the purchase of any site for the
construction of any building ;
(ii) in any trade,
business, profession or vocation carried on or exercised by him ;
"(v) no deduction
under this section shall be made from any employment income included in the
total statutory income;".
(b) the amount of a
loss, other than a loss referred to in paragraph (c) or paragraph (d), incurred
by such person in any trade, business, profession or vocation which if it had
been a profit would have been assessable under this Act, including any such loss
brought forward from a previous year which had not been deducted under this
section previously, and any excess treated as a loss under paragraph (ii) of
the proviso to paragraph (a), upto a maximum limit of thirty five per centum of
the excess of the total statutory income for that year, over the aggregate of :
-
(i) statutory income
from interest and dividends referred to in subsection (1) ;
(ii) any interest income
referred to in subsection (2) ; and
(iii) any reward, share
of fine, any lottery winning and any interest on compensation payable, as
referred to in subsection (3),
for that year of
assessment and any loss which cannot be deducted, may be carried forward to the
next year of assessment and so on:
Provided however,
(A) no loss incurred on
the disposal of shares, rights or warrants in a company referred to in section
44 of this Act, shall be a loss deductible under this paragraph;
(B) no no loss shall be
carried forward beyond the year of assessment in which the death of such person
occurred in the case of an individual, or liquidation of such person occurred
in the case of a company or other body of persons;
(C) where any person has
been declared or adjudged insolvent by a competent court, no loss incurred
prior to the date of bankruptcy or insolvency shall be deducted from income
arising subsequent to such declaration of insolvency ;
(D) no loss shall be
deducted which is incurred by a company in which there had been a change of
ownership otherwise than by way of testate or intestate succession, except
against the statutory income of such trade or business of the company as that
in which the loss was incurred.
For the purposes of this
paragraph, a change of ownership of a company is deemed to have occurred where
more than one third of the issued share capital of the company is held at any
time in the year of assessment for which the claim for deduction is made,
either directly or through nominees, by persons who did not hold such capital
at any time in the year of assessment in which the loss was incurred.
(c) any loss incurred on
or after April 1, 2007, in any business of life insurance, to the extent of any
profits from such business included in such total statutory income; the
balance, if any, of such loss after such deduction, shall be deemed to be a loss
for the year of assessment immediately succeeding that year of assessment.
(cc) Where any person
who is engaged in carrying on both life insurance business and general
insurance business segregates such life insurance business and the general
insurance business into two separate companies, as required by section 53 of
the Regulation of Insurance Industry (Amendment) Act, No. 3 of 2011, incurred
any loss prior to such segregation of which the entirety or any part thereof
had not been deducted previously, the balance, if any, as at the date of such
segregation shall, notwithstanding anything to the contrary in any other
provision of this Act, but subject to the provisions of paragraph (b), be
deducted from the total statutory income of the respective companies in the
following manner:-
(i) such part of the
loss as attributable to the life insurance business, from the total statutory
income of the company which carries on long term insurance business;
(ii) such part of the
loss as attributable to the general insurance business, from the total
statutory income of the company which carries on general insurance business.
(d) any loss incurred on
or after April 1, 2008, in any business of finance leasing to the extent of any
profits from such business included in such total statutory income and the
balance, if any, of such loss after such deduction, shall be deemed to be a
loss for the year of assessment immediately succeeding that year of assessment.
"(dd) the balance ,
if any, of any loss deductible under the provisions of this Act , of any
business of any bank, financial institution or leasing company which is
consolidated, acquired or merged in terms of the guidelines issued by the
Central Bank of Sri Lanka subject to conditions specified in the guidelines
issued by the Commissioner General, shall continue to be deducted, if it would
have been claimed under this section prior to such consolidation, acquisition
or merger, notwithstanding anything to the contrary in any other provision of
this Act, but subject to the provisions of paragraph (b), from the total
statutory income of the respective bank, financial institution or leasing
company as a result of such consolidation, acquisition or merger;
(e) where any person
commenced to carry on any business the annual turnover of which does not exceed
rupees five hundred million, any commencement expenses other than the capital
expenses incurred by that person in the year of assessment immediately preceding
the year of assessment in which the commercial operation of such business is
commenced, shall be deducted from the total statutory income of that person for
that year of assessment in which commercial operation commenced.
For the purpose of this
paragraph, profits or loss from any business of life insurance shall be
computed in accordance with the provisions of section 92.
(6)
(a) Where the profits
and income of an undertaking were exempt from income tax under section 16,
section 16 A, section 16B, section 16C, section 16D, section 17, section 17A,
section 18, section 19, section 20, section 21, section 22, section 23, section
24, section 24A, section 24B, section 24C or section 24D of this Act, or under
section 17, section 18, section 19, section 20, section 21a, section 21b,
section 21c, section 21d, section 21e, section 21f, section 21g or section 21h
of Inland Revenue Act, No. 38 of 2000 or under section 16c or section 17a or
section 17c or section 17d or section 17g or section 17h or section 17j or
section 17jj or section 22a, section 22b, or section 22c or section 22d or
section 22dd or section 22ddd or section 22dddd of the Inland Revenue Act, No.
28 of 1979, for any period (such period being referred to in this paragraph as
the exempt period), there shall be deducted from the total statutory income of
the person who carries on that undertaking in the year of assessment in which
such exemption ceases to apply, the excess, if any, of -
(i) the total of any
losses incurred by such person in such undertaking in any year of assessment
during the exempt period, over
(ii) such profits and
income of that undertaking as were exempt from income tax for any year of
assessment during the exempt period succeeding the year of assessment in which
such loss in that undertaking was incurred.
(b) Where the entirety
or any portion of the balance of such losses referred to in paragraph (a)
cannot be deducted from the total statutory income of such person for the year
of assessment referred to in paragraph (a), the residue, if any, of such entirety
or of such portion, after its deduction from the total statutory income of such
person for that year of assessment, shall be deemed to be a loss incurred by
such person in that undertaking in the year of assessment immediately
succeeding that year of assessment, and may accordingly be deducted in the
manner provided for in paragraph (b) of subsection (5).
(7) The amount of a loss
from any trade, business, profession or vocation shall be ascertained in the
manner provided for in this Act for the ascertainment of profits from a trade,
business, profession or vocation.
(8) Where the total
statutory income of any child for any year of assessment is aggregated with,
and deemed to be a part of, the total statutory income of his parent for that
year of assessment, any sum which could be deducted from the total statutory income
of such child under the provisions of this section shall be deducted from the
total statutory income of such parent.
CHAPTER VII
Ascertainment of Taxable Income
33 TAXABLE INCOME.
33. (1)The taxable
income of an individual or a charitable institution who or which is resident in
Sri Lanka in any year of assessment shall be the assessable income of that
individual or that institution for that year of assessment after deducting
therefrom the aggregate of-
(a) an allowance of-
(i) three hundred
thousand rupees in respect of any year of assessment commencing prior to April
1, 2011; and
(ii) five hundred
thousand rupees in respect of any year of assessment commencing on or after
April 1, 2011, and";
(b) any allowance to
which such individual or institution is entitled under section 34 :
Provided that an
individual who is a trustee, receiver, executor or liquidator shall not be
entitled to deduct the allowance referred to in paragraph (a) as such trustee,
receiver, executor or liquidator:
Provided further, that
for any year of assessment commencing on or after April 1, 2011-
(i) any individual being
a citizen of Sri Lanka irrespective of whether such individual is resident in
Sri Lanka or not, shall be entitled to deduct the allowance referred to in
paragraph (a); and
(ii) an individual shall
not be entitled to deduct any part of any allowance under section 34, other
than the allowance referred to in paragraphs (u) and (v) of subsection (2) of
section 34, from any employment income which is included in such assessable
income.".
(2)The taxable income of
any person (other than any resident individual or any charitable institution)
for any year of assessment shall be the assessable income for that year of
assessment of that person after deducting therefrom any allowance to which such
person is entitled under section 34.
34 AN ALLOWANCE IN RESPECT OF QUALIFYING PAYMENTS.
34. (1) Subject to the
provisions of subsection (4), there shall be deducted, for the purposes of
section 33, from the assessable income of a person for any year of assessment
in respect of every qualifying payment made by him or deemed to have been made
by him in that year of assessment, an allowance equal to the amount of such
qualifying payment.
(2)In this section,
"qualifying payment" means -
(a) a donation made by
any person in money to an approved charity being a charity which is established
for the provision of institutionalized care for the sick or the needy;
(b) a donation made in
money or otherwise to -
(i) the Government of
Sri Lanka;
(ii) a local authority;
(iii) any Higher
Educational Institution established or deemed to be established under the
Universities Act, No. 16 of 1978;
(iv) the Buddhist and
Pali University or any Higher Educational Institution established by or under
the Buddhist and Pali University Act, No. 74 of 1981;
(v) a fund established
by the Government of Sri Lanka,
(vi) a fund established
by a local authority and approved by the Minister ;
(vii) the Sevana Fund
created and administered by the National Housing Development Authority
established by the National Housing Development Authority Act, No. 17 of 1979.
(viii) a fund
established by a Provincial Council and approved by the Minister.
(ix) the Api Wenuwen Api
Fund established by Api Wenuwen Api Fund Act. No. 6 of 2008;";
Provided where the fund
referred to in subparagraph (v) of this paragraph is the President's Fund
established by the President's Fund Act, No. 7 of 1978 and any public
corporation is required in terms of the law by or under which such corporation
is established to remit any profits of such corporation to the President's
Fund, the profits so remitted shall be deemed for the purpose of this
paragraph, to be donations made to such Fund
(x) National Kidney Fund
established under the National Kidney Foundation of Sri Lanka (Incorporation)
Act, No. 34 of 2006;
(c) expenditure incurred
by any person on any project included in a development plan of the Government
of Sri Lanka, if such expenditure was incurred -
(i) with prior written
approval of the Minister; and
(ii) in accordance with
such terms and conditions as may have been specified by the Minister at the
time of granting such approval, such approval being granted and such terms and
conditions being specified by the Minister, having regard to the development
priorities of the Government;
(d) any amount paid
prior to April 1, 2011, by an individual as a contribution to a provident fund
for self employed persons, approved by the Commissioner-General for such
purpose;
(e) any contribution
made prior to April 1, 2011, by an individual to such provident fund or pension
fund as is approved by the Commissioner-General or to a regulated provident
fund, where no part of the emoluments from which such contributions are made is
exempt from income tax under paragraph (b) of section 8 :
Provided that where such
contribution exceeds twelve per centum of such emoluments, such excess shall be
deemed not to comprise a qualifying payment.
(f) a donation made
prior to April 1, 2011, by any person in money to -
(i) the Industrial
Technology Institute established by the Science and Technology Development Act,
No. 11of 1994 ;
(ii) the Sri Lanka
Foundation Institute established by the Sri Lanka Foundation Law, No. 31 of
1973;
(iii) the Tower Hall
Theatre Foundation, established by the Tower Hall Theatre Foundation Act, No. 1
of 1978;
(iv) the Sri Lanka
Inventors Commission, established by the Sri Lanka Inventors Incentives Act,
No. 53 of 1979;
(v) the S W R D
Bandaranaike National Memorial Foundation, established by the S W R D
Bandaranaike National Memorial Foundation Law, No. 2 of 1975;
(vi) the Institute of
Fundamental Studies, Sri Lanka, established by the Institute of Fundamental
Studies, Sri Lanka, Act, No. 55 of 1981;
(vii) the International
Winged Bean (Dambala) Institute, established by the International Winged Bean
(Dambala) Institute Act, No. 7 of 1982;
(viii) the Sri Lanka
Institute of Printing, established by the Sri Lanka Institute of Printing Act,
No. 18 of 1984;
(ix) the Arthur C.
Clarke Institute for Modern Technologies, established by the Science and
Technology Development Act, No. 11 of 1994;
(x) the Institute of
Policy Studies of Sri Lanka, established by the Institute of Policy Studies of
Sri Lanka Act, No. 53 of 1988;
(xi) the J R Jayawardena
Centre, established by the J R Jayawardena Centre Act, No. 77 of 1988;
(xii) the Institution of
Engineers, Sri Lanka, incorporated by the Institution of Engineers, Sri Lanka
Act, No. 17 of 1968;
(g) any premia in any
year of assessment, being premia which have accrued due for payment-
(i) on a life insurance
policy (not being a pure endowment policy) the premia in respect of which are
payable annually over a period of not less than three years;
(ii) on a policy of
medical insurance other than any policy referred to in paragraph (gg), not
being premia paid outside Sri Lanka in respect of any such policy issued
outside Sri Lanka;
"(gg) any premia in
any year of assessment commencing on or after April 1, 2011, being pemia which
have accrued due for payment on a policy of special health insurance which
covers any incurable disease";
(h)
(i) expenditure incurred
by any person in the production at a cost of not less than five million rupees,
of any film the production of which was completed prior to April, 2007 ; or
(ii) expenditure
incurred by any person in the production at a cost of not less than five
million rupees, of any film the production of which was completed after April
1, 2007;
Provided however that
any expenditure referred to in this paragraph shall, for the purposes of
subsection (1) be deemed to have been incurred in the year of assessment in
which the production of such film is completed.
For the purposes of this
paragraph the expression -
(i)
"expenditure" in relation to the production of a film includes any
expenditure incurred in the promotion of that film, within a period of ninety
days from the date of completion of the production of such film;
(ii) "film"
means any audio-visual presentation of the moving image produced on any form or
format whatsoever and which is intended primarily to be exhibited by projection
on a screen in a cinema;
(i) any expenditure
incurred prior to April 1, 2011, otherwise than out of a loan referred to in
paragraph (j) by an individual in either the construction or the purchase of a
house, being in either case the first house, constructed or purchased by such individual
on or after April 1, 2001;
(j) any expenditure
incurred prior to April 1, 2011 by an individual on the repayment of the
capital of any approved housing loan, either for the construction or the
purchase of a house, being in either case the first house constructed or
purchased by such individual on or after April 1, 2001.
For the purpose of this
paragraph "approved housing loan" means any housing loan obtained
from the Government, or any banking institution within the meaning of the
Monetary Law Act (Chapter 422), or from any Provincial Fund, any local
authority or any other institution, approved by the Minister in charge of the
subject of Housing.
(k) fifty per centum of
any investment of not less than rupees five hundred thousand in any year of
assessment in the purchase by any person of ordinary shares, other than the
existing shares, issued by a venture capital company during the period that such
company is exempted from income tax under section 23 ;
(l) any sum invested by
any company and referred to in paragraph (c) of subsection (2) of section 20 ;
(m) the expenditure
referred to in paragraph (c) of subsection (2) of section 21.
"(n) expenditure
not exceeding twenty five million rupees incurred in the construction and
equipping of a cinema, being a cinema-
(i) in which the
exhibition of cinematographic films commences on or after April 1, 2008 ; and
(ii) which is certified
by the National Film Corporation of Sri Lanka established by the National Film
Corporation of Sri Lanka Act, No. 47 of 1971 as being equipped with digital
technology, Digital Theatre System and Dolby Sound Systems;
(o) expenditure not
exceeding ten million rupees incurred in the upgrading of a cinema, being a
cinema-
(i) in which the
exhibition of cinematographic films had commenced prior to April 1, 2008;
(ii) which was not
equipped with digital technology, Digital Theatre Systems and Dolby Sound
Systems, prior to April 1, 2008; and
(iii) which is certified
by the National Film Corporation of Sri Lanka. established by the National Film
Corporation of Sri Lanka Act. No. 47 of 1971 as being equipped on or after
April 1, 2008, with digital technology, Digital Theatre Systems and Dolby Systems;
(p) expenditure incurred
by any company in the relocation of any relocated undertaking .referred to in
subsection (2) of section 21A;
(q) any sum invested by
any person in an undertaking referred to in paragraph (zzz) of section
13;";
(r) expenditure incurred
by any person in any community development project carried on in any
economically marginalised village as identified and published in the Gazette by
the Commissioner- General;
(s) investment of not
less than fifty million rupees in the acquisition of fixed assets made by any
person on or after April 1, 2011 but before April 1, 2014 in the expansion of
any undertaking which would have been qualified for exemption under section 16C
or section 17A had such undertaking commenced to carry on business on or after
April 1, 2011:
Provided however, where
such investment is made in any high tech plant, machinery or equipment which is
acquired for energy efficiency purposes or for technology upgrading purposes or
introducing any new technology or for power generation using renewable energy
resources in the expansion of such undertaking on or after April 1, 2011, but
prior to April 1, 2015 such investment shall comprise a qualifying payment.
(t) investment of not
less than any sum referred to in Column II of the Schedule to section 16D of
this Act made in fixed assets in any undertaking engaged in the manufacture of
any product referred to in Column I of that Schedule, being an investment which
would have qualified such undertaking for exemption under section 16D, referred
to above had such undertaking commenced to carry on business on or after April
1, 2012;
(u) where the profits
from employment of any individual who is a citizen of Sri Lanka or resident in
Sri Lanka other than profits referred to in paragraph (c) of subsection (1) of
section 4, exceeds five hundred thousand rupees, for any year of assessment
commencing on or after April 1, 2013, then-
(i) such part of profits
in excess of five hundred thousand rupees ; or
(ii) for any year of
assessment ended prior to April 1, 2015, one hundred thousand rupees and for
any year of assessment commencing on or after April 1, 2015, two hundred and
fifty thousand rupees,
whichever is lower;
(v) such part of
official emoluments arising in Sri Lanka to any individual who is not a citizen
of Sri Lanka and not resident in Sri Lanka–
(i) for any year of
assessment commencing on or after April 1, 2013, but prior to April 1, 2015
does not exceed one hundred thousand rupees; or
(ii)for any year of
assessment commencing on or after April 1, 2015 does not exceed two hundred and
fifty thousand rupees;
(w) any expenditure
incurred not exceeding six hundred thousand rupees for any year of assessment
commencing on or after April 1, 2014 on the repayment of the capital of a loan
obtained from any bank licensed under the Banking Act, No. 30 of 1988 or any finance
company licensed under the Finance Business Act, No. 42 of 2011, of which the
proceeds are utilized to construct a house or to purchase ahouse or a unit of a
residential apartment complex, by an individual who is a professional and who
furnishes a return under section 106, whether such individual obtained such
loan alone or together with any other individual:
Provided that, if such
loan is obtained together with another individual or obtained for a co-owned
property, such deduction shall not exceed the amount of expenditure
attributable to such individual who obtained such loan.
For the purpose of this
paragraph, "professional" shall have the same meaning as given for
that expression in section 40 C;
(x) any expenditure
incurred by any bank, any financial institution or any leasing company, by way
of cost of acquisition or merger of any other bank, any other financial
institution or any other leasing company, where such cost is ascertained by
considering all the facts on case by case basis in accordance with the
guidelines issued by the Central Bank of Sri Lanka, in the manner specified by
the Commissioner General for that purpose.
(3) Where the total
statutory income of any child for any year of assessment is aggregated with,
and deemed to be a part of, the total statutory income of his parent for that
year of assessment, any qualifying payment made by that child in that year of assessment
shall be deemed to be a qualifying payment made by such parent.
(4) The deduction from
the assessable income of any-
(a) person, other than a
company, for any year of assessment -
(i) in respect of all
qualifying payments other than those referred to in paragraphs (a), (b), (c),
(e), (g), (gg), (h), (i), (j), (k), (n), (o), (q),(r), (s), t), (u), (v) and
(w) of subsection (2) made by him or deemed to have been made by him in any year
of assessment shall not exceed one third of such assessable income or twenty
five thousand rupees whichever is less ;
(ii) in respect of all
qualifying payments referred to in paragraph (c) of subsection (2), made by him
or deemed to have been made by him in that year of assessment shall not exceed
twenty five thousand rupees ;
(iii) in respect of any
qualifying payment referred to in paragraph (h) of subsection (2), deemed to
have been made by him in that year, of assessment shall not exceed : -
(A) ten million rupees,
where such year of assessment is the year of assessment commencing on April 1,
2006; and
(B) thirty five million
rupees, where such year of assessment is any year of assessment commencing on
or after April 1, 2007;
(iv) in respect of the
aggregate of all qualifying payments made and referred to in paragraphs (a),
(e) and
(g) of subsection (2),
shall not exceed seventy five thousand rupees or one third of such assessable
income whichever is less ;
(v) in respect of all
qualifying payments referred to in paragraphs (i) and (j) of subsection (2)
made by him in that year of assessment, shall not exceed one third of the
assessable income or one hundred thousand rupees whichever is less ;
(vi) in respect of all
qualifying payments referred to in paragraphs (k) of subsection (2) made by him
in that year of assessment, shall not exceed one third of his assessable income
or such qualifying payment whichever is less ;
"(vii) in respect
of all qualifying payments referred to in paragraph (n) of subsection (2) made
by him in that year of assessment, shall not exceed twenty five million rupees;
(viii) in respect of all
qualifying payments referred to in paragraph (o) of subsection (2) made by him
in that year of assessment. shall not exceed ten million rupees;
(ix) in respect of all
qualifying payments referred to in paragraph (r) of subsection (2) made by him
in that year of assessment shall not exceed one million rupees;
(x) in respect of all
qualifying payments-
(A) referred to in
paragraph (s) of subsection (2) made by him in that year of assessment shall
not exceed twenty five per centum of such qualifying payment:
Provided however, where
investments made in more than one year of assessment are aggregated to reach
the minimum investment to qualify for deduction as qualifying payment, such
investment made in any previous year of assessment (being any year of assessment
commencing on or after April 1, 2011) shall be deemed to be an investment made
in the year of assessment in which the fifty million rupees aggregate is
reached;
(B) referred to in
paragraph (t) of subsection (2) made by him in that year of assessment shall
not exceed twenty five per centum of such qualifying payment:
Provided however, where
investments made in more than one year of assessment are aggregated to reach
the minimum investment to qualify for deduction as qualifying payment, such
investment made in any previous year of assessment (being any year of assessment
commencing on or after April 1, 2012) shall be deemed to be an investment made
in the year of assessment in which the respective minimum investment referred
to in section 59C is reached;
(b) a company, for any
year of assessment -
(i) in respect of all
qualifying payments other than those referred to in paragraphs (b), (h), (k),
(l), (m), (n), (o), (q), (r), (s), (t) and (x) of subsection (2) made by that
company or deemed to have been made by that company in that year of assessment
shall not exceed one-fifth of such assessable income;
(ii) in respect of any
qualifying payment referred to in paragraph (h) of subsection (2), made by that
company in that year, of assessment shall not exceed : -
(A) ten million rupees,
where such year of assessment is the year of assessment commencing on April 1,
2006; and
(B) thirty five million
rupees, where such year of assessment is any year of assessment commencing on
or after April 1, 2007;
(iii) in respect of all
qualifying payments referred to in paragraph (k) of subsection (2), made by
that company shall not exceed one-fifth of its assessable income or such
qualifying payment, whichever is less ;
(iv) in respect of all
qualifying payments, referred to in paragraph (l) of subsection (2), made by
that company, shall not exceed one hundred million rupees, or such qualifying
payment, whichever is less.
"(v) in respect of
all qualifying payments referred to paragraph (a) of subsection (2) by made by
that company, shall not exceed one fifth of the assessable income or five
hundred thousand rupees, whichever is less;
(vi) in respect of all
qualifying payments referred to in paragraph (n) of subsection (2) made by that
company in that year of assessment, shall not exceed twenty five million
rupees;
(vii) in respect of all
qualifying payments referred to in paragraph (o) of subsection (2) made by that
company in that year of assessment, shall not exceed ten million rupees;
(viii) in respect of all
qualifying payments referred to in paragraph (r) of subsection (2) made by that
company in that year of assessment shall not exceed ten million rupees;
(ix) in respect of all
qualifying payments-
(A) referred to in
paragraph (s) of subsection (2) made by that company in that year of assessment
shall not exceed twenty five per centum of such qualifying payment:
Provided however, where
investments made in more than one year of assessment are aggregated to reach
the minimum investment to qualify for deduction as qualifying payment, such
investment made in any previous year of assessment (being any year of assessment
commencing on or after April 1, 2011) shall be deemed to be an investment made
in the year of assessment in which the fifty million rupees aggregate is
reached;
(B) referred to in
paragraph (t) of subsection (2) made by him in that year of assessment shall
not exceed twenty five per centum of such qualifying payment:
Provided however, where
investments made in more than one year of assessment are aggregated to reach
the minimum investment to qualify for deduction as qualifying payment, such
investment made in any previous year of assessment (being any year of assessment
commencing on or after April 1, 2012) shall be deemed to be an investment made
in the year of assessment inwhich the respective minimum investment referred to
in section 59C is reached;
(x) in respect of any
qualifying payment referred to in paragraph (x) of subsection (2), on the
expenditure incurred by any bank or other company referred to in that paragraph
in any year of assessment shall not exceed one third of the assessable income or
three hundred million rupees whichever is higher. The balance, if any, not
deductible in the same year of assessment shall be carried forward and be
deductible from the assessable income of such bank or other company for the
next succeeding year of assessment and so on subject to the same conditions.
(5) The amount of any
qualifying payment referred to in paragraph (b), paragraph (c), paragraph (h)
(ii), paragraph (l), paragraph (m), paragraph (n), paragraph (o) or paragraph
(q) of subsection (2): made or deemed to have been made by any person in any
year of assessment and which cannot be deducted from his assessable income for
that year of assessment, shall be deducted from his assessable income for the
next succeeding year of assessment and so on.
(6) The excess of the
allowance in respect of any qualifying payment referred to in paragraph (h) (i)
of subsection (2) deemed to have been made in any year of assessment by any
person, shall be deducted, to the extent it can be so deducted from the assessable
income of that person for the year of assessment immediately succeeding that
year of assessment, (hereinafter referred to as "the first succeeding year
of assessment") and any residue of such excess shall be deducted from the
assessable income of the year of assessment immediately succeeding the first
succeeding year of assessment.
(7) The excess of the
allowance of any qualifying payment referred to in paragraph (i) of subsection
(2) which cannot be deducted from the assessable income in the year of
assessment in which such expenditure is incurred, may be apportioned over a
period of not more than nine years immediately succeeding the year of
assessment in which such expenditure was incurred, and such apportioned amount
shall be deemed to be a qualifying payment made in each such year of
assessment.
(7A) The seventy five
per centum of any qualifying payment referred to in sub-paragraph (x) of
paragraph (a) or sub- paragraph (ix) paragraph (b) of subsection 4, may be
apportioned in equal amounts over a period of three years of assessment
immediately succeeding that year of assessment and such apportioned amount
shall be deuctible from the assessable income of that person in each such year
of assessment.
(8) For the purposes of
this section-
(a) an "approved
charity" means an approved charity within the meaning of section 16A of
the Inland Revenue Act, No. 4 of 1963, or under paragraph (a) of subsection (9)
of section 31 of the Inland Revenue Act, No. 28 of 1979 or paragraph (a) of
subsection (7) of section 31 of the Inland Revenue Act, No. 38 of 2000 or any
such public charitable trust or institution as is declared by the Minister by
notice published in the Gazette to be an approved charity for the purposes of
this section;
(b) the amount of a
donation made to the Government otherwise than in money, shall be the value of
such donation and such value shall -
(i) be the cost incurred
during that year of assessment by the donor of the property donated; or
(ii) where the cost
incurred by the donor during that year of assessment cannot be ascertained or
where no cost was incurred in that year of assessment, be the value of the
property donated at the time of such donation.
CHAPTER VIII
Rates of Income Tax on persons other than Companies.
35 RATES OF INCOME TAX ON PERSONS OTHER THAN COMPANIES.
35. (1) Subject as
hereinafter provided, income tax shall be charged for each year of assessment
on the taxable income for that year of assessment of any person -
(a) if he is an
individual other than a receiver, trustee, executor or liquidator acting in
such capacity in respect of any year of assessment, at the appropriate rates
specified in Part I, Part IA or Part IB of the First Schedule to this Act;
(b) if he is an
individual who is not a citizen of Sri Lanka and is deemed by subsection (7) of
section 79, to be non-resident, at the rate specified in Part II of the First
Schedule to this Act; or
(c) if such person is a
person other than a company or an individual to whom paragraph (a) applies, in
respect of any year of assessment at the appropriate rates specified in the
Third Schedule to this Act:
Provided that the income
tax payable for any year of assessment by an individual who is deemed to be
non-resident under subsection (7) of section 79, shall not be more than the
amount by which his assessable income for that year of assessment exceeds the
allowance referred to in paragraph (a) of subsection (1) of section 33.
(2) Where in consequence
of the inclusion in the statutory income of an individual for any year of
assessment of -
(a) a sum received in
commutation of a pension;
(b) a sum received as a
retiring gratuity other than such part of such sum as exceeds -
(i) one million eight
hundred thousand rupees; or
(ii) a sum equivalent to
the average monthly salary or wage paid to such individual during the period of
three years immediately preceding his retirement from any employment under the
employer who pays such gratuity, multiplied by the number of completed years of
service, whichever is greater;
(c) any sum received as
compensation for loss of office or employment;
(d) a sum paid to him,
at the time of his retirement from any employment, or at any subsequent time,
from a provident fund approved by the Commissioner-General other than such part
of that sum as represents his contributions to that provident fund;
(e) any sum paid from a
regulated provident fund to an employee (other than such part of that sum as
represents the contributions made by the employer to that fund prior to April
1, 1968, and the interest which accrued on such contributions made by the employer,
if in respect of such contributions made by the employer and the interest which
accrued on such contributions made by the employer, tax at the rate of fifteen
per centum has been paid by the employer); or
(f) any sum paid to him
at the time of his retirement from any employment or at any subsequent time,
from the Employees' Trust Fund, established by the Employees' Trust Fund Act,
No.46 of 1980,
his taxable income for
that year of assessment exceeds that which would be his taxable income if no
such aforementioned sum were included in his statutory income, the excess,
notwithstanding anything contained in any other provision of this Act, shall be
chargeable with tax at the appropriate rates specified in Part IV of the First
Schedule to this Act, if such aforementioned sum has been paid by the employer
of such individual, in accordance with a scheme which, in the opinion of the
Commissioner-General, is uniformly applicable to all individuals employed by
such employer. If any such aforementioned sum has been paid to such individual
in accordance with a scheme which, in the opinion of the Commissioner-General,
is not uniformly applicable to all individuals employed by such employer, his
taxable income (inclusive of such excess) shall be chargeable with tax at the
appropriate rate specified in Part V of the First Schedule to this Act:
Provided however, that
where the taxable income of an individual for any year of assessment includes
any sum referred to in paragraph (c), which has been paid to such individual in
accordance with a scheme which in the opinion of the Commissioner-General, is
not uniformly applicable to all individuals employed by the employer of that
individual, such sum is deemed to be income from employment within paragraph
(c) of subsection (1) of section 4, and shall be chargeable with tax at the
appropriate rate specified in the Part I, Part IA or Part IB of the First
Schedule to this Act.
(3) Where any charitable
institution provides in any year of assessment institutionalised care for the
sick or the needy and where the Commissioner-General is satisfied that the cost
of provision of such care is borne by such charitable institution, the Commissioner-General
may, subject to such condition as he may specify, reduce or remit the tax
payable by such charitable institution in respect of its profits and income for
such year of assessment, if it appears to the Commissioner-General that such reduction
or remission is just and equitable in all the circumstances of the case.
(4) Where a fund or
society has been set up or formed for the welfare of the members of the Sri
Lanka Army, Sri Lanka Navy, Sri Lanka Air Force or the Sri Lanka Police Force
and their respective families, the Commissioner-General may, subject to such
conditions as he may specify, reduce or remit the tax payable by such fund or
society, as the case may be, if it appears to the Commissioner-General that
such reduction or remission is just and equitable in all the circumstances of
the case.
CHAPTER IX
Special Provisions Relating to the Taxation of Certain
Profits and of Dividends out of Such Profits
36 SPECIAL PROVISION RELATING TO TAXATION OF INTEREST ON
COMPENSATION PAYABLE IN RESPECT OF PROPERTY VESTED IN THE GOVERNMENT, THE LAND
REFORM COMMISSION OR A PUBLIC CORPORATION OR A LOCAL AUTHORITY.
36. (1) The provisions
of this section shall apply to the interest payable on the compensation payable
in respect of any immovable or movable property vested in the Government or in
the Land Reform Commission or in a public corporation or in a local authority,
such interest being the accumulated interest payable on such compensation for
the period commencing on the date on which such compensation accrues is due,
and ending on the date of payment of such compensation (in this section
referred to as the "relevant interest").
(2)Notwithstanding
anything to the contrary in any law -
(a) the relevant
interest received by any person shall be deemed to be income arising to that
person in the year of assessment in which he receives such interest and not in
the year of assessment to which such interest relates, and such interest shall
be liable to income tax at the appropriate rate specified in the Fifth Schedule
to this Act ;
(b) the Government, the
Land Reform Commission, the public corporation or the local authority paying
the relevant interest to any person, shall deduct from such interest an amount
equal to ten per centum of such interest and shall remit the amount so deducted
to the Commissioner-General, with a statement in writing or electronic means
showing the particulars of the gross amount of the relevant interest payable,
the tax deducted, the net amount paid, the name and address of the person to
whom it is paid, and the amount so remitted shall be set off against the tax
payable by such person under paragraph (a).
(3) In this section
"Land Reform Commission" means the Land Reform Commission established
by the Land Reform Law, No. 1 of 1972.
37 DEDUCTION OF INCOME TAX FROM INTEREST PAYABLE ON
CERTAIN DEPOSIT ACCOUNTS.
37. (1) The provisions
of this section shall apply to the accumulated interest (in this section
referred to as "the relevant interest ") paid on a sum of money
deposited in a banking institution by -
(a) any individual; or
(b) another person on
behalf of any individual, under a scheme approved by the Commissioner-General
which-
(i) is operated by such
banking institution; and
(ii) conforms to such
conditions as may be specified from time to time, by the Commissioner-General.
The Commissioner-General
shall, in specifying any matter which is required by this subsection to be
specified by him, have regard to the need to encourage and facilitate savings.
(2) Notwithstanding
anything to the contrary in this Act -
(a) the relevant
interest paid to any individual shall be deemed to be income arising to such
individual in the year of assessment in which such interest is paid to him and
not in the year of assessment to which such interest relates, and such interest
shall be liable to income tax at the appropriate rates specified in the Fifth
Schedule to this Act ;
(b) the banking
institution paying the relevant interest to such individual shall,
notwithstanding anything in paragraph (a), deduct from such interest an amount
equal to ten per centum of such interest, and shall forthwith remit the sum so
deducted to the Commissioner-General;
(c) where a banking
institution deducts income tax in accordance with paragraph (b) from the
relevant interest paid to any individual, it shall issue to such individual a
statement in writing setting out the gross amount of the relevant interest
payable, the rate and amount of tax deducted and the net amount actually paid;
(d) where -
(i) any amount is
deducted in accordance with paragraph (b) from the relevant interest paid to
any individual ; and
(ii) the maximum rate at
which such individual is liable to pay income tax for the year of assessment in
which such deduction is made, in respect of profits and income (exclusive of
the relevant interest) is less than ten per centum,
then such individual
shall be entitled, on the production of the statement referred to in paragraph
(c) and subject to the provisions of Chapter XXVIII to a refund of such
percentage of the relevant interest as is equal to the difference between ten
per centum and such maximum rate of tax.
(3) Where a banking
institution which is required by subsection (2) to deduct any income tax from
the relevant interest paid by it to any individual fails to deduct such income
tax, then, the director, general manager or other principal officer of such banking
institution, shall be personally liable for the tax which such institution, was
required to deduct under this section, and such tax may be recovered from such
director, general manager, or principal officer, by all the means provided for
in this Act.
(4) Where any money is
deposited in a banking institution by an individual under a scheme approved by
the Commissioner-General under subsection (1), and such individual withdraws
the interest on such money in contravention of the conditions imposed by the
Commissioner-General in relation to such scheme, additional assessments may,
notwithstanding anything in this Act, be made in respect of every year of
assessment to which the interest so withdrawn relates.
38 RATES OF INCOME TAX ON THE GROSS INTEREST ON LOANS
GRANTED BY A COMPANY, PARTNERSHIP OR OTHER BODY OF PERSONS OUTSIDE SRI LANKA.
38. The gross interest
(not being interest exempt under any other provision of this Act), payable on a
loan granted to any person in Sri Lanka by any company, partnership or other
body of persons outside Sri Lanka, being interest which arises or is deemed, by
section 93, to arise to such company, partnership or other body of persons
shall, notwithstanding anything in this Act, be chargeable with income tax at
the appropriate rate specified in the Fifth Schedule to this Act.
39 THE RATE OF INCOME TAX ON ROYALTY PAYABLE TO ANY
COMPANY PARTNERSHIP OR OTHER BODY OF PERSONS OUTSIDE SRI LANKA.
39. The gross royalty
(not being royalty exempt under any other provision of this Act) payable by any
person in Sri Lanka to any company, partnership or body of persons outside Sri
Lanka, being royalty which arises or is deemed by section 94 to arise in Sri
Lanka to such company, partnership or other body of persons shall,
notwithstanding anything to the contrary in any other provision of this Act, be
chargeable with income tax at the appropriate rate specified in the Fifth
Schedule to this Act.
40 THE RATE OF INCOME TAX ON PROFITS FROM EMPLOYMENT, FOR
A SPECIFIED PERIOD OF A NON-CITIZEN EMPLOYED IN SRI LANKA.
40. (1) Where an
individual who is deemed, under subsection (7) of section 79 to be non-resident
for a period of three years, continues to be employed in Sri Lanka after the
expiry of such period, the profits from such employment of such individual for
a period of two years commencing from the end of such period of three years
shall, notwithstanding anything to the contrary in this Act, be chargeable with
income tax at the rate specified in Part III of the First Schedule to this Act.
(2) Where an individual
who is employed in a flagship company and who is deemed under the proviso to
subsection (7) of section 79 to be non-resident for a period of five years,
continues to be employed in such flagship company after the expiry of such period,
the profits from employment in such flagship company of such individual for the
period commencing from the end of such period of five years and ending on the
date on which - (a) the exemption of the profits and income of such flagship
company ceases under the terms of its agreement with the Board of Investment of
Sri Lanka; or (b) a further period of five years from the end of such period of
five years ends,
whichever occurs
earlier, shall, notwithstanding anything to the contrary in this Act, be
chargeable with income tax at the rate specified in Part III of the First
Schedule to this Act. In this subsection a "flagship company" means a
company which has on or after November 8, 1995 entered into an agreement with
the Board of Investment of Sri Lanka under section 17 of the Board of
Investment of Sri Lanka Law, No. 4 of 1978 and which has in accordance with
such agreement invested in Sri Lanka within the period specified in such
agreement, not less than fifty million United States Dollars or its equivalent
in any other foreign currency- (a) in the purchase or construction of any
building or in the purchase of any land, plant, machinery or furniture ; and
(b) in the acquisition of any asset not included in paragraph (a), for the use
of the enterprise carried on by such company.
40A "RATES OF INCOME TAX ON THE PROFITS FROM
EMPLOYMENT OF ANY PILOT.
40A. Where the taxable
income of any individual being a citizen of Sri Lanka, for any year of
assessment commencing on or after April 1, 2008, but prior to April 1, 2014,
includes any profits from employment as a pilot under any airline licensed
under the Air Navigation Act (Chapter 365) (hereinafter in this section
referred to as "relevant profits") and the rate of income tax payable
on a part of such taxable income (hereinafter in this section referred to as
the "relevant part of the taxable income") exceeds sixteen per
centum, then in regard to the relevant part of the taxable income, the tax
payable shall be computed as follows:-
(a) where such relevant
part of the taxable income exceeds the amount of the relevant profits:-
(i) the tax payable on
such portion of the relevant part of the taxable income as is equal to the
amount of such relevant profits, shall be computed at the rate of sixteen per
centum; and
(ii) the tax payable on
the balance of the relevant part of the taxable income, shall be computed
according to such of the rates above sixteen per centum, as are applicable
thereto, under the First Schedule to this Act; or
(b) where such relevant
part of the taxable income does not exceed the amount of the relevant profits,
the tax payable on the entirety of the relevant part of the taxable income,
shall be computed at the rate of sixteen per centum."
40B
(1) Where the taxable
income for any year of assessment commencing on or after April 1, 2009 but
prior to April 1, 2015, of any qualified individual, includes any profits from
employment under any qualified person in foreign currency (hereinafter in this
section referred to as "qualified profits") and the rate of income
tax payable on a part of such taxable income (hereinafter in this section
referred to as the "relevant part of the taxable income") exceeds
sixteen per centum, then in regard to the relevant part of the taxable income,
the tax payable shall, subject to the provisions of subsection (2), be computed
as follows:-
(a) where the relevant
part of the taxable income exceeds the amount of such qualified profits-
(i) the tax payable on
such portion of the relevant part of the taxable income as is equal to the
amount of such qualified profits, shall be computed at the rate of sixteen per
centum; and
(ii) the tax payable on
the balance of the relevant part of the taxable income, shall be computed
according to such of the rates above sixteen per centum, as are applicable
thereto, under the First Schedule to this Act; or
(b) where such relevant
part of the taxable income does not exceed the amount of the qualified profits,
the tax payable on the entirety of the qualified part of the taxable income
shall be computed at the rate of sixteen per centum.
(2) The provisions of
subsection (1) shall not apply unless the qualified person referred to in that
subsection certifies, that the aggregate of the qualified profits paid in any
year of assessment to all qualified individuals employed by such qualified person,
does not exceed the amount of the total earnings of such qualified person in
foreign currency, the profits and income attributable to which are exempt from
income tax under paragraph (ddd) of section 13 or would have been exempt under
that paragraph had such qualified person not entered into any agreement with
the Board of Investment of Sri Lanka under section 17 of the Board of
Investment Law, No. 4 of 1978, and earned by such qualified person in the year
of assessment immediately preceding that year of assessment.
(3) For the purposes of
this section-
(a) "qualified
individual" means an individual who is an employee of a qualified person,
and who provides in the course of such employment any service, being a service
rendered in the course of any profession or vocation as specified by the Commissioner-General
under paragraph (ddd) of section 13; and
(b) "qualified
person" means any person or partnership, the entirety or a part of whose
profits and income are exempt from income tax under paragraph (ddd) of section
13 or would have been exempt under that paragraph had such person or partnership
not entered into any agreement with the Board of Investment of Sri Lanka under
section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978.".
40C RATES OF INCOME TAX ON THE PROFITS FROM EMPLOYMENT OF
PROFESSIONALS.
40C. (1) Where the
taxable income of any individual:
(i) being a citizen of
Sri Lanka, for any year of assessment commencing on or after April 1, 2014 but
prior to April 1, 2015, includes any profits from employment in the exercise of
his duties as a professional; or
(ii) includes any
profits from employment for any year of assessment commencing on or after April
1, 2015, (hereinafter in this section referred to as "relevant
profits") and the rate of income tax" payable on a part of such
taxable income (hereinafter in this section referred to as the "relevant
part of the taxable income") exceeds sixteen per centum, then in regard to
the relevant part of the taxable income, the tax payable shall be computed as
follows:-
(a) where such relevant
part of the taxable income exceeds the amount of the relevant profits:-
(i) the tax payable on
such portion of the relevant part of the taxable income as is equal to the
amount of such relevant profits, shall be computed at the rate of sixteen per
centum; and
(ii) the tax payable on
the balance of the relevant part of the taxable income, shall be computed
according to such of the rates above sixteen per centum, as are applicable
thereto, under the First Schedule to this Act; or
(b) where such relevant
part of the taxable income does not exceed the amount of the relevant profits,
the tax payable on the entirety of the relevant part of the taxable income,
shall be computed at the rate of sixteen per centum.
(2) For the purpose of
this section "professional" means a doctor registered under the
Medical Ordinance (Chapter 105), a chartered engineer, a chartered architect, a
member of the Institute of Chartered Accountants of Sri Lanka, a member of the
Association of Chartered Certified Accountants, a member of the Chartered
Institute of Management Accountants (U.K.) and an attorney-at-law, and includes
a software engineer, a pilot licensed under the Air Navigation Act (Chapter
365), a navigation officer and a researcher or senior academic,recognized as an
accredited professional.
41 RATE OF INCOME TAX ON PROFITS AND INCOME OF ANY
FOREIGN CURRENCY BANKING UNIT ARISING FROM ANY OFF-SHORE FOREIGN CURRENCY
TRANSACTION.
41.The profits and
income of any foreign currency banking unit arising from any off-shore foreign
currency transaction shall, for any year of assessment be liable to income tax
at the appropriate rate given in the Fifth Schedule to this Act. For the purposes
of this section, any foreign currency transaction which any foreign currency
banking unit enters into with any other foreign currency banking unit, shall be
deemed to be an "off-shore foreign currency transaction".
42 RATE OF INCOME TAX ON PROFITS AND INCOME ARISING IN
SRI LANKA TO THE CONSIGNOR OR CONSIGNEE FROM CERTAIN EXPORTS.
42. (1) The profits and
income, for the year of assessment commencing on April 1, 2006, arising in Sri
Lanka to a consignor or consignee, from the export of -
(a) any precious stones
or metals not mined in Sri Lanka;
(b) any petroleum, gas
or petroleum products; or
(c) such other products
as may be approved by the Minister for the purposes of this paragraph, having
regard to the foreign exchange benefits that are likely to accrue to the
country from the export of such products,
being goods brought to
Sri Lanka on a consignment basis, and re-exported without subjecting such goods
to any process of manufacture, shall be liable to income tax at the appropriate
rate specified in the Fifth Schedule to this Act.
(2) The profits and
income for any year of assessment commencing on or after April 1, 2007, but
prior to April 1, 2011 arising in Sri Lanka to any consignor or consignee from
the export of any goods brought to Sri Lanka on a consignment basis and re-exported
without subjecting such goods to any process of manufacture, shall be liable to
income tax at the appropriate rate specified in the Fifth Schedule to this Act.
43 RATE OF INCOME TAX ON PROFITS AND INCOME ARISING FROM
CERTAIN UNDERTAKING APPROVED BY MINISTER.
43. The profits and
income arising to any person from an undertaking approved by the Minister for
the operation and maintenance of facilities for the storage of goods or
commodities brought into Sri Lanka for re-export, shall be liable to income tax
at the appropriate rate specified in the Fifth Schedule to this Act.
44 RATE OF INCOME TAX ON SALE OF ANY SHARE OR A WARRANT.
44. The profits of any
person other than a unit trust or mutual fund, from the sale on or before March
31, 2007, of any share or right to any share or a share warrant shall, where
such sale takes place within two years from the date of acquisition of such
share, right to a share or a share warrant, be liable at the appropriate rate
specified in the Fifth Schedule to this Act :
Provided that the
provisions of this section shall not apply in relation to the sale of any
share, if in respect of such sale the share transaction levy under section 7 of
the Finance Act, No. 5 of 2005 has been paid.
For the purposes of this
section the "profits", includes gains and shall be computed, after
deducting any expenditure allowable under section 25 directly related to the
disposal of such shares and the cost of acquisition of such shares, from the
sale proceeds, and shall be the net profit or gain for that year, after
deducting losses incurred in the same year from the disposal of shares, rights
or warrants, calculated in the same manner as mentioned above, had such loss
been a profit or gain would have been liable to tax under this paragraph, have
been held for a period not exceeding twenty four months by such person, and in
the event that the sale comprises shares of the same company, acquired on
different dates, the cost of such shares or the period of ownership shall be
determined on a first in first out basis of such shares. Any excess of such
deductible loss over the profits or gain for any year may be carried forward to
the succeeding year and so on, and deducted in computing the net profits or
gains under this paragraph.
45 RATES OF INCOME TAX ON PROFITS FROM CERTAIN
UNDERTAKINGS CARRIED ON BY A PERSON OTHER THAN A COMPANY.
45. (1) Where the
taxable income of any person other than a company for any year of assessment
includes any profits and income within the meaning of paragraph (a) of section
3 from any -
(a) agricultural
undertaking;
(aa) undertaking for the
manufacture of animal feed;
(b) undertaking for the
promotion of tourism;
(c) undertaking for
construction work , hereinafter in this section referred to as "specified
profits", such specified profits shall, subject to the other provisions of
this Act, be chargeable with tax at the appropriate rate specified in the Fifth
Schedule to this Act.
(d)undertaking for the
manufacture of sugar;
(2)For the purposes of
subsection (1)-
(a) "agricultural
undertaking" includes any undertaking for-
(i) fishing; and
(ii) provision of the
services of management to any undertaking for cultivating land with plants of
whatever description ;
(b) profits and income
from any agricultural undertaking means -
(i) in the case of an
undertaking referred to in sub-paragraph (ii) of paragraph (a), the profits and
income from fees for providing the services of management; and
(ii) in any other case,
the profits and income from the sale of produce of such undertaking without
subjecting such produce to any process of production or manufacture;
(c) "undertaking
for construction work" means an undertaking carried on by a resident
person for the construction of any -
(i) building;
(ii) roads or bridges;
(iii) water supply,
drainage or sewerage system; or
(iv) harbour, airport or
any infrastructure project in telecommunication or electricity;
(d) "undertaking
for the promotion of tourism" means an undertaking for the operation of -
(i) any hotel or guest
house approved by the Ceylon Tourist Board;
(ii) any restaurant
graded by the Ceylon Tourist Board as being in "Class A" or
"Class B";
(iii) any business of
travel agent;
(iv) any business of
transporting tourists; or
(v) any business
approved by the Ceylon Tourist Board for providing facilities for recreation or
sports.
(e)"undertaking for
the manufacture of sugar" means an undertaking carried on for locally
manufacturing sugar by using sugar cane or beet or any other produce
exclusively cultivated locally.
46 RATE OF INCOME TAX ON PROFITS FROM CERTAIN
UNDERTAKINGS CARRIED ON BY A COMPANY.
46. (1) Where the
taxable income of any company for any year of assessment includes any profits
and income within the meaning of paragraph (a) of section 3 from any -
(a) agricultural
undertaking;
(aa) undertaking for the
manufacture of animal feed;
(b) undertaking for the
promotion of tourism;
(c) undertaking for
construction work; or
(d) undertaking for the
manufacture of sugar,
such part of such
taxable income as consists of such profits and income shall, notwithstanding
anything to the contrary in other provisions. but subject to the provisions of
section 16 of this Act, be chargeable with income tax at the appropriate rate
specified in the Fifth Schedule to this Act.
(2) For the purposes of
subsection (1) ,the expressions "agricultural undertaking",
"undertaking for the promotion of tourism", the profits and income
from any agricultural undertaking" , "undertaking for construction
work" and "undertaking for the manufacture of sugar", shall have
the respective meanings assigned to them in section 45 of this Act.
46A RATES OF INCOME TAX ON PROFITS FROM POULTRY FARMING.
46A. Where the taxable
income of any person for any year of assessment includes any profits and income
within the meaning of paragraph (a) of section 3 (other than any profits and
income from the disposal of any capital asset) from poultry farming, such part
of such taxable income as consists of such profits and income shall,
notwithstanding anything to the contrary in other provisions, be chargeable
with income tax at the appropriate rate specified in the Fifth Schedule to this
Act.
For the purposes of this
section "profits and income from poultry farming" means such profits
and income from the sale of produce by such person without subjecting such
produce to any process of production or manufacture.
47 RATE OF INCOME TAX APPLICABLE TO SPECIALIZED HOUSING
BANKS.
47. (1) Where the
taxable income of any company carrying on the business of a specialized housing
bank for any year of assessment commencing prior to April 1, 2011 includes any
profits and income within the meaning of paragraph (a) of section 3 from such
business, such part of such taxable income as consists of such profits and
income shall, notwithstanding anything to the contrary in this Act, be
chargeable with income tax at the appropriate rate specified in the Fifth
Schedule to this Act.
(2) For the purposes of
this section "specialized housing bank" means a licensed commercial
or specialized bank within the meaning of the Banking Act, No. 30 of 1988 and
which is engaged in lending money only for activities relating to residential
housing.
48 "RATES OF INCOME TAX FOR PERIODS AFTER THE,
EXPIRY OF THE TAX EXEMPTION PERIOD.
48. (1) Such part of the
taxable income of any person for any year of assessment referred to in
subsection (2), which consists of the profits and income from:-
(a) any specified
undertaking referred to in sections 17, 18 or 19;
(b) any new undertaking
referred to in sections 20, 22, 24C and 24D;
(c) any relocated
undertaking referred to in sections 21 and 21A;
(d) any venture capital
company referred to in section 23;
(e) any business
referred to in section 24;
(f) any new cinema or
upgraded cinema referred to in section 24A; or
(g) any re-opened
abandoned factory referred to in section 24B,
shall, notwithstanding
anything to the contrary in any other provision of this Act, be taxable at the
rate specified in that subsection, as being applicable to that year of
assessment.
(2) The rate of tax
applicable to the year of assessment immediately succeeding
(a) the end of the
period for which the profits and income are exempt from income tax, being any
year of assessment commencing on or after April 1, 2008, (hereinafter referred
to as the "first post-exemption year") shall be five per centum;
(b) the end of the first
post-exemption year (hereinafter referred to as the "second post-exemption
year") shall be ten per centum; and
(c) the end of the
second post- exemption year shall be fifteen per centum.".
48A RATE OF INCOME TAX AFTER THE EXPIRY OF TAX EXEMPTION
UNDER SECTION 16.
48A. Such part of the
profits and income from any agricultural undertaking referred to in section 16,
included in the taxable income of any person for any year of assessment
commencing on or after April 1, 2011 shall, notwithstanding anything to the
contrary in any other provisions of this Act, be taxable at the appropriate
rate specified in the Fifth Schedule to this Act.
48B "RATE OF INCOME TAX APPLICABLE TO STRATEGIC
IMPORT REPLACEMENT UNDERTAKING AFTER THE EXPIRY OF THE PERIOD OF EXEMPTION.
48B. Such part of the
profits and income from any strategic import replacement undertaking referred
to in section 16D, included in the taxable income of any person for any year of
assessment commencing after the date of expiry of tax exemption under that
section, shall notwithstanding anything to the contrary in any other provisions
of this Act, be taxable at the appropriate rate specified in the Fifth Schedule
to this Act.".
48C RATE OF INCOME TAX APPLICABLE TO BOI REGISTERED
UNDERTAKINGS AFTER THE EXPIRY OF THE PERIOD OF TAX EXEMPTION.
48C.Where any
undertaking which has entered into an agreement with the Board of Investment of
Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No. 4
of 1978, which provides for tax concessions, and the taxation under such
agreement after the expiry of the tax exemption period provided thereunder is
more burdensome than the texation under the Inland Revenue Act, the profits and
income of such undertaking after the expiry of such tax exemption period shall
be chargeable with income tax in accordance with the provisions of the Inland
Revenue Act, provided such undertaking shall not seek any further tax
concession in respect of such agreement through any supplementary agreement.
48D EXTENSION OF THE PERIOD SPECIFIED FOR THE FULFILMENT
OF INVESTMENT CRITERIA BY ANY COMPANY ENTERED INTO AN AGREEMENT WITH THE BOARD
OF INVESTMENT OF SRI LANKA UNDER SECTION 16D OR SECTION 17A.
48D.Notwithstanding the
period specified in section 16D or paragraph (b) and (c) of subsection (2) of
section 17A to complete investment and to commence the commercial operations by
any new undertaking which has been approved by the Board of Investment of Sri
Lanka by entering into an agreement under section 17 of the Board of Investment
of Sri Lanka Law, No. 4 of 1978 which provides tax holiday under section 16D or
section 17A of this Act, if the approval of the Board of Investment was granted
prior to October 31, 2014 and the company which invested in such undertaking is
unable to complete the required investment prior to April 1, 2015 and to
commence commercial operations prior to April 1, 2016 due to any practical
reasons depending on the nature of the business, such period shall be extended
up to April 1, 2018, if the Commissioner-General is satisfied that the nature
of the activities engaged in by such new undertaking are only activities
qualified under section 16D or section 17A and the Board of Investment of Sri
Lanka confirms , on request made by the investor, that the reasons for such
extension is justifiable and acceptable by examining the status of the progress
of such new undertaking
49 RATE OF INCOME TAX ON DIVIDENDS PAID OUT OF PROFITS
TAXED IN ACCORDANCE WITH SECTION 46.
49. Where the taxable
income of any person other than a company for any year of assessment includes
any dividend, being a dividend, -
(a) out of profits and
income referred to in section 46; or
(b) paid out of any such
dividend as is referred to in paragraph (a) received by any company directly
from a company referred to in section 46 or through one or more intermediary
companies, if the first mentioned dividend is paid during the year of assessment
in which the profits and income referred to in section 46 arose or accrued or
within two years from the end of that year of assessment,
then such part of such
taxable income as consists of such dividend, shall be chargeable with income
tax at the appropriate rate specified in the Fifth Schedule to this Act.
50 RATE OF INCOME TAX ON QUALIFIED EXPORT PROFITS AND
INCOME OF PERSON NOT BEING A COMPANY, WHO COMMENCED TO CARRY ON ANY SPECIFIED
UNDERTAKING.
50. Where any person not
being a company commences on or after November 10, 1993, to carry on any
specified undertaking and the taxable income of that person for any year of
assessment includes any qualified export profits and income, such income shall
be chargeable with tax at the appropriate rate specified in the Fifth Schedule
to this Act.
51 RATE OF INCOME TAX ON QUALIFIED EXPORT PROFITS AND
INCOME OF A COMPANY WHICH COMMENCED TO CARRY ON ANY SPECIFIED UNDERTAKING.
51. Where any company
commences on or after November 10, 1993, to carry on any specified undertaking
and the taxable income of that company for any year of assessment includes any
qualified export profits and income, such part of the taxable income of that
company for that year of assessment as consists of such qualified exports
profits and income shall, notwithstanding anything to the contrary in this Act,
be chargeable with income tax at the appropriate rate specified in the Fifth
Schedule to this Act.
52 RATE OF INCOME TAX ON QUALIFIED EXPORT PROFITS AND
INCOME OF A COMPANY WHICH CARRIES ON ANY SPECIFIED UNDERTAKING.
52. Where any company
commenced prior to November 10, 1993, to carry on any specified undertaking and
the taxable income of that company for any year of assessment includes any
qualified export profits and income from such specified undertaking, such part
of such taxable income as consists of such qualified export profits and income,
shall, notwithstanding anything to the contrary in this Act, be chargeable with
income tax at the appropriate rate specified in the Fifth Schedule to this Act.
53 RATE OF INCOME TAX ON DIVIDENDS OUT OF EXPORTS PROFITS
AND INCOME.
53. (1) Where the
taxable income of any person other than a company, for any year of assessment
includes any dividend-
(a) being a dividend out
of -
(i) export profits and
income of any company referred to in section 32f of the Inland Revenue Act, No.
28 of 1979, paid during the period in which such profits and income are taxable
at the rate of ten per centum, or within one year thereafter; or
(ii) profits and income
of any company which has entered into an agreement with the Board of Investment
of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No.
4 of 1978, being profits and income in respect of which such company has, in
lieu of the exemption granted to it under such agreement, opted to be charged
with income tax at the rate of ten per centum, paid during the period for which
such profits are so chargeable with income tax or within one year thereafter;
or
(b) being a dividend
paid by any company out of such dividend received by that company as is
referred to in sub-paragraph (i) or sub-paragraph (ii) of paragraph (a), if the
first mentioned dividend is paid during any year of assessment in which the
second mentioned dividend was received by that company, or within one year
thereafter; or
(c) being dividend out
of any such dividend as is referred to in sub-paragraph (i) or sub-paragraph
(ii) of paragraph (a) received by any company through one or more intermediary
companies, during the period for which the profits income out of which the dividends
referred to in sub-paragraph (i) or sub-paragraph (ii) of paragraph (a) are
paid are taxable at the rate of ten per centum or within two years thereafter,
if the first-mentioned dividend is paid during the year of assessment in which
the second mentioned dividend was received by that company or within one year
thereafter,
such part of such
taxable income as consists of such dividend, shall be chargeable with tax at
the appropriate rate specified in the Fifth Schedule to this Act.
(2) Where the taxable
income of any person other than a company for any year of assessment includes
any dividend-
(a) being a dividend out
of the qualified export profits and income of a company-
(i) referred to in
section 51 or section 52 or the profits and income referred to in section 56
paid during the period in which such profits and income are taxable at the rate
of fifteen per centum or within one year thereafter,
(ii) which has entered
into an agreement with the Board of Investment of Sri Lanka under section 17 of
the Board of Investment of Sri Lanka Law, No. 4 of 1978, being an agreement
entered into prior to December 31, 1994, on an application made in that behalf
prior to November 11, 1993, being profits and income in respect of which such
company has paid income tax at the rate of fifteen per centum paid during the
period in which such profits and income are chargeable with income tax at the
rate of fifteen per centum or within one year thereafter ;
(b) being a dividend
paid by any company out of such dividend received by that company as is
referred to in subparagraph (i) or subparagraph (ii) of paragraph (a), if the
first-mentioned dividend is paid during any year of assessment in which the
second mentioned dividend was received by that company or within one year
thereafter; or
(c) being a dividend out
of any such dividend as is referred to in sub-paragraph (i) or sub-paragraph
(ii) of paragraph (a), received by any company during the period for which the
profits and income out of which such dividends are paid are taxable at the rate
of fifteen per centum or within two years thereafter, if the first mentioned
dividend is paid during the year of assessment in which the second mentioned
dividend was received by that company or within one year thereafter,
such part of such
taxable income as consists of such dividend, shall be chargeable with tax at
the appropriate rate specified in the Fifth Schedule to this Act.
(3) Subject to the
provisions of section 63, where the taxable income of any company includes any
dividend referred to in subsection (1) or subsection (2), the rate of income
tax applicable to such part of such taxable income as consists of such dividend,
shall for any year of assessment commencing from April, 2008, be ten per
centum.
54 RATE OF INCOME TAX ON CERTAIN DIVIDENDS.
54. Where the taxable
income of any person (other than a company) for any year of assessment includes
a dividend, other than any dividend exempt from income tax as referred to in
subsection (1) of section 10:-
(a) not in the form of
money or an order to pay money;
(b) in the form of money
or an order to pay money, out of income exempt from tax or not chargeable with
tax; or
(c) out of dividends
received from another company where such dividends is not exempt from income
tax under section 10, without a deduction of tax under subsection (1) of
section 65, irrespective of whether such company is entitled to deduct such tax
or not, the income tax on such dividend shall be charged at the appropriate
rate specified in the Fifth Schedule to this Act.
55 RATE OF INCOME TAX ON DIVIDEND RECEIVED FROM OUTSIDE
SRI LANKA.
55. Where the taxable
income of any person for any year of assessment includes a dividend received
from outside Sri Lanka, such part of such taxable income as consists of such
dividend, shall be charged with tax at the appropriate rate as specified in the
Fifth Schedule to this Act, subject to the provisions of any agreement for the
avoidance of double taxation.
56 RATE OF INCOME TAX ON DEEMED EXPORTS OF ANY PERSON OR
PARTNERSHIP.
56. (1)Where any person
or partnership who or which carries on any undertaking for the production or
manufacture and supply to any specified undertaking referred to in subparagraph
(i) of paragraph (c) of section 60 -
(a) of any commodity,
other than black tea in bulk, crepe rubber, sheet rubber, scrap rubber, latex
or fresh coconut, for export by such specified undertaking without further
production or manufacture by such specified undertaking; or
(b) of any goods for the
production, manufacture or packaging by such specified undertaking of any
commodity for export by such specified undertaking, the profits and income from
such supply being profits and income within the meaning of paragraph (a) of
section 3 other than any profits and income from the sale of capital assets,
shall be chargeable with income tax in accordance with the succeeding provision
of this section.
(2) Where any person
referred to in sub section (1) is a company (including a company being a
partner of any such partnership) and the taxable income of such company for any
year of assessment includes profits and income referred to in such subsection,
then such company shall be chargeable with income tax at the rate of twelve per
centum in respect of such profits and income.
(3) Where any person
referred to in sub section (1) is an individual (including an individual being
a partner of such partnership) and the taxable income of such individual for
any year of assessment includes profits and income referred to in such subsection
and the rate of income tax payable on a part of such income (hereinafter in
this section referred to as the "relevant part of income") exceeds
twelve per centum, then in regard to the relevant part of the income, the tax
shall be computed as follows :-
(a) if the relevant part
of the income exceeds the amount of such profits and income -
(i) the tax payable on
such part of the relevant part of the income as is equal to the amount of such
profits and income shall be at the rate of twelve per centum ; and
(ii) the tax payable on
the balance of the relevant part of the income shall be computed according to
such of the rates above twelve per centum as are applicable thereto under this
Act ; and
(b) if the relevant part
of the income does not exceed the amount of such profits and income, the tax
payable on the entirety of the relevant part of the income shall be at the rate
of twelve per centum, notwithstanding anything to the contrary in this Act.
(4) The provisions of
subsections (1), (2) and (3) shall apply if the supply referred to therein-
(a) is made during the
period for which -
(i) the taxable income
of the person who, or of any partner of a partnership which, carried on the
specified undertaking referred to in subsection (1) is chargeable with income
tax in accordance with the provisions of this Chapter; or
(ii) the export profits
and income of the specified undertaking referred to in subsection (1) are
exempt from income tax, under paragraph (b) of subsection (1) of section 20 of
the Inland Revenue Act, No. 28 of 1979 or in terms of an agreement entered into
by such specified undertaking with the Board of Investment of Sri Lanka under
section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978; and
(b) is a supply in
respect of which such documentary evidence as is required to satisfy the
Commissioner General that the exports relating to such supply were in fact
made, is adduced.
56A RATE OF INCOME TAX ON THE PROFITS AND INCOME FROM THE
SALE OF GOODS BY AN EXPORT ORIENTED COMPANY.
56A. Such part of the
profits and income of an export oriented company which has entered into an
agreement with the Board of Investment of Sri Lanka under section 17 of the
Board of Investment of Sri Lanka Law, No. 4 of 1978, for any year of assessment
commencing on or after April 1, 2013, from the sale of goods manufactured in
Sri Lanka, up to the quantity approved by the Board of Investment as import
replacement, to-
(a) any company which
has entered into an agreement with the Board of Investment of Sri Lanka under
section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, enjoying
tax holiday under section 16C, 16D or 17A of this Act or under the Strategic
Development Projects Act, No.14 of 2008 and which is permitted to import
project related goods or raw materials on duty free basis under the provisions
of such agreement, during the project implementation period; or
(b) any person eligible
to import specific goods on duty free basis under any Government Authority,
shall notwithstanding
anything to the contrary in any other provisions of this Act, be deemed to be
profits and income from exports and be chargeable with income tax at the
appropriate rate specified in the Fifth Schedule to this Act.
56B RATE OF INCOME TAX ON THE PROFITS AND INCOME FROM THE
SUPPLY OF GOODS OR SERVICES TO FOREIGN SHIPS.
56B. Such part of the
profits and income of any person for any year of assessment commencing on or
after April 1, 2013 from the supply of any goods manufactured in Sri Lanka or
the provision of services, to foreign ships for payments in foreign currency,
shall notwithstanding anything to the contrary in any other provisions of this
Act, be deemed to be profits and income from exports and be chargeable with
income tax at the appropriate rate specified in the Fifth Schedule to this Act.
56C RATE OF INCOME TAX ON THE PROFITS AND INCOME FROM THE
SALE OF PRODUCTS MANUFACTURED IN SRI LANKA FOR PAYMENT IN FOREIGN CURRENCY.
56C. Such part of the
profits and income of any person for any year of assessment commencing on or
after April 1, 2013 from the sale of any product manufactured in Sri Lanka,
other than such part of the profits and income exempt under section 13, for payment
in foreign currency through foreign exchange earning account authorized by the
Central Bank of Sri Lanka, shall notwithstanding anything to the contrary in
any other provisions of this Act, be deemed to be profits and income from
exports and be chargeable with income tax at the appropriate rate specified in
the Fifth Schedule to this Act.
56D. For any year of
assessment commencing on or after April 1, 2013 such part of the profits and
income from the sale in the local market, of locally manufactured garments,
bags made out of fabric, linen, curtains, packing items or ceramic products, of
any export oriented company which exports not less than sixty per centum of its
products shall be chargeble with income tax at the rate of twelve per centum:
Provided however, where
the local value addition of such garments, bags, linen, curtains, packing items
or ceramic products, as the case may be, is greater than sixty five per centum
with Sri Lankan brand name, such part of the profits and income of such export
oriented company from the sale in the local market, of such garments, bags,
linen, curtains, or other goods shall be chargeable with income tax at the rate
of ten per centum.
57 RATE OF INCOME TAX ON PROFITS AND INCOME FROM SERVICES
RENDERED OUTSIDE SRI LANKA BY ANY RESIDENT COMPANY OR PARTNERSHIP.
57. The profits and
income earned in foreign currency in any year of assessment ending on or before
March 31, 2008 by any company resident in Sri Lanka from services rendered in
Sri Lanka to any person or partnership outside Sri Lanka, being services rendered
in the course of carrying on or exercising any profession shall, if such
profits and income are remitted to such company through a bank in Sri Lanka, be
chargeable with income tax at the appropriate rate specified in the Fifth
Schedule to this Act.
58 "RATE OF TAX ON PROFITS AND INCOME FROM THE
SUPPLY OF ANY SERVICES TO ANY EXPORTER.
58. Such part of the
profits and income within the meaning of paragraph (a) of section 3, of any
person as consists of profits and income from the supply of-
(i) any services to any
exporter of goods or services or to any foreign principal of such exporter
directly, being services which could be treated as essentially related to the
manufacture of such goods or provisions of such services exported by such exporter
either directly or through any export trading house;
(ii)any services
provided by an agent of a ship operator to such agent’s foreign principal; or
(iii) any services
provided by any freight forwarder insofar as such services are for export of
goods, and the payment for such services are made by such exporter, foreign
principal or the recipient of the services of the freight forwarder, to such
person in Sri Lanka
"For the purpose of
this section "freight forwarder" means a person or a partnership who
or which is registered with the Central Bank of Sri Lanka under the Exchange
Control Act, as a Freight forwarder and who-
issues multi-modal
documents of carriage covered by a Freight Forwarders' "All Risks and
Legal Liability Insurance Policy"; and
furnishes, together with
the return of relevant turnover for any relevant quarter, copies of the
statements, furnished to the Controller of Exchange in respects of each month
comprised in such relevant quarter of turnover prepared in the form specified in
the Third Schedule to the Notification issued by the Controller of Exchange
under section 29B of the Exchange Control Act, and net collections prepared in
the form specified in the Fourth, Fifth and Sixth Schedules to such
Notification.
in foreign currency,
shall, notwithstanding anything to the contrary in any other provision of this
Act, be chargeable with income tax at the appropriate rate specified in the
Fifth Schedule to this Act, if -
(a) such supply is
covered by an international letter of credit or a letter of credit opened in a
bank in Sri Lanka on a back to back basis against an international letter of
credit for the remittance to Sri Lanka of the foreign exchange value of the exports
related to such supply; or
(b)
(i) the payment of the
consideration for such supply is made in foreign currency by means of a draft
or telegraphic transfer made in favour of such person by such exporter or
foreign principal; and
(ii) such other
documentary evidence as is required by the CommissionerGeneral to satisfy
himself that the goods or services relating to such supply have in fact been
exported, is adduced.".
59 RATE OF TAX ON PROFITS FROM TRANSSHIPMENT AGENCY FEES.
59. (1) The profits and
income of any agent of any non-resident person carrying on the business of ship
owner or chartere, attributable to the agency fees payable to such agent in
freign currency in consideration of services rendered to such non-resident
person in connection with any transhipment activity carried on by such
non-resident person, shall, where such agent is an agent approved by the
Director of Merchant Shipping, be chargeable with income tax at the appropriate
rate specified in the Fifth Schedule to this Act.
(2) For the purposes of
subsection (1), the profits and income attributable to agency fees in relation
to any agent referred to in subsection (1) and to any year of assessment, shall
be the sum which bears to the agency fee referred to in subseciton (1) and
which accrued to such agent in such year of assessment, the same proportion, as
the proportion which the statutory income of such agent from the business of
shipping agent bears to the total receipts from such business of shipping
agent.
59A RATE OF INCOME TAX ON THE PROFITS FROM THE EXPORT OR
SUPPLY TO AN EXPORTER OF CERTAIN PRODUCT HAVING DOMESTIC VALUE ADDITION OVER
SIXTY FIVE PER CENTUM.
59A. Such part of the
profits and income of any person for any year of assessment commencing on or
after April 1, 2011 from an undertaking for the manufacture of any product for
export, or for supply to an exporter for export, being a product having domestic
value addition in excess of sixty five per centum and Sri Lankan brand name
with patent rights reserved in Sri Lanka, shall notwithstanding anything to the
contrary in any other provisions of this Act, be chargeable with income tax at
the appropriate rate specified in the Fifth Schedule to this Act.
59B RATE OF INCOME TAX APPLICABLE TO THE PROFITS AND
INCOME OF ANY PERSON FROM ANY UNDERTAKING WITH ANNUAL TURNOVER NOT EXCEEDING
CERTAIN AMOUNT.
59B. (1) The profits and
income of any person (not being the holding company, a subsidiary company, or
an associate company of a group of companies) for any year of assessment
commencing on or after April 1, 2011, from any undertaking referred to in subsection
(2) shall, notwithstanding anything to the contrary in any other provisions of
this Act, but subject to provisions of section 59F, be chargeable with income
tax at the appropriate rate specified in the Fifth Schedule to this Act-
(2) For the purpose of
this section "undertaking" in relation to any year of assessment
means any undertaking-
(a) engaged in the
manufacture of any article or in the provision of any service; and
(b) the turnover of such
undertaking (other than from the sale of any capital asset) for that year of
assessment-
(i) being any year of
assessment commencing on or after April 1, 2011 but prior to April 1, 2013,
does not exceed three hundred million rupees;
(ii) being any year of
assessment commencing on or after April 1, 2013, but prior to April 1,
2015,does not exceed five hundred million rupees;
(iii) being any year of
assessment commencing on or after April 1, 2015,does not exceed seven hundred
and fifty million rupees.
59C TAX RATE APPLICABLE TO STRATEGIC IMPORT REPLACEMENT
UNDERTAKINGS.
59C. (1) The profits and
income within the meaning of paragraph (a) of section 3, (other than any
profits and income from the sale of any capital asset), of any existing
undertaking referred to in subsection (2), and carried on by any person or
partnership, shall notwithstanding anything to the contrary in any other
provisions of this Act, be taxable at the appropriate rate specified in the
Fifth Schedule to this Act for a period of five years reckoned from the
commencement of the year of assessment in which such undertaking satisfies the
minimum investment as specified under subsection (2).
(2) For the purpose of
subsection (1), "existing undertaking" means an undertaking which is
engaged in the manufacture of products specified in Column I below with a
minimum investment as specified in Column II below made in fixed assets as an expansion
on or after April 1, 2011 -
Column I (product)
Column II (Minimum investment in USD or its equivalent)
Fabric 5 million
Pharmaceuticals 10
million
Milk powder 30 million
Cement 50 million
59D RATE OF INCOME TAX APPLICABLE TO COMPANIES LISTING
ITS SHARES IN THE COLOMBO STOCK EXCHANGE AND ISSUING ITS SHARES TO THE GENERAL
PUBLIC.
59D. (1) The tax rate
applicable on the profits and income within the meaning of paragraph (a) of
section 3 (other than any profits and income from the sale of any capital
asset), of any company which lists its shares on or after April 1, 2013 but
prior to April 1, 2014, in the Colombo Stock Exchange licensed by the
Securities and Exchange Commission of Sri Lanka and issues by way of Initial
Public Offering not less than twenty per centum of its shares to the general
public, shall be reduced by fifty per centum for the year of assessment in
which such shares are listed and for another two years of assessment
immediately succeeding that year of assessment subject where such company after
listing continues to maintain not less than twenty per centum of holding of its
shares by the general public:
Provided however, where
any company lists its shares in the aforesaid manner, on or before April 1,
2017 and which is liable to pay income tax at the rate specified in item 3 of
PART-B of Second Schedule to this Act, such rate shall be reduced by fifty per
centum for the year of assessment in which such shares are listed and for
another two years of assessment immediately succeeding that year of assessment
subject such company after listing continues to maintain not less than twenty
per centum of holding of its shares by the general public.".
(2) Where the company
referred to in subsection (1) fails to maintain in any subsequent year of
assessment after listing its shares, not less than twenty per centum of holding
of shares by the general public in the opinion of an Assessor or Assistant Commissioner,
the tax reduced under subsection (1) shall notwithstanding to the contrary in
any other provisions of this Act, be re-assessable, payable and recoverable.
For the purposes of this
section "shares held by the general public" in relation to a listed
company means shares of such company held by any person other than those
directly or indirectly held by :-
(a) its parent,
subsidiary or associate companies or any subsidiaries or associates of its
parent company;
(b) its directors who
are holding office as directors of such company, their spouses and children
under 18 years of age;
(c) its Chief Executive
Officer, his spouse and children under 18 years of age; and
(d) any single
shareholder who holds ten per centum or more of the shares of such company.
59E RATE OF INCOME TAX ON THE PROFITS AND INCOME FROM
OPERATING ANY ALTERNATIVE POWER GENERATION PROJECT.
59E. Such part of the
profits and income of any person or partnership from operating any project for
producing any alternative energy including operating any mini hydro power
project shall notwithstanding anything to the contrary in any other provisions of
this Act, be taxable at the appropriate rate specified in the Fifth Schedule to
this Act.
For the purposes of this
section "mini hydro power project" means any hydro power project
which generates less than ten Mega Watts electricity.
59F "RATE OF INCOME TAX ON THE PROFITS AND INCOME
FROM THE PROVISION OF PROFESSIONAL SERVICES.
59F. (1) Where the
taxable income of any individual being a citizen of Sri Lanka, for any year of
assessment commencing on or after April 1, 2014, includes any profits and
income from providing professional services as a professional (hereinafter in
this section referred to as the "relevant profits") and the rate of
income tax payable under the First Schedule to this Act, on a part of such
taxable income (hereinafter in this section referred to as the"relevant
part of the taxable income") exceeds twelve per centum, then in regard to
the relevant part of the taxable income, the tax payable shall be computed as
given below:-
(a) where such relevant
part of the taxable income exceeds the amount of the relevant profits then the
tax payable on such relevant part of the taxable income shall be computed as
follows:-
(i) if such relevant
profits does not exceed twenty five million rupees, then the tax payable on
such portion of the relevant part of the taxable income as is equal to the
relevant profits, shall be at the rate of twelve per centum, and the tax
payable on the balance of the relevant part of the taxable income, shall be
computed according to such of the rates above twelve per centum, as are
applicable thereto under the First Schedule to this Act; or
(ii) if such relevant
profits exceed twenty five million rupees, then the tax payable, - on such
portion of the relevant part of the taxable income as is equal to twenty five
million rupees shall be at twelve per centum; - on such protion of the balance as
does not exceed ten million rupees shall be at the rate of fourteen per centum;
and - on any balance relevant part of the taxable income shall be computed
according to such of the rates above twelve per centum, as are applicable
thereto under the First Schedule to this Act subject to the following:—
(A)where the rate of
income tax, under the First Schedule to this Act, payable on a portion of such
balance relevant part of the taxable income exceeds sixteen per centum: - the
tax payable on such balance relevant part of the taxable income as is not exceeding
the excess of relevant profits over thirty five million rupees shall be
computed at sixteen per centum; and - the tax payable on any balance of the
relevant part of the taxable income, shall be computed according to such of the
rates above sixteen per centum, as are applicable thereto under the First
Schedule to this Act; or
(B)where the rate of
income tax payable under the First Schedule to this Act, on any portion of such
balance relevant part of the taxable income does not exceed sixteen per centum,
then the tax payable on the entirety of such balance shall be computed at
sixteen per centum; or
(b) where such relevant
part of the taxable income does not exceed the amount of the relevant profits,
then the tax payable on the relevant part of the taxable income shall be
computed as follows:-
(i) if such relevant
profits do not exceed twenty five million rupees then, the tax payable on the
entirety of the relevant part of the taxable income, shall be at twelve per
centum; or
(ii) if the relevant
profits exceed twenty five million rupees, then the tax payable, - on the
portion by which twenty five million rupees exceeds the amount by which the
relevant profits exceed relevant part of the taxable income shall be at twelve
per centum; - on the portion up to ten million rupees of the balance relevant
part of the taxable income shall be at fourteen per centum; and - on any
balance relevant part of the taxable income shall be at sixteen per centum.
(2) For the purpose of
this section, "professional" shall have the same meaning as given for
that expression in section 40C.
59G RATE OF INCOME TAX APPLICABLE TO THE PROFITS AND
INCOME EARNED BY ANY BANK ON LOANS GRANTED TO PROFESSIONALS FOR CONSTRUCTION
PURPOSES.
59G. (1) The tax rate
applicable on the profits and income earned by a bank for any year of
assessment commencing on or after April 1, 2014, on any loan granted to any
individual, who is a professional, for the purpose of constructing a house or
purchasing a house or a unit of a residential apartment complex, by such
individual alone or together with any other individual, shall be reduced by
fifty per centum.
(2) For the purpose of
this section, "professional" shall have the same meaning as given for
that expression in section 40C.
59H INCOME TAX PAYABLE BY SHIP OPERATORS, SHIP BUILDERS
OR ANY AGENT OF A FOREIGN SHIP.
59H. Such part of the
tax computed in accordance with this Act, as being payable by any ship
operator, ship builder or any agent of a foreign ship shall, notwithstanding
anything to the contrary in any other provision of this Act, be reduced by ten
per centum, if such ship operator, ship builder or agent provides training on
skill development in the shipping industry to trainees.
Rate of income tax
applicable to profits and income of any manufacturing company which carries on
an expansion of such business to any Province other than the Western Province.
59I The tax rate
applicable on the profits and income of an existing company carrying on a
business of manufacture of products (other than liquor or tobacco), on
expansion of the manufacturing of such products of such company in any Province
other than the Western Province (not by relocating the existing company or part
thereof), by investing in the acquisition of fixed assets (other than land or
building) not less than three hundred million rupees for any year of assessment
commencing on or after April 1, 2015 but prior to April 1, 2017, and which is
liable to pay income tax at the rate specified in item 3 of PART-B of the
Second Schedule to this Act, shall be reduced by fifty per centum up to a
maximum not exceeding five hundred million rupees, for the year of assessment
in which such company commences the commercial operations of such expansion
project and another four years of assessment immediately succeeding that year
of assessment.
59J RATE OF INCOME TAX APPLICABLE TO THE PROFITS AND
INCOME OF A NEW COMPANY ENGAGED IN ANY MANUFACTURING BUSINESS.
59J.The tax rate
applicable on the profits and income of any company which is registered with
the Department of Inland Revenue for tax purposes on or before December 31,
2015 with a committed investment in excess of five hundred million rupees, to
be made in any manufacturing business (other than liquor or tobacco based
products) not by splitting-up or re - construction of an existing undertaking
of any nature within the specified period as approved by the Commissioner
General, shall be reduced by fifty per centum for the year of assessment in
which such company commences the commercial operations and for consecutive
period of six years of assessment immediately succeeding that year of
assessment, if the applicable rate of income tax is twenty eight per centum.
59K INCOME TAX PAYABLE BY LOCAL MANUFACTURER WHO IS IN
THE BUSINESS SINCE 1970.
59k.Such part of the tax
computed in accordance with this Act, for any year of assessment commencing on
or after April 1, 2015, as being payable by any manufacturer who has been in
the business of manufacturing since the year nineteen seventy and sustained
competitiveness with imports, shall notwithstanding anything to the contrary in
any other provisions of this Act, be reduced by ten per centum, on the profits
and income from the sales made on such manufactured products (other than liquor
or tobacco based products) in the local market which is liable to tax at the
maximum rate of twenty eight per centum on the profit on ssuch sales.
59L INCOME TAX PAYABLE BY LOCAL ENTREPRENEURS ENGAGED IN
INTERCROPPING ACTIVITIES OR VEGETABLE AND FOOD PROCESSING ACTIVITIES.
59L.Such part of the tax
computed in accordance with this Act, for any year of assessment commencing on
or after April 1, 2015, as being payable by any local entrepreneurs engaged in
the intercropping activities or vegetable and food processing activities, be
reduced by fifty per centum, on the profits and income from such activities.
For the purpose of this section : "local entrepreneur" means, a
person who is a citizen of Sri Lanka and includes a company or partnership, the
controlling interest of which is held by Sri Lankans; "Intercropping
activities" means, cultivation of two or more crops simultaneously on the
same field; "vegetable and food processing activities" means,
processing of vegetables or foods by any person with not less than thirty five
percent of local value addition and the final product shall consist of not less
than seventy per centum of locally grown vegetables or locally manufactured
foods.
59M INCOME TAX PAYABLE BY A PERSON ON AN UNDERTAKING
LOCATED IN ANY LAGGING REGION.
59M.Such part of the tax
computed in accordance with this Act, as being payable by any person being a
manufacturer or provider of services who made investment in any undertaking for
the manufacture or the provision of services located in any lagging region in a
sum of not less than two hundred and fifty million rupees on or after February
1, 2015 but prior to March 31, 2017, shall notwithstanding anything to the
contrary in any other provisions of this Act, be reduced by fifty per centum,
on the profits and income of such person for the year of assessment in which
such undertaking commences business operations and another four years of
assessment immediately succeeding that year of assessment. For the purpose of
this section "lagging region in relation to any year of assessment"
means, any Divisional Secretary's Division as being in a state of economic
backwardness as specified, by the Commissioner-General by Notice published in
the Gazette in consultation with any appropriate authority within whose
jurisdiction such Division comes and with the approval of the Minister.
60 INTERPRETATION.
60. For the purposes of
this Chapter-
(a) "export
turnover" in relation to any specified undertaking means the total amount
receivable, whether, received or not, by that undertaking from the export of
goods or commodities or from the provision of any service referred to
sub-paragraph (ii) of paragraph (c), but does not include-
(i) any amount
receivable, whether received or not, from the export of gems or jewellery or
from the sale of any capital asset;
(ii) any amount
receivable, whether received or not-from the export of black tea not in packet
or package form and each packet or package weighing not more than one kilogram,
crepe rubber,, sheet rubber, scrap rubber, latex or fresh coconuts; or
(iii) any profits and
income not being profits and income within the meaning of paragraph (a) of
section 3;
(b) "qualified
export profits and income" in relation to any person, means the sum which
bears to the profits and income within the meaning of paragraph (a) of section
3, after excluding therefrom any profits and income from the sale of gems and
jewellery and any profits and income from the sale of capital assets, for that
year of assessment from any specified undertaking carried on by such person,
ascertained in accordance with the provisions of this Act, the same proportion
as the export turnover of that undertaking for that year of assessment bears to
the total turnover of that undertaking for that year of assessment;
(c) "specified
undertaking" means any undertaking which is engaged in -
(i) the export of
non-traditional goods manufactured, produced or purchased by such undertaking;
or
(ii) the performance of
any service of ship repair, ship breaking repair and refurbishment of marine
cargo containers, provision of computer software, computer programmes, computer
systems or recording computer data, or such other services as may be specified
by the Minister by Notice published in the Gazette, for payment in foreign
currency; and
(d) "total
turnover" in relation to any specified undertaking means the total amount
receivable, whether received or not, by that undertaking from any trade or
business carried on by that undertaking, but does not include any amount
receivable, whether received or not, from the sale of capital assets, gems or
jewellery or any profits and income not being profits and income within the
meaning of paragraph (a) of section3. For the purposes of this section the
expression "non traditional goods" means goods other than black tea
not in packet or package form and each packet or package weighing not more than
one kilogram, crepe rubber, sheet rubber, scrap rubber, latex or fresh coconuts
or any other produce referred to in section 16, but include organic tea in bulk.
CHAPTER X
Companies
61 INCOME TAX TO WHICH ANY RESIDENT COMPANY IS LIABLE.
61. (1) The income tax
to which any company resident in Sri Lanka in any year of assessment shall be
liable for that year of assessment, shall consist of an amount -
(a) calculated on the
taxable income of such company for that year of assessment at the appropriate
rate specified in the Second Schedule or Fifth Schedule to this Act, as the
case may be;
(b) equal to:-
(i) ten per centum of
the relevant part of the aggregate amount of the gross dividends distributed by
such company in that year of assessment, out of the profits for any year of
assessment; and
(ii) fifteen per centum
of the excess of thirty three and one third per centum of the distributable
profits of such company other than a company referred to in paragraph (h) of
the first proviso to paragraph (a) of subsection (1) of section 25, for the year
of assessment immediately preceding that year of assessment, (hereinafter in
this paragraph referred to as the "preceding year") over the
aggregate of the gross dividends distributed by such company out of such
distributable profits, within a period of eighteen months immediately
succeeding the commencement of such preceding year,
(A) where such year of
assessment is any year of assessment commencing prior to April 1, 2011 and the
company has within such period distributed dividends less in amount than twenty
five per centum; or
(B) where such year of
assessment is any year of assessment commencing on or after April 1, 2011, and
the company has within such period distributed dividends less in amount than
ten per centum,
of the distributable
profits for that preceding year: and
Provided that, where the
Commissioner-General is satisfied, that any company has been restrained from
distributing or has set apart, the whole or any part of its distributable
profits for any year of assessment in order to comply with any requirement imposed
by any other written law, the whole or such part so restrained from being
distributed or so set apart, shall be deemed to have been distributed, for the
purposes of determining whether such company has distributed-
(A) twenty five per
centum, where such year of assessment is any year of assessment commencing
prior to April 1, 2011; or
(B) ten per centum,
where such year of assessment is any year of assessment commencing on or after
April 1, 2011,
of its distributable
profits for that year of assessment.
In this paragraph-
"company" does
not include any unit trust or mutual fund;
"distributable
profits" in relation to any year of assessment and to any company means,
the book profits of that company for that year of assessment, reduced by the
aggregate of-
(a) the income tax
payable by that company for that year of assessment calculated in accordance
with paragraph (a);
(b) the cost incurred by
that company in that year of assessment in the acquisition of any land or any
capital asset; and
(c) any notional profit
computed on the basis of a revaluation of any capital asset and included in
such book profits,
increased by the
aggregate of the allowance for depreciation deducted in respect of such capital
asset in calculating such book profits and any notional loss computed on the
basis of a revaluation of any capital asset and included in such book profits;
"relevant
part" in relation to the aggregate amount of the gross dividends
distributed by any company, means the balance of such aggregate after deducting
therefrom any dividend distributed:-
(a) to any company or
other body of person, who or which is exempt from income tax under paragraph
(a) or paragraph (c) of section 7;
(b) to any registered
society referred to in paragraph (h) of section 7, during the period referred
to in that paragraph;
(c) to any shareholder
who is exempt from income tax under section 10 in respect of such dividend; or
(d) out of any dividend
received from another resident company;
"(e) to any unit
trust or to any mutual fund;
(f) to Api Wenuwen Api
Fund established by the Api Wenuwen Api Fund Act, No.6 of 2008;".
(c) in the case of any
public corporation not less than seventy-five per centum of the capital of
which is provided by the Government other than by way of loan, an amount equal
to twenty-five per centum of the balance of its profits after deducting therefrom
the income tax payable for that year of assessment under paragraph (a) :
Provided that where the
aggregate amount of any gross dividend distributed in that year of assessment
out of the profits on which the taxable income of such corporation is computed
for any year of assessment-
(i) is not less than
twenty-five per centum of such balance, the provisions of this paragraph shall
not apply; and
(ii) is less than
twenty-five per centum of such balance, the tax to which such public
corporation is liable under this paragraph, for that year of assessment, shall
be an amount equal to the excess of twenty-five per centum of such balance over
such amount of such dividend.
For the purposes of this
paragraph, the profits of the Insurance Corporation Limited of Sri Lanka shall
be deemed not to include its profits from the business of life insurance ;
Repealed.
(2) For the purposes of
this section "gross dividends" in relation to any dividend
distributed by any company, means the amount of the dividend before any
deduction is made under section 65.
62 INCOME TAX TO WHICH ANY NON-RESIDENT COMPANY IS
LIABLE.
62. (1) The income tax
to which a company which is not resident in Sri Lanka in any year of
assessment, shall be liable for that year of assessment shall consist of -
(a) a sum equal to the
amount calculated at the rate specified in the Second Schedule to this Act ;
(b) where there are
remittances of such company in that year of assessment, a sum equal to ten per
centum of the aggregate amount of such remittances by such company.
(2) In subsection (1),
"remittances" with reference to a non-resident company mean-
"(a) sums remitted
or retained abroad out of the profits and income chargeable with income tax of
the company and any sum received outside Sri Lanka by or on behalf of such
company in relation to any trade, business, profession or vocation carried on
in Sri Lanka by such company the profits of which are chargeable with income
tax in Sri Lanka, such sums not including any dividend paid by a resident
company to such non-resident company;".
(b) such part of the
proceeds of the sale abroad of products exported by that company as is retained
abroad; and
(c) in respect of any
products exported by that company and not sold in a wholesale market or not
sold at all, such part of the profits deemed under section 84 to be derived
from Sri Lanka as is retained abroad.
63 CERTAIN DIVIDENDS NOT TO FORM PART OF THE TOTAL
STATUTORY INCOME OF THE RECEIVING COMPANY.
63.Where a dividend is
paid by any resident company to any resident or non-resident company, and
either-
(a) a deduction has been
made under section 65 in respect of that dividend by the first mentioned
resident company;
(b) that dividend is
exempt from income tax under section 10;
(c) such dividend
consists of any part of the amount of a dividend received by the
first-mentioned resident company from another resident company; or,
(d) such dividend is a
dividend declared by a quoted public company,
profits and income from
such dividend shall, notwithstanding anything to the contrary in any other
provision of this Act, be deemed not to form part of the total statutory income
of the second mentioned company.
For the purpose of this
section the profits and income from such dividends which form part of the
profits under section 3(a) of this Act, means profits and income after
deducting expenses in ascertaining the profits from such business of receiving
dividends.
64 PROFITS OF A COMPANY FROM TRANSACTIONS WITH ITS
SHAREHOLDERS.
64. The profits of a
company from transactions with its shareholders which would be assessable if
such transactions were with persons other than its shareholders, shall be
profits within the meaning of this Act.
65 RESIDENT COMPANY TO DEDUCT TAX FROM ANY DIVIDEND.
65. (1) Every resident
company, other than a unit trust or mutual fund approved by the Securities and
Exchange Commission of Sri Lanka, shall deduct from the amount of gross
dividend payable to any shareholder, other than-
(a) any company or body
of persons which is exempt from income tax under paragraph (a) or paragraph (c)
of section 7;
(b) any unit trust or
mutual fund approved by the Securities and Exchange Commission of Sri Lanka.
"(c) the Api
Wenuwen Api Fund established by the Api Wenuwen Api Fund Act, No. 6 of 2008;
(d) any registered
society referred to in paragraph (h) of section 7, during the period referred
to in that paragraph;
(e) any person who is
exempt from income tax under section to in respect of any dividend received by
such person as referred to in that section,";
in the form of money or
and order to pay money, income tax equal to ten per centum of such gross
dividend
Provided however, income
tax under this subsection, shall be deducted from the amount of any gross
dividend payable out of profits and income of such company, whether such
profits and income are chargeable with income tax or not, excluding any
dividend received from another company after deduction of income tax under
subsection (1) or under this subsection, and any dividend which is exempt under
seciton10.
Provided that, in
determining for the purposes of this subsection, the amount of gross dividend
in relation to any dividend payable by any resident company, no account shall
be taken of such part of that dividend, if any, as is paid by any other
resident company and received by the first mentioned resident company, either
directly or through one or more intermediary companies."; and
(2) Every person who
issues a warrant, cheque or other order drawn or made in payment of any
dividend which becomes payable by a resident company during any year of
assessment, shall annex thereto a statement in such form as may be specified by
the Commissioner-General setting out -
(a) the gross amount
which after deduction of income tax thereon, corresponds to the net amount
actually paid;
(b) the sum deducted as
income tax;
(c) the net amount
actually paid;
(d) the composition of
the gross dividend indicating separately the amount paid out of-
(i) dividends received;
Omitted
(iii) income exempt from
or not chargeable with income tax;
(iv) other profits and
income.
(3) Where for any year
of assessment the assessable income of a person other than a company includes a
dividend from a resident company in the form of shares or debentures, he shall
be entitled to deduct from the tax payable by him an amount equal to an amount
which the company would have been entitled under subsection (1) to deduct as
tax on such dividend, had such dividend been paid in the form of cash.
"(4) The excess of
the aggregate of the deductions made by any resident company under subsection
(1), over the tax payable by such company under sub-paragraph (i) of paragraph
(b) of subsection (1) of section 61, shall be remitted to the Commissioner-
General within a period of thirty days from the date on which the gross
dividend referred to in that subsection, is paid.".
66 CERTAIN UNDISTRIBUTED PROFITS TO BE TREATED AS
DISTRIBUTED.
66. (1) Where in the
case of a company the Assessor or Assistant Commissioner is satisfied that the
company has not distributed to its shareholders a reasonable part of its
profits for any year of assessment, the Assessor or Assistant Commissioner may,
subject to the provisions of subsections (2), (3) and (4) of this section,
treat the whole or a part of the profits of the company, after deducting
therefrom any expenditure incurred for the development of the business of the
company, (other than the price paid for the purchase of an existing business or
an agricultural undertaking), as distributed in the form of dividends to the
shareholders of the company, on a date specified by the Assessor or Assistant
Commissioner.
(2) In determining under
subsection (1) whether a company has not distributed to its shareholders a
reasonable part of its profits, the Assessor or Assistant Commissioner shall
have regard to-
(a) the total amount of
its profits;
(b) the additional
assessments, if any, made on the company;
(c) the current
requirements of the company's business; and
(d) such other
requirements as may be necessary or advisable for the maintenance and
development of the company's business.
(3) For the purposes of
subsection (1), any of the following sums shall be regarded as profits
available for distribution among the shareholders of the company, and not as
having been applied or being applicable to the requirements of the company's
business or to such other requirements as may be necessary or advisable for the
maintenance and development of that business, namely -
(a) any sum expended or
applied, or intended to be expended or applied, out of the profits of the
company, in the redemption or repayment of any share or loan capital or debt
(including any premium on such share or loan capital or debt) issued or incurred
otherwise than for adequate consideration;
(b) any sum lent to a
director or shareholder of the company; and
(c) any sum expended or
applied, or intended to be expended or applied, in pursuance or in consequence
of any fictitious or artificial transactions.
(4)For the purpose of
subsection (3), any share or loan capital or debt shall be deemed to be issued
or incurred otherwise than for adequate consideration, if it is issued or
incurred-
(a) for a consideration
the value of which to the company is substantially less than the amount of the
capital or debt (including any premium thereon); or
(b) in or towards, or
for the purpose of raising money applied or to be applied in or towards, the
redemption or repayment of any share or loan capital or debt which itself was
issued or incurred for such consideration as is mentioned in paragraph (a) or
which represents directly or indirectly, any share or loan capital or debt
which itself was issued or incurred for such consideration,
and references in this
subsection and in subsection (3) to money applied or to be applied for any
purposes, shall be deemed to include references to money applied or to be
applied in or towards the replacement of that money.
(5)Where the Assessor or
Assistant Commissioner under subsection (1) treats the whole or part of the
profits of the company for any year of assessment as distributed in the form of
dividends to shareholders of the company, such company shall be liable to pay
income tax for that year of assessment on the profits treated as so
distributed, at the highest rate at which income tax is chargeable for that
year upon the taxable income of an individual, and such tax shall -
(a) be in addition to
and not in lieu of any income tax payable by that company under any other
provision of this Act ; and
(b) be assessed and
charged upon such company by an Assessor or Assistant Commissioner, and the
provisions relating to payment and recovery shall apply accordingly.
Provided that the tax so
assessed and charged shall be reduced by the amount of the tax, if any,
referred to in sub-paragraph (ii) of paragraph (b) of subsection (1) of section
61.
(6)Where a company
referred to in subsection (1) is being wound up in pursuance of an order made
by a court or a resolution passed in that behalf by the shareholders of the
company, then the balance of the income after payment of income tax in the year
of assessment in which such winding up commences and for each subsequent year
of assessment until such winding-up is completed, shall be regarded as income
distributed as dividends to such shareholders.
67 PROVISIONS APPLICABLE WHERE THE PROFITS AND INCOME OF
A COMPANY ARE APPROPRIATED BY THE DIRECTOR & C. OF THAT COMPANY.
67.Where the profits and
income of a company for any year of assessment or any part of such profits and
income are appropriated by any director, manager, shareholder or executive
officer of that company, such profits and income or such part of such profits
and income shall form part of the profits and income for that year of
assessment of the person by whom such profits or income or part thereof are
appropriated and shall be assessable accordingly and, the Commissioner-General
may, taking into account all the circumstances of the case, deduct such profits
and income or part thereof under subsection (1) of section 25 for the purpose
of ascertaining the profits and income of that company for that year of
assessment.
68 PROVISIONS OF THIS CHAPTER NOT TO APPLY TO CHARITABLE
INSTITUTIONS ETC.
68.The provisions of
this Chapter shall not apply to, any charitable institution or any body of
persons which is a body corporate and assessable under section 101.
CHAPTER XI
Special Cases
A -
CHILDREN
69 ASSESSMENT OF CHILD'S INCOME.
69. (1)Where during any
year of assessment an individual who is a child reaches the age of eighteen or
marries, then for that year of assessment -
(a) the total statutory
income of that individual shall not be aggregated with and deemed to form part
of the total statutory income of his parent;
(b) any sum which could
be deducted from the total statutory income of that individual under section 32
shall not be deducted from the total statutory income of his parent;
(c) any qualifying
payment within the meaning of section 34 made by that individual shall not be
deemed to be a qualifying payment made by his parent,
and such child shall be
liable to pay income tax for that year of assessment calculated as though he
was an individual who is not a child throughout that year of assessment.
(2)Where during any year
of assessment the marriage of the parents of a child ceases to subsist or is
deemed not to subsist -
(a) the total statutory
income of that child for that year of assessment shall be aggregated with and
deemed to be part of the total statutory income of his father;
(b) any sum which could
be deducted for that year of assessment from the total statutory income of that
child under section 32, shall be deducted from the total statutory income of
his father;
(c) any qualifying
payment within the meaning of section 34 made by that child in that year of
assessment shall be deemed to be a qualifying payment made by his father.
(3) For the purposes of
subsection (2), a marriage shall not be deemed to subsist if the wife is living
apart from her husband under the decree of a competent court or a duly executed
deed of separation, or if the husband and wife are in fact separated in such
circumstances that the separation is likely to be permanent.
B-Receiver,
Trustee, Executor, &c,.
70 RETURNS TO BE FURNISHED BY RECEIVER AND TRUSTEE AND
THEIR LIABILITY TO TAX.
70. (1) An Assessor or
Assistant Commissioner may give notice in writing or electronic means to a
receiver or trustee requiring him to furnish within the period specified in the
notice, in the case of a -
(a) receiver, a return
for the purposes of income tax, of the income from the properties under his
control;
(b) trustee, a return
for the purposes of income tax, of the income from the properties subject to
the trust, and a receiver or trustee shall be chargeable with income tax, in
the case of a-
(i) receiver, on the
income of the properties subject to his control; and
(ii) trustee, subject to
the provisions of subsection (2), on the income of the properties of the trust.
(2)Where there are any
beneficiaries to a trust the income of which is liable to income tax under
subsection (1), then the share of the income to which such beneficiaries are
entitled shall be deducted from the amount of the income which is liable to tax
under subsection (1), and shall be considered for the purposes of this Act, as
the income of such beneficiaries and accordingly each such beneficiary shall be
chargeable with income tax in respect of his share of such income.
(3)Where, for any year
of assessment, the entirety or any part of the income of a trust is considered
under subsection (2), to be the income of a beneficiary the trustee shall, on
or before the thirtieth day respectively of July, October and January of that
year of assessment and on or before the thirtieth day of April of the
immediately succeeding year of assessment, give to that beneficiary in such
form as may be specified by the Commissioner-General, a notice stating the
amount of such income.
(4) The income tax with
which a receiver or a trustee is chargeable for any year of assessment shall be
paid by him in accordance with the provisions of section 113, notwithstanding
that no assessment has been made on him.
(5) For the purpose of
this section, the term "trust" shall not include any unit trust, and
the term "trustee" shall not include any trustee of any unit trust.
71 CHARGEABILITY TO TAX OF TRUSTEE OF AN INCAPACITATED
PERSON.
71. The trustee of an
incapacitated person shall be chargeable with income tax in like manner and to
the like amount as such person would be chargeable under this Act:
Provided that nothing in
the preceding provisions of this section shall be deemed to prevent such person
from being assessed directly in his own name.
72 LIABILITY OF EXECUTOR TO TAX PAYABLE BY DECEASED
PERSON.
72. An executor of a
deceased person shall be liable to do all such acts, matters and things as such
deceased person would be liable to do under this Act if he were alive, and
shall be chargeable with income tax, with which such deceased person would be chargeable
if he were alive in respect of all periods prior to the date of the death of
such person:
Provided that-
(a) no proceedings shall
be instituted against the executor under the provisions of Chapter XXIX of this
Act, in respect of any act or default of the deceased person;
(b) no assessment or
additional assessment in respect of a period prior to the date of such person's
death shall be made after the expiry of the third year of assessment subsequent
to the year of assessment in which probate or letters of administration, as the
case may be , was issued to the executor in respect of the estate of such
person, except where there has been non-assessment or under-assessment by
reason of fraud or wilful evasion by such person, or by reason of an incorrect
statement by the executor of his estate, in which case an assessment or
additional assessment may be made at any time after the expiry of the aforesaid
third year of assessment; and
(c) the liability of an
executor under this section shall be limited to the aggregate of-
(i) the deceased
person's estate in his possession or control at the date when notice is given
to him that liability to tax will arise under this section ; and
(ii) any part of the
estate which may have passed to a heir or other person having any interest in
such estate.
73 RETURN TO BE FURNISHED BY EXECUTOR AND CHARGEABILITY
OF AN EXECUTOR AND BENEFICIARY.
73. (1) An Assessor or
Assistant Commissioner may give notice in writing or electronic means to the
executor of a deceased person requiring him to furnish within the period
specified in such notice a return for the purposes of income tax, of the income
from the estate administered by him and the name and address of each heir and
other person having any interest in the estate of the deceased person (such
heir or other person hereinafter referred to as a "beneficiary") and
his interest in such estate.
(2) A beneficiary shall,
subject to the provisions of subsection (4), be chargeable with income tax in
respect of his share of the income to which he is entitled from the estate of
the deceased person.
(3) Where, for any year
of assessment, a beneficiary is chargeable with income tax under subsection (2)
in respect of his share of the income to which he is entitled from the estate
of a deceased person, the executor of that estate shall, on or before the
thirtieth day of July, October and January of that year of assessment and of
April of the succeeding year of assessment, give to the beneficiary in such
form as may be specified by the Commissioner-General, a notice stating the
amount of such income and such notice shall contain the particulars required to
be set out in such form.
(4) Where the income to
which a beneficiary is entitled from the estate of a deceased person cannot be
ascertained, the executor shall be chargeable with income tax in respect of
such income.
(5) The income tax with
which an executor is chargeable under this Act for any year of assessment shall
be paid by him in accordance with the provisions of section 113,
notwithstanding that no assessment has been made on him.
74 JOINT TRUSTEES AND EXECUTORS.
74. Where two or more
persons act in the capacity of trustees of a trust not being any unit trust, or
executors of a deceased person's estate, they may be charged jointly or
severally with the income tax with which they are chargeable in that capacity
under this Act, and shall be jointly and severally liable for payment of such
taxes.
C-Unit
Trusts
75 EVERY UNIT TRUST DEEMED TO BE A COMPANY.
75. (1) For the purposes
of this Act, every unit trust and every mutual fund shall be deemed to be a
company resident in Sri Lanka and accordingly the provisions of this Act,
relating to companies resident in Sri Lanka shall, mutatis mutandis, apply to every
unit trust and every mutual fund.
(2) Without prejudice to
the generality of the provisions of subsection (1) -
(a) a "unit"
in any unit trust or a mutual fund shall be deemed to be a "share" in
that company;
(b) a unit holder in any
unit trust or mutual fund shall be deemed to be a shareholder in that company;
(c) the profits and
income derived by or which arose or accrued to the benefit of, the trustee of
any unit trust or the custodian of any mutual fund from any property subject to
that unit trust or mutual fund or from any trade or business carried on by such
trustee or such custodian for, or on behalf of, that unit trust or mutual fund
shall be deemed to be the profits and income of that company;
(d) any distribution, in
any manner whatsoever, of the profits or income of any unit trust or mutual
fund to its unit holders shall be deemed to be a dividend distributed to the
shareholders of that company; and
(e) the paid up value of
any unit in any unit trust or mutual fund shall be deemed to be the paid up
value of any share in that company.
(3) Any sum appropriated
or paid by way of remuneration to the manager or the trustee of any unit trust
or to the manager or custodian of any mutual fund out of the funds of that unit
trust or mutual fund shall, for the purposes of section 25 be deemed to be
outgoings and expenses incurred by that company in the production of its
income.
(4) Such part of the
taxable income : -
(a) for the year of
assessment commencing on April 1, 2006, of any unit trust or mutual fund, as
consists of the profits and income derived from the business of dealing in
shares or debt instruments; and
(b) for any year of
assessment commencing on or after April 1, 2007, of any unit trust or mutual
fund as consists of the profits and income derived from dealing in debt
instruments,
in accordance with the
Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987 or any
regulations or rules made thereunder, shall be chargeable with income tax at
the rate specified in item 2 (a) of part A of the Second Schedule to this Act.
76 ASSESSMENT OF PARTNERSHIP INCOME.
76. (1)Where a trade,
business, profession or vocation is carried on or exercised by two or more
persons in partnership, the provisions of the following subsections shall
apply.
(2) The divisible profit
or loss of a partnership for any year of assessment shall be the profit or loss
of the partnership from any trade, business, profession or vocation carried on
or exercised by such partnership during that year of assessment, ascertained in
accordance with the provisions of this Act, relating to the ascertainment of
profits and income of a person, after deducting from the total of such profit
or adding to the total of such loss, as the case may be, the amount of any
interest or annuity (except where it is payable by a person out of Sri Lanka)
payable by the partnership: Provided that, in ascertaining the profit or loss
of the partnership, nothing shall be deducted for salaries or other
remuneration of partners or for interest on partner's capital, but such sums
shall be taken into account in apportioning among the partners the divisible
profit or loss.
(3) A Commissioner may
give notice in writing or electronic means to the precedent partner of a
partnership requiring him to furnish within the time specified in such notice a
return, showing_
(a) the profits or
losses of the partnership from any trade, business, profession or vocation
carried on or exercised by such partnership during any year of assessment
ascertained in accordance with the provisions of this Act relating to the
ascertainment of profits and income of a person, and showing also any interest,
annuity, ground rent or royalty payable by such partnership in respect of such
trade, business, profession or vocation for that year of assessment;
(b) any other income of
the partnership for that year of assessment; and
(c) the names and
addresses of all the partners and the apportionment among them of the whole of
the divisible profit or loss and other income in accordance with their shares
in the partnership during the period in which such profit or loss or income arose,
taking into account in such apportionment the salaries and other remuneration
of partners and any interest on partners' capital. Where no active partner is
resident in Sri Lanka, the return shall be furnished by the agent in Sri Lanka
of the partnership.
(4) The precedent
partner of a partnership or where no active partner is resident in Sri Lanka
the agent in Sri Lanka of such partnership shall, in respect of any year of
assessment, issue to each partner of that partnership on or before the thirty
first day of July, October and January of that year of assessment and the
thirtieth day of April immediately succeeding the end of that year of
assessment, a notice in such form as may be specified by the
Commissioner-General specifying each partner's share of the divisible profit or
loss and other income of the partnership for that year of assessment, taking
into account any salary and other remuneration of that partner and any interest
on the partner's capital:
Provided that the
liability of, or duty imposed on, any partner of such partnership by or under
any of the provisions of this Act, shall not be affected by reason of the fact
that no notice under this subsection was issued to him by the precedent partner
or the agent of that partnership.
(5) The statutory income
of any partner from a partnership shall be computed in accordance with the
provisions of section 28 by treating his share of the divisible profit of the
partnership as though it were the profits of a trade, business, profession or
vocation carried on or exercised by him and his share of other income as though
it accrued to him solely and the share of any partner of a divisible loss shall
be treated as a loss incurred by him within the meaning of section 32:
Provided that where no
return has been made as required by subsection (3) or a return made under that
subsection has not been accepted, the Assessor or Assistant Commissioner may
estimate the statutory income of any partner, from the partnership or the share
of any partner of any divisible loss of the partnership to the best of his
judgement:
Provided further that
where the Assessor or Assistant Commissioner is of the opinion that the whole
or a part of the divisible profit of the partnership has been appropriated by a
partner, the Assessor or Assistant Commissioner may include in that partner's
share of the divisible profits of the partnership, the amount appropriated by
that partner and the statutory income of such partner shall be computed
accordingly.
(6) The income of any
non-resident partner or partners from the partnership shall be assessable in
the name of the partnership or of any resident partner or of any agent in Sri
Lanka of the non-resident partner or of the partnership, and the income tax charged
thereon shall be recoverable in the manner provided in Chapter XXVI, out of the
assets of the partnership, or from any partner, or from any such agent.
77 ASSESSMENT TO BE MADE IN THE NAME OF THE PARTNERSHIP
IN CERTAIN CIRCUMSTANCES.
77. (1) Where no return
has been made in accordance with subsection (3) of section 76 or the return has
not been accepted by the Assessor or Assistant Commissioner, either as regards
the amount of the profits or income or the apportionment thereof among the
partners, it shall be lawful for an assessment to be made in the name of the
partnership on the estimated amount of the profits and income of the
partnership ascertained in accordance with the provisions of this Act relating
to the ascertainment of the assessable income of a person, and income tax
thereon shall be charged at such rate or rates as may be specified in that
behalf in the Third Schedule to this Act, and shall be recoverable out of the
assets of the partnership, or from any partner, or from any agent of the
partnership. Any person aggrieved by such assessment may appeal therefrom in
the manner provided in Chapter XXIII. The commissioner-General or the Board of
Review, as the case may be, may upon such appeal, determine the divisible
profits and other income of the partnership and apportion the same among the
partners and compute the statutory income of each of the partners from the
partnership in accordance with subsection (5) section 76 and the income tax
payable in respect thereof. Such income tax may be recovered as tax on the
assessment appealed against without any new assessment.
(2) Where after an
assessment has been made in the name of a partnership under subsection (1), a
change occurs in such partnership by reason of the retirement or death of, or
the dissolution of the partnership in relation to, one or more of the partners,
or the admission of a new partner, so however, that one or more of the persons
who were joint owners of the assets of such partnership prior to such
assessment continues or continued to be owner or joint owners of such assets,
the person or partnership becoming owner of such assets, in consequence of such
change shall be charged with the income tax or any part of it which remains
unpaid on that assessment and the provisions of Chapter XXVI shall apply to
such persons or partnership accordingly.
78 TAX CHARGEABLE ON PARTNERSHIPS.
78. (1) Notwithstanding
the provisions contained in section 77, every partnership shall be charged with
income tax : -
(a) for the year of
assessment commencing on April 1, 2006, on the aggregate of the divisible
profits referred to in section 76 and other income;
(b) for any year of
assessment commencing on or after April 1, 2007, but prior to April 1, 2013, on
the excess, if any, of the aggregate of the divisible profits referred to in
section 76 and other income over six hundred thousand rupees"; and
(c) for any year of
assessment commencing on or after April 1, 2013, on the excess, if any, of the
aggregate of the divisible profits referred to in section 76 and other income
over one million rupees,
at the appropriate rate
given in the Fifth Schedule to this Act, for each year of assessment and such
tax shall be paid by the partnership in quarterly instalments as provided for
in Chapter XIII, subject to the provisions of this section:
Provided that for any
year of assessment income tax referred to in sub section (1) of this section
shall not apply, if the Economic Service Charge paid under the Economic Service
Charge Act, No. 13 of 2006, for that year of assessment is more than the income
tax payable under the provisions of this subsection :
Provided further if the
income tax payable under subsection (1) is more than the Economic Service
Charge under the Economic Service Charge Act, No. 13 of 2006, the amount of
income tax payable shall be reduced by the Economic Service Charge paid for the
same year of assessment.
(2) Where there is a
divisible loss for any year of assessment, the tax shall be charged on the
total amount of other income, without any set off of such divisible loss from
such other income.
(3) Notwithstanding
anything to the contrary in any other provision of this Act, the share of the
tax paid (other than any tax in default recovered) under subsection (1), less
any amount set off against the Economic Service Charge levied under the Economic
Service Charge Act, No. 13 of 2006 paid by the partnership for that year that
is attributable to each partner using the ratio of shares of profits inclusive
of any salary from such partnership for that year of assessment, may be set off
against the income tax liability of such partner of such partnership for the
same year of assessment on such share of profit and other income from such
partnership, without any right to a refund or carry forward of any excess of
such share of tax attributable to such partner.
(4) Any quarterly
instalment of tax payable as provided for in Chapter XIII of this Act subject
to the provisions of this section and not paid on or before the due date, shall
be a tax in default for the purposes of this Act and recovery action under Chapter
XXVI of this Act may be instituted by the Commissioner-General under that
Chapter, against any or all of the partners of such partnership for the
recovery of such tax in default.
For the purposes of this
section "any quarterly instalment of tax payable" shall include an
estimated amount of tax on the basis of the preceding year's divisible profit
and other income, where the divisible profit and other income for that year
cannot be ascertained due to the non-availability of details of such profits
and income of the partnership.
(5)For the purpose of
sections 76, 77 and this section, the word "person" referred to in
those sections, shall be read and construed as including a partnership.
E -
Residence
79 WHAT CONSTITUTES RESIDENCE.
79. (1) Where a company
or a body of persons has its registered or principal office in Sri Lanka, or
where the control and management of its business are exercised in Sri Lanka,
such company or body of persons shall be deemed to be resident in Sri Lanka for
the purposes of this Act.
(2) An individual who is
physically present in Sri Lanka for one hundred and eighty three days or more
during any year of assessment, shall be deemed to be resident in Sri Lanka
throughout that year of assessment.
(3) For any year of
assessment commencing prior to April 1, 2013, an individual who has been deemed
resident for two or more consecutive years of assessment shall be deemed to be
resident until such time as he is continuously absent from Sri Lanka for an
unbroken period of three hundred and sixty five days. When such person is so
absent, he shall notwithstanding the provisions of subsection (2), be deemed to
be non-resident from the commencement of the year of assessment in which such
absence commences.
(4)Where, but for his
presence in Sri Lanka for any period or periods not exceeding in the aggregate
of thirty days, a person would have been deemed under subsection (3) to have
been non-resident, such period or periods not exceeding in the aggregate of thirty
days for any year of assessment prior to April 1, 2013, shall be treated as if
it or they had been spent by him outside Sri Lanka.
(5)An individual who is
in the employment of the Government of Sri Lanka and who is resident in any
other country during any period for the purposes of such employment and the
spouse of such individual shall, for the purposes of this Act, be deemed to be
resident in Sri Lanka during that period, if income tax or any tax of a similar
character is not payable in that country in respect of the official emoluments
payable to him for such period:
Provided that any such
individual who is a citizen or subject of any country other than Sri Lanka
shall not, by reason of his being so deemed to be resident in Sri Lanka, be
liable to income tax as a resident in respect of any income, other than his
official emoluments or other income arising in or derived from Sri Lanka.
(6) An individual who is
employed in a Sri Lanka ship, within the meaning of the Merchant Shipping Act,
shall for the purposes of this Act, be deemed to be resident in Sri Lanka
during the period he is so employed:
Provided that where any
such individual is a citizen or subject of any country other than Sri Lanka, he
shall not, by reason of his being so deemed to be resident in Sri Lanka, be
liable to income tax as a resident in respect of any income other than his
income from employment in such ship.
(7) An individual who is
not a citizen of Sri Lanka and who is employed in Sri Lanka shall,
notwithstanding the provisions of the preceding subsections, be deemed to be
non-resident for a period of three years calculated from the date on which he
commences employment in Sri Lanka: Provided that where such individual is an
individual employed in a flagship company within the meaning of subsection (2)
of section 40 such individual shall be deemed to be non-resident for a period
of five years calculated from the date on which he commences employment in Sri
Lanka:
"Provided further
that no individual shall be deemed to be a non-resident under the provisions of
this subsection, on or after April 1, 2008.".
F -
Liability of Non-Resident Persons
80 CHARGEABILITY OF CERTAIN PROFITS OF NON RESIDENT
PERSONS.
80. Where a person in
Sri Lanka, acting on behalf of a non-resident person, effects or is
instrumental in effecting any insurance or sells or disposes of or is
instrumental in selling or disposing of any property, whether such property is
in Sri Lanka or is to be brought into Sri Lanka and whether the insurance, sale
or disposal is effected by such person in Sri Lanka or by or on behalf of the
non-resident person outside Sri Lanka and whether the moneys arising therefrom
are paid to or received by the non-resident person directly or otherwise, the
profits arising from any such insurance, sale or disposal shall be deemed to be
derived by the non-resident person from business transacted by him in Sri
Lanka, and the person in Sri Lanka who acts on his behalf shall be deemed to be
his agent for all the purposes of this Act:
Provided that where the
property sold or disposed of is produced or manufactured by such non-resident
person outside Sri Lanka, the profits from the sale or disposal shall, if the
sale or disposal was by-
(a) whole sale, be
deemed to be not more than the profits which might reasonably be expected to be
made by a merchant selling the property by wholesale; and
(b) retail, be deemed to
be not more than the profits which might reasonably be expected to be made by a
merchant selling the property by retail.
81 PERSONS ASSESSABLE ON BEHALF OF A NON-RESIDENT PERSON.
81. A non-resident
person shall be assessable either directly or in the name of his agent in
respect of all his profits and income arising in or derived from Sri Lanka,
whether such agent has the receipt of the profits or income or not, and the
income tax so assessed whether directly or in the name of the agent shall be
recoverable in the manner provided for in this Act, out of the assets of the
non-resident person or from the agent. Where there are more agents than one,
for they may be assessed jointly or severally in respect of the profits and
income of the non-resident person and shall be jointly and severally liable for
income tax thereon.
82 LIABILITY OF CERTAIN NON- RESIDENT PERSONS.
82. (1) For the purposes
of this section-
(a) a person is closely
connected with another person, where the Commissioner-General is satisfied that
such persons are substantially identical or that the ultimate controlling
interest of each is owned or deemed under this section to be owned by the same
person or persons;
(b) the controlling
interest of a company shall be deemed to be owned by the beneficial owners of
its shares, whether held directly or through nominees, and shares in one
company held by or on behalf of another company shall be deemed to be held by
the shareholders of the last-mentioned company.
(2) Where a non-resident
person carries on business with a resident person with whom he is closely
connected and the course of such business is so arranged that it produces to
the resident person either no profits or less than the ordinary profits which might
be expected to arise from such business, the business done by the non-resident
person in pursuance of his connection with the resident person shall be deemed
to be carried on in Sri Lanka, and such non-resident person shall be assessable
and chargeable with income tax in respect of his profits from such business in
the name of the resident person, as if the resident person were his agent, and
all the provisions of this Act shall apply accordingly.
(3) Where income tax is
chargeable in respect of the profits arising from the sale of goods or produce
manufactured or produced outside Sri Lanka by a non resident person or by a
person or persons with whom he is closely connected, the profits of such non-resident
person for the purposes of this Act from the sale of such goods or produce,
shall be deemed to be not less than the profits which might reasonably be
expected to have been made by a merchant or where the goods or produce are
retained by or on behalf of the non-resident person, by a retailer of the goods
or produce sold, who had bought the same direct from a manufacturer or producer
with whom he was not connected.
(4) Where import duty
levied on an ad valorem basis under the Customs Ordinance has been paid in Sri
Lanka on such goods or produce, the sum to be deducted as the cost of such
goods or produce on arrival in Sri Lanka shall not, for the purpose of computing
the profits arising in Sri Lanka, be greater than the value on which such
import duty has been so paid.
83 PROFITS OF CERTAIN BUSINESSES TO BE COMPUTED AS A
PERCENTAGE OF THE RECEIPTS.
83. Where the
Commissioner-General is of the opinion that the correct amount of the profits
of a non-resident person arising in or derived from Sri Lanka from any trade or
business cannot be readily ascertained, for the reason that such person is
unable to furnish the fuller or further returns or fuller or further
information referred to in subsection (12) of section 106, or the documents or
the other documents referred to in subsection (13) of section 106, relating to
such trade or business, the Commissioner-General shall, where such non-
resident person makes a declaration of such inability, ascertain such profits
as a percentage of the sum receivable by such person from such trade or
business:
Provided that such
percentage shall in no circumstances, be less than six.
84 PROFITS OF NON-RESIDENT PERSON FROM SALE OF EXPORTED
PRODUCE.
84. Where a non-resident
person carries on in Sri Lanka any agricultural, manufacturing or other
productive undertaking, and sells any product of such undertaking outside Sri
Lanka or for delivery outside Sri Lanka, whether the contract is made within or
outside Sri Lanka, the full profit arising from the sale in a wholesale market
shall be deemed to be income arising in or derived from Sri Lanka, within the
meaning of section 2:
Provided that, if it is
shown that the profit has been increased through treatment other than handling,
blending, sorting, packing and disposal of the product outside Sri Lanka, such
increase of profit shall not be deemed to be income arising in or derived from
Sri Lanka.
Where any such product
is not sold in a wholesale market, or is not sold at all, such person shall be
deemed to derive profits from Sri Lanka within the meaning of section 2, and
such profits shall be deemed to be not less than the profits which might have
been obtained, if such person had sold such product wholesale to the best
advantage.
85 LIABILITY TO INCOME TAX OF CERTAIN PROFITS OF
NON-RESIDENT PERSON.
85. The profits of a
non-resident person from employment by a resident person shall be chargeable
with income tax insofar as such profits arise from services or past services,
rendered in Sri Lanka.
86 EXEMPTION FROM INCOME TAX OF NON-RESIDENT PERSONS IN
CERTAIN CASES AND LIABILITY OF CERTAIN NON-RESIDENT PERSONS TO INCOME TAX AT
REDUCED RATES.
86. (1)Where the
assessable income for any year of assessment of an individual deemed to be
non-resident under subsection (7) of section 79, consists solely of income from
services rendered in Sri Lanka and does not exceed three hundred thousand
rupees, such income shall not be taxable.
(2) Subject to the
provisions of subsection (3), where a non-resident person receives any sum by
way of dividend from a non-resident company or by way of interest, annuity,
ground rent, or royalty which has been disallowed or excepted under subsection
(2) of section 76, such sums shall not be regarded as income of such
non-resident person arising in or derived from Sri Lanka, and he shall not be
chargeable with income tax or entitled to any repayment of tax, in respect
thereof.
(3) Nothing in the
provisions of subsection (2) shall operate so as to exclude any sum mentioned
in that subsection from the computation of the profits of any trade or business
carried on in Sri Lanka, where such sum forms part of the receipts of such trade
or business.
(4)Notwithstanding
anything in any other provision of this Act, the rate at which income tax is
payable by a non-resident person in respect of any royalty received by him from
a company with which an agreement has been entered into by the Board of Investment
of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No.
4 of 1978, shall not exceed the rate, if any, specified in that agreement as
the rate at which income tax is deductible from that royalty.
G -
Shipping and Operation of Aircraft
87 PROFITS OF NON-RESIDENT SHIPOWNERS OR CHARTERERS.
87. (1) Where a
non-resident person carries on the business of shipowner or charterer and any
ship owned or chartered by him calls at a port in Sri Lanka, an amount equal to
six per centum of the entire sum receivable on account of the carrying of
passengers, mails, livestock and goods shipped in Sri Lanka (other than goods
brought to Sri Lanka solely for transhipment) shall, notwithstanding anything
to the contrary in any other provision of this Act, be deemed to be his full
profits arising from the carriage of such passengers, mails, livestock or
goods, and such profits shall be deemed to arise in Sri Lanka.
(2) Where the call of a
ship owned or chartered by a non-resident person at a port in Sri Lanka is
casual and further calls by that ship or others owned or chartered by that
person are unlikely, the provisions of this section shall not apply to the
profits of such ship, and no income tax shall be charged thereon.
88 MASTER OF SHIP TO BE AN AGENT.
88.The master of any
ship owned or chartered by a non-resident person who is chargeable under the
provisions of section 87 shall, (though not to the exclusion of any other
agent) be deemed to be the agent of such non-resident person for all the
purposes of this Act.
89 REFUSAL OF CLEARANCE FOR SHIP WHERE INCOME TAX IS IN
ARREARS.
89. (1) In addition to
exercising any other powers of collection and recovery provided for in this
Act, the Commissioner-General may, where the income tax charged on the income
of any person who carried on the business of ship owner or charterer has been
in default for more than three months (whether such person is assessed directly
or in the name of some other person), issue to the Director-General of Customs
or other authority by whom clearance may be granted to that ship, a certificate
containing the name of such person and particulars of the income tax in
default. On receipt of such certificate, the Director-General of Customs or
other authority shall be empowered and is hereby required to refuse clearance
from any port in Sri Lanka to any ship owned wholly or partly or chartered by
such person, until the tax in default has been paid.
(2) No civil or criminal
proceedings shall be instituted or maintained against the Director-General of
Customs or other authority in respect of a refusal of clearance under this
section, nor shall the fact that a ship is detained under this section affect
the liability of the owner, charterer, or agent to pay harbour dues and charges
for the period of detention.
90 PROFITS OF NON-RESIDENT OWNERS OR CHARTERERS OF
AIRCRAFT.
90. (1)Where a
non-resident person carries on the business as owner or charterer of aircraft,
and any aircraft owned or chartered by him calls at any customs aerodrome in
Sri Lanka, his full profits arising from the carriage of passengers, mails,
livestock, or goods loaded-into that aircraft in Sri Lanka, shall be deemed to
arise in Sri Lanka:
Provided that this
section shall not apply to goods, which are brought to Sri Lanka solely for
transfer from one aircraft to another or from an aircraft to a vessel or from a
vessel to an aircraft.
(2) Where for any
accounting period any non-resident person carrying on business as owner or
charterer of an aircraft produces the certificate referred to in subsection
(3), the profits arising in Sri Lanka from his business of carriage of
passengers, mails, livestock or goods by aircraft for such period, before
deducting any allowance for depreciation, shall be a sum bearing the same ratio
to the sums receivable in respect of the carriage of passengers, mails,
livestock and goods loaded into an aircraft in Sri Lanka, as the ratio for that
period shown by that certificate of that total profits to the total sums
receivable by him in respect of the carriage of passengers, mails, livestock
and goods:
Provided that where such
profits have been computed on a basis which differs materially from that
specified in the preceding provisions of this Act, the ratio of profits shall
be adjusted so as to correspond, as nearly as may be, to the ratio which would
have been arrived at if the profits had been computed in accordance with such
provisions.
(3) The certificate
shall be one issued by or on behalf of any income tax authority which assesses
the full profits of the non-resident person from his business as owner or
charterer of an aircraft, and shall certify for any accounting period as
regards such business-
(a) the ratio of the
profits, or where there are no profits, of the loss as computed for the
purposes of income tax by that authority, without making any allowance by way
of depreciation, to the total sums receivable in respect of the carriage of
passengers, mails, livestock, or goods ; and
(b) the ratio of the
allowance for depreciation as computed by that authority, to the total sums
receivable in respect of the carriage of passengers, mails, livestock and
goods.
(4)Where at the time of
assessment the provisions of subsection (2) cannot for any reason be
satisfactorily applied, the profits arising in Sri Lanka may be computed on a
fair percentage of the full sum receivable on account of the carriage of
passengers, mails, livestock and goods, loaded into an aircraft in Sri Lanka:
Provided that where any
person has been assessed for any year of assessment by reference to such
percentage, he shall be entitled to claim at any time within three years of the
end of such year of assessment, that his liability to income tax for that year
be recomputed on the basis provided by subsection(2).
91 APPLICATION OF SUBSECTION (2) OF SECTION 87, SECTION
88, AND SECTION 89, TO PROFITS OF NON-RESIDENT OWNERS OR CHARTERERS OF ANY
AIRCRAFT.
91. (1) The provisions
of subsection (2) of section 87 and of section 88 and section 89, shall apply
to every non-resident person who carries on business as the owner or charterer
of any aircraft, in like manner as they apply in the case of a non-resident
person who carries on the business of ship owner or charterer.
(2) In the application
of the provisions of subsection (2) of section 87, section 88 and section 89 to
any non-resident person who carries on business as owner or charterer of an
aircraft-
(a) "harbour dues
and charges" shall be deemed to include any charges payable to the
Government of Sri Lanka or to any person on account of the landing, staying or
housing at a customs aerodrome, of any aircraft arriving in or departing from
Sri Lanka;
(b) "port"
shall be deemed to include, a customs aerodrome;
(c) "ship"
shall be deemed to include aircraft, and "ship owner" shall be
construed accordingly;
(d) any reference to the
granting of clearance to any ship shall be deemed to include a reference to the
doing of any act which, under the provisions of any written law, is required or
authorized to be done in relation to an aircraft in lieu of the granting of a
certificate of clearance under section 63 of the Customs Ordinance, and any
reference to the refusal of clearance shall be construed accordingly;
(e) any reference to the
master of a ship shall be deemed to include a reference to the person having
for the time being, control or charge of an aircraft.
H _ Insurance
92 ASCERTAINMENT OF PROFITS OF INSURANCE COMPANIES.
92. (1) The profits of a
company whether mutual or proprietary, from the business of life insurance,
shall be the investment income of the Life Insurance Fund, less the management
expenses (including commission) attributable to that business:
Provided that where such
a company which is not resident in Sri Lanka transacts life insurance business
in Sri Lanka, whether directly or through an agent, the profits therefrom shall
be ascertained by reference to such proportion of the total investment income
of the Life Insurance Fund of the company, as is equal to the proportion which
the premiums from life insurance business in Sri Lanka bear to the total life
insurance premiums received by the company, subject to a deduction of-
(a) agency expenses in
Sri Lanka (including commission); and
(b) a fair proportion of
the expenses of the head office of the company,
due account being taken
in each case, by a set-off against such expenses of any income or profits other
than life insurance premiums or investment income.
(2) The profits of a
non-resident company whether mutual or proprietary, from the business of
insurance (other than life insurance) shall be ascertained by taking the gross
premiums from insurance business in Sri Lanka (less any premiums returned to
the insured and premiums paid on reinsurance) and deducting therefrom a reserve
from unexpired risks at the percentage adopted by the company in relation to
its operations as a whole for such risks at the end of the period for which the
profits are being ascertained, and adding thereto a reserve similarly
calculated for unexpired risks outstanding at the commencement of such period,
and from the net amount so arrived at, deducting the actual losses (less the
amount recovered in respect thereof under reinsurance), the agency expenses in
Sri Lanka and a fair proportion of the expenses of the head office of the
company, due account being taken in each case by set-off against such expenses,
of any income or profits other than premiums.
(3)Where the
Commissioner-General is satisfied that by reason of the limited extent of the
business transacted in Sri Lanka by a non-resident insurance company, it would
be unreasonable to require the company to furnish the particulars necessary for
the application of subsections (1) and (2), he may notwithstanding the
provisions of such subsections, permit the profits of the company to be
ascertained by reference to such proportion of the total profits and income of
the company as is equal to the proportion which its premiums from insurance
business in Sri Lanka bears to its total premiums, or on any other basis which
appears to him to be equitable in all the circumstances of the case.
(4) In this section the
expression "investment income of the Life Insurance Fund" means ,in
the case-
(a) of a company whose
sole business is life insurance, the whole of its income from investment; and
(b) any other company,
such part of its income from investment as is fairly attributable to its life
insurance business, other than the amount of any dividend referred to in
subsection(5).
(5)Where a dividend is
paid by any resident company to any company carrying on the business of life
insurance and that dividend consists of any part of the amount of a dividend
received by such resident company from another company, that dividend shall not
form part of the investment income of the Life Insurance Fund of the company
carrying on the business of life insurance.
I -
Interest, etc. Payable to persons Outside Sri Lanka
93 INTEREST ON CERTAIN LOANS DEEMED TO BE PROFITS AND
INCOME.
93. Where interest is
payable to a non-resident person on a loan obtained from such person and the
interest on such loan is borne_ (a) directly or indirectly by a person resident
in Sri Lanka; or (b) by a non-resident person, where the amount of such loan or
part thereof has been brought to or used in Sri Lanka, such interest shall be
deemed to be profits and income arising in or derived from Sri Lanka.
94 CERTAIN ROYALTIES OR FEES FOR TECHNICAL SERVICES
DEEMED TO BE PROFITS AND INCOME.
94. Where royalties or
fees for technical services are -
(a) borne directly or
indirectly by a person resident in Sri Lanka; or
(b) deductible under
section 32, such royalties or fees for technical services shall be deemed to be
profits and income arising in or derived from Sri Lanka.
95 DEDUCTION OF INCOME TAX FROM INTEREST, & C,
PAYABLE TO PERSONS OUTSIDE SRI LANKA.
95. (1) Where any person
or partnership in Sri Lanka pays or credits to any person or partnership out of
Sri Lanka, any sum falling due as - (a) interest on debentures, mortgages,
loans, deposits or advances; or (b) rent, ground rent, royalty or annuity which
is payable either in respect of property in Sri Lanka or out of income arising
in Sri Lanka; or (c) fees for technical services referred to in section 94,
whether such sum is due
from him or from another person or from a partnership, he shall be entitled,
notwithstanding any agreement to the contrary, to deduct income tax at the
appropriate rate specified in the Fourth Schedule to this Act, or where an agreement
in force between the Government of Sri Lanka and the Government of any
territory in which such person or partnership is resident for the relief of
double taxation at the appropriate rate specified in such agreement, on such
sum and the amount of tax so deductible shall be a debt due from such person to
the Republic and shall be recoverable forthwith or may be assessed and charged
upon such person in addition to any income tax otherwise payable by him under
this Act:
Provided that -
(a) the
Commissioner-General may, having regard to the total tax payable under this Act
by any person or partnership out of Sri Lanka, by notice in writing, require
any person in Sri Lanka to deduct for any year of assessment from any sums to
be paid or credited by such person to the person or partnership out of Sri
Lanka, income tax on such sums at a rate other than the appropriate rate
specified in the Fourth Schedule to this Act or the agreement for the relief of
double taxation, as the case may be; the tax so deductible shall be recoverable
and chargeable as aforesaid;
(aa) the deduction of
tax under this section from interest on any corporate debt security referred to
in paragraph (g) of subsection (3) of section 32 and paid or credited on or
after April 1, 2008, shall, notwithstanding anything to the contrary in any other
provision of this Act, be at the rate of ten per centum;
(aaa) no deduction shall
be made under this section from any interest which is exempt from income tax
under any provision of this Act;
(b) the preceding
provisions of this subsection shall not apply to any interest paid out of
income not arising in Sri Lanka or to interest on any loan or advance made by a
banker or to any interest paid to any person on moneys lying to his credit in
foreign currency with any foreign currency banking unit ; and.
(c) for any year of
assessment commencing on or after April 1, 2015, no deduction shall be made
under this section from any interest paid to any individual on money deposited
in any bank or financial institution and tax is deductible on such interest at the
rate of two and a half per centum as referred to in section 133 of this Act.
(2) Any person who
deducts income tax in accordance with the provisions of subsection (1) from any
sum paid or credited to a person or partnership out of Sri Lanka, shall issue
to such person or partnership a statement in writing showing-
(a) the gross amount of
such payment or credit;
(b) the rate and amount
of the tax so deducted;
(c) the net amount
actually paid or credited.
(3) Where the assessable
income of a person includes a sum from which income tax has been deducted in
accordance with subsection (1), he shall be entitled on production of statement
relating to such sum issued in accordance with subsection (2), to a set-off
against the tax payable by him, of the amount shown on such statement as the
amount of tax deducted.
96 DEDUCTION OF INCOME TAX FROM PAYMENT MADE TO ANY
FOREIGN ENTERTAINER OR ARTISTE.
96. (1) Every person or
partnership who or which makes a payment to any other person who -
(a) is not a citizen of
Sri Lanka; and
(b) carries on or
exercises the profession or vocation of an entertainer or artiste, in respect
of services rendered by such other person in Sri Lanka in the course of
carrying on or exercising such profession or vocation, shall deduct from such
payment income tax at the rate specified in the Fifth Schedule to this Act.
(2)Every person or
partnership, who or which deducts income tax in accordance with subsection (1)
from any payment made by him to any other person, shall issue a statement to
such other person setting out the following particulars:-
(a) the gross amount of
the payment due;
(b) the net amount
actually paid.
(3) Where the assessable
income of a person or partnership for any year of assessment includes a payment
referred to in this section, then, if such person is -
(a) liable to pay income
tax for that year of assessment, he shall be entitled on production of a
statement relating to such payment made in accordance with subsection (2), to
deduct from the income tax payable by him, the amount of tax set out in such statement;
(b) not liable to pay
income tax for that year of assessment, he shall be entitled on production of a
statement relating to such payment made in accordance with subsection (2), and
subject to the provisions of Chapter XXVIII, to a refund of the amount of tax
set out in such statement.
(4) Where any person or
partnership who or which is required by subsection (1) to deduct income tax in
accordance with that subsection from any payment made by him, fails to deduct
such tax, then, if such person is -
(a) an individual, such
individual;
(b) is a company or a
body of persons, whether corporate or unincorporate, the secretary, manager or
other principal officer of such company or body of persons,
shall be personally
liable to pay the tax he was required to deduct under that subsection, and such
tax may be recovered from such individual, secretary, manager or other
principal officer, as the case may be, by all the means provided in this Act.
(5) In this section, the
expression "profession or vocation of entertainer or artiste"
includes the profession or vocation of actor, musician, athlete or acrobat.
J -
Relief in cases of Double Taxation
97 EFFECT OF AGREEMENTS FOR DOUBLE TAXATION RELIEF.
97. (1)
(a) Where Parliament by
resolution approves any agreement entered into between the Government of Sri
Lanka and the Government of any other territory or any agreement by the
Government of Sri Lanka with the Governments of any other territories, for the
purpose of affording relief from double taxation in relation to income tax
under Sri Lanka law and any taxes of a similar character imposed by the laws of
that territory, the agreement shall, notwithstanding anything in any other
written law, have the force of law in Sri Lanka, in so far as it provides for -
(i) relief from income
tax;
(ii) determining the
profits or income to be attributed in Sri Lanka to persons not resident in Sri
Lanka, or determining the profits or income to be attributed to such persons
and their agencies, branches or establishments in Sri Lanka;
(iii) determining the
profits or income to be attributed to persons resident in Sri Lanka who have
special relationships with persons not so resident ;
(iv) exchange of
information ; or
(v) assistance in the
recovery of tax payable.
(b) Every agreement
which is approved by a resolution under paragraph (a), shall be published in
the Gazette together with a notice that it has been so approved.
(c) In any case where
any agreement referred to in paragraph (a) provides that tax payable under the
laws of any territory outside Sri Lanka, shall be allowed as a credit against
any tax payable in Sri Lanka, the credit to be granted in respect of any Sri
Lanka tax upon profits or income arising from any source, shall not exceed the
amount of the Sri Lanka tax payable in respect of such profits or income.
(2)
(a) For the purposes of
this section -
(i) "income"
shall be calculated as far as may be in accordance with the provisions of this
Act relating to the ascertainment of assessable income, but shall not include
any sum payable out of such income by way of interest, annuity, ground rent or
royalty;
(ii) "Sri Lanka
tax" means the amount of income tax payable under this Act before
deducting any reliefs under this section, but does not include tax on any sum
payable, by way of interest, annuity, ground rent, or royalty out of the income
in respect of which the tax is charged.
(b) The Sri Lanka rate
of tax shall be ascertained by dividing the Sri Lanka tax by the income on
which the tax has been paid or is payable, calculated in accordance with
paragraph (a) of this sub section.
(3) Every agreement
entered into between the Government of Sri Lanka and the Government of any
other territory and having the force of law in Sri Lanka by virtue of the
provisions of section 70 of the Inland Revenue Act, No. 4 of 1963, or section
82 of Inland Revenue Act, No. 28 of 1979, or section 92 of the Inland Revenue
Act, No. 38 of 2000, shall be deemed for all purposes to be an agreement
approved by Parliament by resolution under subsection (1) of this section.
98 RELIEF IN RESPECT OF SRI LANKA INCOME TAX.
98. (1) Where any person
or any partnership, referred to in subsection (2), proves to the satisfaction
of the Commissioner-General that in respect of his or its income referred to in
subsection (2), he or it has paid or is liable to pay for any year of assessment
income tax in Sri Lanka and income tax for the corresponding period in any
other country, then, such person shall be entitled to relief from income tax
payable by him or it in Sri Lanka of an amount equal to the excess, if any, of
the income tax in respect of such income payable by him or it in Sri Lanka
(before granting any relief under this section), over the income tax in respect
of such income, payable by him or it in such other country:
Where however such
person or partnership is not liable to pay income tax in respect of such
profits and income, for such corresponding period in such other country, such
person or partnership shall be entitled to relief equal to the amount of income
tax payable in Sri Lanka by such person or partnership in respect of such
profits and income, for such year of assessment.
(2) The provisions of
subsection (1) shall apply-
(a)
(i) to any non-resident
person or any partnership registered outside Sri Lanka, being a person or
partnership who or which provides in Sri Lanka, management consultancy services
in areas specified by the Commissioner-General by notice published in the Gazette;
or
(ii) to any non-resident
person or to any partnership registered outside Sri Lanka, who or which
provides in Sri Lanka, architectural, engineering, quantity surveying or
construction management services and such other services as may be ancillary
thereto, to any resident company, being a company with which an agreement has
been entered into by the Board of Investment under section 17 of the Board of
Investment of Sri Lanka Law, No. 4 of 1978, and which has in accordance with
such agreement invested or agreed to invest in Sri Lanka within the period
specified in such agreement, not less than fifty million United States Dollars
or its equivalent in any other foreign currency, to meet the cost of -
(a) any building
purchased or constructed, and of any land, plant, machinery or furniture
purchased; and
(b) the acquisition of
any asset not included in paragraph (a), for the use of the undertaking; or
(iii) to any
non-resident person or to any partnership registered outside Sri Lanka who or
which provides in Sri Lanka, architectural, engineering, quantity surveying or
construction management services and such other services as may be ancillary
thereto, to any non-resident person or partnership referred to in sub-paragraph
(ii);
(b) in respect of the
profits and income arising in or derived from Sri Lanka from the provision of
any service referred to in sub-paragraph (ii) or subparagraph (iii) of
paragraph (a), by any person or by any partnership referred to in those
sub-paragraphs.
(3) For the purposes of
subsection (1), the income tax in Sri Lanka or in any other country, payable by
any person or by any partner of any partnership referred to in subsection (2),
in respect of his profits and income referred to in subsection (2), shall be
computed at the rate equivalent to the quotient obtained by dividing the income
tax payable by such person or such partner (before granting any relief under
this section) in Sri Lanka, or in such other country, as the case may be, in
respect of his taxable income ascertained for the purposes of income tax in Sri
Lanka or in such other country, as the case may be, by his taxable income
ascertained for the purposes of income tax in Sri Lanka, or in such other
country, as the case may be.
K -
Miscellaneous
99 APPLICABILITY OF PROVISIONS RELATING TO PARTICULAR
SOURCES OF PROFITS OR INCOME.
99. Where any provision
of this Act expressly relates to any particular source of profits or income
referred to in section 3, such provision shall not be applied in the
determination of any profits or income arising from any other source referred
to in that section.
100 HOW CERTAIN RECEIPTS OF INSURANCE ARE TO BE TREATED.
100. Where any sum paid
as insurance premium is allowable as an expense incurred in the production of
profits or income form any trade, business, profession or vocation, any sum
realized under such contract of insurance shall be deemed to be-
(a) a receipt from such
trade, business, profession or vocation, if the sum so realized is in respect
of stock in trade or loss of profits or any other sum not referred to in
sub-paragraph (b) or sub-paragraph (c);
(b) an amount realized
from the disposal of property, if the sum so realized is in respect of a
capital asset on which an allowance for depreciation, within the meaning of
subsection (7) of section 25, has been granted and accordingly, the provisions
of subsection (3) of that section shall apply to, and in relation to, that
amount;
(c) a receipt of a
capital nature if the sum so realized is in respect of a capital asset on which
an allowance for depreciation within the meaning of subsection (7) of section
25 has not been granted:
Provided that the
provisions of paragraph (b) and paragraph (c) shall not be applicable if the
sum realized is in respect of a capital asset which is replaced, and in such
event the deduction for depreciation in accordance with the provisions of
paragraph (a) of subsection (1) of section 25, shall be computed on the cost of
replacement of such capital asset, less the amount realized under a contract of
insurance.
101 ASCERTAINMENT OF INCOME OF CLUBS, TRADE ASSOCIATIONS
ETC.
101. (1) Where a body of
persons, whether corporate or unincorporate, carries on a club or similar
institution and receives from its members not less than three-fourths of its
gross receipts on revenue account (including entrance fees and subscriptions),
it shall not be deemed to carry on a business; but where less than
three-fourths of its gross receipts are received from members, the whole of the
income arising from transactions both with members and others (including
entrance fees and subscriptions) shall be deemed to be receipts from a
business, and the body of persons shall be liable to income tax in respect of
the profits therefrom and in respect of the income which would be assessable,
if it were not deemed to carry on a business.
(2) Where a body of
persons, whether corporate or unincorporate, carries on a trade association,
chamber of commerce or similar institution in such circumstances, that more
than half its receipts by way of entrance fees and subscriptions are from
persons who claim or would be entitled to claim that such sums were allowable
deductions for the purpose of section 25, such body of person shall be deemed
to carry on a business, and the whole of its income from transactions both with
members and others (including entrance fees and subscriptions) shall be deemed
to be receipts from a business, and the body of persons shall be liable to
income tax either in respect of the profits therefrom or in respect of the
income which would be assessable, if it were not deemed to carry on a business,
whichever is the greater.
(3)In this section,
"members", in relation to a body of persons, means those persons who
are entitled to vote at a general meeting of the body which exercises effective
control over its affairs.
(4) Nothing in this
section shall be read and construed as affecting any exemption granted under
Chapter III.
(5) The provisions of
Chapter X shall not apply to any body of persons which is a body corporate and
which is assessable for income tax under this section.
102 DEEMED PROFITS AND INCOME OF ANY NONGOVERNMENTAL
ORGANIZATION TO BE CHARGEABLE WITH INCOME TAX.
102. (1) Where any non
governmental organization as defined in subsection (2) of this section,
receives in any year of assessment any money in the form of a grant, donation,
contribution or in any other form, an amount equal to three per centum of the
aggregate of such money after deducting from such aggregate any part of such
money as is received from the Government of Sri Lanka, shall, notwithstanding
anything to the contrary in any other provision of this Act, be deemed to be
the profits and income attributable to the aggregate of such money (hereinafter
in this section referred to as "deemed profits and income") of such
non-governmental organization for that year of assessment, and such deemed
profits and income of such non governmental organization for such year of
assessment, shall be deemed to have arisen in Sri Lanka.
(2) For the purposes of
subsection (1) a "nongovernmental organization" means any
organization or association, whether corporate or unincorporate, formed by a
person or a group of persons on a voluntary basis and which is non governmental
in nature, dependent on money received in the manner referred to in subsection
(1) and established and constituted for the provision or relief and services of
a humanitarian nature to the poor and destitute, the sick, orphans, widows,
youth, children or generally for the provision of relief to the needy, unless
such organization or association is determined by the Commissioner-General not
to be a non-governmental organization for the purposes of this section, but
does not include any approved charity within the meaning of paragraph (a) of
subsection (8) of section 34, in respect of which any remission or reduction
has been granted under subsection (3) of section 35.
(3) The deemed profits
and income of a nongovernmental organization shall, subject to the provisions
of paragraph (e) of section 7, be chargeable with income tax at the appropriate
rate specified in the Fifth Schedule to this Act :
Provided that where the
Commissioner- General is satisfied that any non-governmental organization is
engaged, in any year of assessment, in :-
(a) rehabilitation and
the provision of infrastructure facilities and livelihood support to displaced
persons in any area identified by the Government for the purposes of such
rehabilitation and provision; or
(b) any other activity
approved by the Minister as being of humanitarian in nature, taking into
consideration the nature and gravity of any disaster and the magnitude of
relief required to be provided consequently, the Commissioner-General may
reduce or remove the tax payable by such non-governmental organization for that
year of assessment, if it appears to him that such reduction is just and
equitable in all the circumstances of the case.
103 CERTAIN TRANSACTIONS AND DISPOSITIONS TO BE
DISREGARDED.
103. Where an Assessor
or Assistant Commissioner is of the opinion that any transaction which reduces
or would have the effect of reducing the amount of tax payable by any person is
artificial or fictitious or that any disposition is not in fact given effect
to, he may disregard any such transaction or disposition and the parties to the
transaction or disposition shall be assessable accordingly.
In this section
"disposition" includes any trust, grant, covenant, agreement, or
arrangement.
104 PROFITS AND INCOME OR LOSS FROM INTERNATIONAL
TRANSACTIONS BETWEEN ASSOCIATED UNDERTAKINGS TO BE DETERMINED HAVING REGARD TO
THE ARM'S LENGTHPRICE.
104. (1) Any profits and
income arising, derived or accruing from, or any loss incurred in any
international transaction entered into between two associated undertakings
shall be ascertained having regard to the arm's length price.
(2) Where it appears to
an Assessor or Assistant Commissioner that the profits and income or the loss
referred to in subsection (1), has not been as ascertained having regard to the
arm's length price, he may refer the computation of the arm's length price in
relation to such international transaction to a Transfer Pricing Officer. The
Transfer Pricing Officer may, in writing or electronic means addressed to the
person who carries on either the one or the other or both of the two associated
undertakings referred to in subsection (1), require him to prove to the
satisfaction of the Transfer pricing Officer, that such profits and income or
such loss, as the case may be, has in fact been ascertained having regard to
the arm's length price. Where such person fails to so prove, the Transfer
Pricing Officer may determin the arm’s length price and inform it to the
Assessor or Assistant Commissioner. Thereupon the Assessor or Assistant
Commissioner may estimate the amount of the profit and income or the Amendment
of section 104 of the principal enactment loss, as the case may be, referred to
in subsection (1), and make an assessment accordingly.
(3) The arm's length
price referred to in subsection (1) shall be determined on the basis of any one
or more of the methods, prescribed for that purpose.
(3A) An advance pricing
agreement may be entered into between any person and the Commissioner-General
in respect of arm's length price for the purposes of this section on the basis
of a prescribed manner.
(4) For the purposes of
this section-
(a) an undertaking shall
be deemed to be an associated undertaking of another undertaking, if the
first-mentioned undertaking participates directly or indirectly or through one
or more intermediaries, in the control of the second-mentioned undertaking in
such manner or to such extent as may be prescribed;
(b) "arm's length
price" means a price which is applied in uncontrolled conditions in a
transaction between persons, other than associated undertakings;
"international
transaction" means a transaction between two or more associated
undertakings, either one or both of whom are non-residents, in the nature of
purchase, sale or lease of tangible or intangible property, or provision of
services, or lending or borrowing money or any other transaction having a
bearing on the profits, income, losses or assets of such undertakings, and
includes any allocation or apportionment of, or any contribution to any cost or
expense incurred or to be incurred in connection with a benefit, service or
facility provided or to be provided to any one or more of such undertakings
under any mutual agreement or arrangement between two or more such associated
undertakings. Any transaction entered into by an undertaking with a person,
either one is non-resident, other than an associated undertaking shall, for the
purposes of subsection (1) be deemed to be an nternational transaction entered
into between two associated undertakings, if there exists a prior agreement
between such undertaking and other person and, by which the terms of such
transaction are determined in substance between such undertaking and other
person which results in the reduction of or would have the effect of reducing
the amount of tax payable.
Without prejudice to the
generality of the provision of this subsection, the allowance for any expense
or interest arising from an international transaction shall also be determined
having regard to the arm’s length price;
Transfer Pricing
Officer" means any officer of Inland Revenue prescribed by the
Commissioner - General as a Transfer Pricing Officer.
104A PROFITS AND INCOME OR LOSS FROM TRANSACTIONS BETWEEN
ASSOCIATED UNDERTAKINGS TO BE DETERMINED HAVING REGARD TO THE ARM'S LENGTH
PRICE.
104A. (1) Any profits
and income arising, derived or accruing from, or any loss incurred in any
transaction, other than transactions referred to in subsection (1) of section
104, entered into between two associated undertakings shall be ascertained
having regard to the arm's length price.
(2) Where it appears to
an Assessor or Assistant Commissioner that the profits and income or the loss
referred to in subsection (1), has not been ascertained having regard to the
arm's length price, he may, in writing or electronic means addressed to the
person who carries on either the one or the other or both of the two associated
undertakings referred to in subsection (1), require him to prove to the
satisfaction of the Assessor or Assistant Commissioner, that such profits and
income or such loss, as the case may be, has in fact been ascertained having
regard to the arm's length price. Where such person fails to so prove, the
Assessor or Assistant Commissioner may estimate the amount of the profit and
income or the loss, as the case may be, referred to in subsection (1), and make
an assessment accordingly.
(3) The arm's length
price referred to in subsection (1) shall be determined on the basis of any one
or more of the methods, prescribed for that purpose.
(4) For the purposes of
this section-
(a) an undertaking shall
be deemed to be an associated undertaking of another undertaking, if the
first-mentioned undertaking participates directly or indirectly or through one
or more intermediaries, in the control of the second-mentioned undertaking in
such manner or to such extent as may be prescribed;
(b) "arm's length
price"means a price which is applied in uncontrolled conditions in a
transaction between persons other than associated undertakings.
L -
Petroleum exploration and Exploitaion
105 ASCERTAINMENT OF PROFITS AND INCOME FROM BUSINESS OF
PETROLEUM EXPLOITATION UNDER A PETROLEUM RESOURCES AGREEMENT.
105. (1)Any person or
partnership which has entered into an agreement as a contractor or
sub-contractor under the Petroleum Resources Act, No 26 of 2003, shall,
notwithstanding the provisions of section 79 of this Act, be deemed to be
resident in Sri Lanka during the tenure of such contract or sub contract, as
the case may be, for the purposes of this Act.
(2) The turnover from
exports and local sales of petroleum exploited under any Petroleum Resources
Agreement referred to in subsection (1), shall be determined on the basis of
accepted commercial practices and be subject to any specific provisions in the
Petroleum Resources Agreements, entered into under Petroleum Resources Act, No.
26 of 2003.
(3) The profits and
income from the business of petroleum exploitation under any Petroleum
Resources Agreement referred to in subsection (1), shall be ascertained after
allowing the following deductions in addition to other allowable expenses under
the provisions of this Act, and shall notwithstanding anything to the contrary
in any other provision of this Act, be chargeable with income tax at the
appropriate rate specified in the Fifth Schedule to this Act, provided that the
same item of expenditure shall not be deducted more than once-
(a) payments made to
service sub-contracts for conducting petroleum operations;
(b) one hundred per
centum of the cost of acquisition of any plant, machinery or equipment used for
the recovery of petroleum resources, in lieu of the allowance for depreciation
or cost of renewal under section 25. Any proceeds realized on the sale of such
assets shall be considered as a receipt from such business;
(c) interest expenses;
(d) royalty paid on
petroleum resources recovered under any Petroleum Resources Agreement. However,
this amount shall not be allowed as a deduction under section 32;
(e) all expenses on the
development and production of petroleum, including capital expenses, where a
deduction under paragraph (b) above has not been granted;
(f) in the year of first
commercial production, all costs incurred by any contractor in the exploration
for unsuccessful wells in exploration blocks under any Petroleum Resources
Agreement, upto and including such year of first commercial production;
(g) any costs incurred
by any contractor in the exploration for unsuccessful wells in exploration
blocks under any Petroleum Resources Agreement in any year of assessment, after
the first commercial production.
M -
ISLAMIC FINANCIAL TRANSACTIONS.
105A PROFITS AND INCOME ARISING FROM ISLAMIC FINANCIAL
TRANSACTIONS ARE TAXED.
105A. (1) The profits
and income arising from any Islamic financial transaction relating to any
Islamic financial instrument shall be treated for tax purposes under the
provisions of the Act, as hereinafter provided in this section.
(2) The Profits and
income arising to any person or partnership out of any Islamic financial
transaction shall, where such transaction is similar or equivalent in
substance, to any conventional financial transaction under the provisions of
the Act, be subject to tax in similar manner as such conventional financial
transaction is taxed under the Act.
(3) The
Commissioner-General of Inland Revenue shall in order to determine the extent
of liability to tax of any particular Islamic financial transaction, issue from
time to time, such rules and guidelines as may be required for the purpose of -
(a) identifying the
circumstances which would amount to an Islamic financial transaction; and
(b) ascertaining the
profit and income arising out of any Islamic financial transaction.".
105B THE USE OF ELECTRONIC COMMUNICATIONS OR ELECTRONIC
RECORDS.
105B. (1) The Minister
may, on the recommendation of the Commissioner-General make regulations for the
purpose of authorizing or facilitating the use of electronic communications or
electronic records in respect of matters specified in section 8 of the Electronic
Transactions Act, No. 19 of 2006.
(2) For the purpose of
application of the electronic means in filing returns, submitting information
and documents, the relevant sections of the Act are amended as follows which
shall come into effect on such date as the Minister may appoint by Order published
in the Gazette.
(a) identifying the
circumstances which would amount to an Islamic financial transaction; and
(b) ascertaining the
profit and income arising out of any Islamic financial transaction.".
CHAPTERXII
Returns &c.
106 RETURNS AND INFORMATION TO BE FURNISHED.
106. (1) Every person
who is chargeable with income tax under this Act for any year of assessment
shall, on or before the thirtieth day of November immediately succeeding the
end of that year of assessment, furnish to an Assessor or Assistant Commissioner,
either in writing or by electronic means, a return in such from and containing
such particulars as may be specified by the Commissioner-General, of his
income, and if he has a child, the income of such child:
Provided however, the
preceding provisions shall not apply to an individual whose income for any year
of assessment comprises solely of one or a combination of the following -
(a) profits from
employment as specified in section 4 and chargeable with income tax, does not
exceed-
(i) rupees four hundred
and twenty thousand, where such year of assessment is any year of assessment
ending on or before March 31, 2009; or
(ii) rupees one million,
where such year of assessment is any year of assessment commencing on or after
April 1, 2009,
and income tax under
Chapter XIV has been deducted by the employer on such profits from employment;
(b) dividends chargeable
with tax on which tax at ten per centum has been deducted under subsection (1)
of section 65;
(c) income from interest
chargeable with tax on which income tax at the rate specified for the purpose
of deduction has been deducted under section 133, section 134 or section 135,
as the case may be:
Provided further, that
for any year of assessment commencing on or after April 1, 2011, the preceding
provisions shall not apply to an individual being an employee who has no any
other income chargeable with income tax other than any income referred to in
sub-paragraph (b) or sub-paragraph (c).
(2)Any person who
carries on any trade, business, profession or vocation, including any company
which has entered into any agreement with the Board of Investment of Sri Lanka
established under the Board of Investment of Sri Lanka Law, No. 4 of 1978, shall
obtain a registration number within one year of such registration or
incorporation or commencement of the activity, as the case may be, from the
Commissioner-General, and furnish a return on or before the thirtieth day of
November following the end of each year of assessment, containing such
particulars and documents as may be specified by the Commissioner-General,
notwithstanding that no tax is chargeable under this Act on such person.
(3)
(a)The Commissioner
General shall issue a certificate of registration containing the name, address,
registration number and any other particulars as determined by him, to all such
persons registered under subsection (2).
(b)It shall be the duty
of the Registrar of Companies, notwithstanding anything to the contrary
contained in any provision of the Companies Act, No, 17 of 1982, to obtain the
certificate issued by the Commissioner-General under subsection (2), as an integral
part of the annual return filed under such Companies Act -
(i) in relation to any
company registered before such date as may be determined by the
Commissioner-General, by a notice published in that behalf, along with any
annual return due in respect of any financial year;
(ii) in relation to any
company registered on or after the date determined by the Commissioner-General
under sub-paragraph (1), along with the first annual return due to be submitted
by such company.
(c)The date as
determined by the Commissioner General under sub-paragraph (i) of paragraph (b)
shall immediately upon such determination, be forthwith communicated to the
Registrar of Companies, by the Commissioner-General.
(4)
(a) Every company deemed
to be a resident in Sri Lanka under section 79 of this Act, shall submit a
return to the Commissioner-General for each year on a half yearly basis on or
before October, 31 and April 30, of dividends declared, containing such particulars
as specified by him, including the details of dividends declared during the
period April to September and October to March respectively. Where no dividends
have been declared during any such period, a "NIL" return shall be
submitted.
(b)Every company not
deemed to be a resident in Sri Lanka, shall submit a return to the
Commissioner-General on a half yearly basis on or before October 31 and April
30, of remittances made by such company as referred to in paragraph (b) of
subsection (1) of section 62 containing such particulars as specified by him,
including the details of remittances made during the period April to September
and October to March respectively, in each year. Where there were no
remittances made during such period covered by such return, a "NIL"
return shall be submitted.
(5)
(a)Any individual who
satisfies any four requirements out of the five requirements specified in
paragraph (b) of this subsection during any year of assessment, shall submit a
return of income to the Commissioner-General not later than one month after the
fulfilment of such requirement.
(b)For the purpose of
paragraph (a) of this subsection, the requirements are as follows :-
(i) paying a monthly
residential electricity bill exceeding a net amount of ten thousand rupees ;
(ii) incurring a monthly
credit card bill exceeding twenty five thousand rupees ;
(iii) paying a monthly
residential telephone bill exceeding a net amount of ten thousand rupees ;
(iv) purchasing an air
ticket to travel abroad ; and
(v) owning a motor
vehicle which is used for travelling purposes.
(6)Every person
chargeable to pay income tax under any provision of this Act shall be required
to declare -
(a) the value of every
asset and liability at the last day of any year of assessment ; and
(b) any profits or
income exempted from the payment of income under this Act for any year of
assessment.
(7)A Commissioner may
give notice in writing or electronic means to any person requiring him to
furnish within the time specified in such notice a return in such form and
containing such particulars as may be specified by the Commissioner-General of,
his income and, if he has a child, the income of such child.
(8)Every person who
furnishes a return of income which is not in such form and does not contain
such particulars as are specified by the Commissioner-General for the purposes
of the foregoing subsections, shall be deemed for the purposes of this Act, not
to have furnished a return of his income.
(9)Where any person
furnishes a return of income on or before the date specified in subsection (1)
for any year of assessment and is deemed, under the provisions of subsection
(8), not to have furnished a return of income, the Assessor or Assistant Commissioner
shall, before the expiry of thirty days from the end of the year of assessment
immediately succeeding that year of assessment inform such person in writing,
that the return furnished by him is not in such form or does not contain such
particulars as is or are specified by the Commissioner-General.
(10)Where any person
receives an intimation under subsection (9), such person may within thirty days
of receipt of such intimation, furnish necessary particulars required to make
such return a proper return, and the provisions of subsection (8) shall thereafter
not apply in respect of such return.
(11) Where any person or
partnership carries on or exercises any trade, business, profession or vocation
in several units or undertakings as one trade, business, profession or
vacation, as the case may be, or where such person or partnership carries on or
exercises more than one trade, business, profession or vocation and the profits
and income from any such unit or undertaking or from such trade, business,
profession or vocation is exempted from or chargeable with income tax at
different rates, such person or partnership shall maintain and prepare
statements of account in a manner that the profits and income from each such
unit or undertaking or such trade, business, profession or vocation as the case
may be, may be separately identified.
(12) An Assessor or
Assistant Commissioner may give notice in writing or electronic means to any
person when and as often as he thinks necessary, requiring him to furnish
within the time specified in such notice:-
(a) fuller and further
returns; or
(b) fuller and further
information relating to any matter as is in the opinion of the Assessor or
Assistant Commissioner, necessary or relevant for the assessment of the income
tax, payable by such person.
(13) For the purpose of
obtaining full information in respect of any person's income, an Assessor or
Assistant Commissioner may give notice in writing or electronic means to such
person requiring him-
(a) to produce for
examination, or transmit to the Assessor or Assistant Commissioner, within the
period specified in such notice, any such deeds, plans, instruments, books,
accounts, trade lists, stock lists, registers, cheques, paying-in-slips,
auditor's reports or other documents in his possession as may be specified in
such notice;
(b) to attend in person
or by an authorized representative at such place and on such date and at such
time as may be specified in the notice, for the purpose of being examined
regarding his income.
(14)For the purposes of
this Act, a Commissioner may give notice in writing or electronic means to any
person requiring him_
(a) to attend in person
or by an authorized representative at such place and on such date and at such
time as may be specified in such notice, so that he may be examined on any such
matter as may be specified in the notice ;
(b) to produce before or
transmit to such Commissioner within the period specified in such notice, any
such deeds, plans, instruments, books, accounts, trade lists, registers,
cheques, paying-in-slips, auditors' reports or other documents in his possession,
as may be specified in such notice;
(c) to furnish within
the period specified in such notice such information as may be called for in
that notice, in relation to any transactions between such person and any other
person or class of persons.
Where a notice has been
given to any person under this subsection requiring him to furnish any
information, such person shall comply with the requirements of such notice,
notwithstanding anything to the contrary in any other law prohibiting the
furnishing of such information.
For the avoidance of
doubts, it is hereby declared that any reference in this subsection to
"any person" include a reference to a banker.
(15)A person who attends
in compliance with a notice given under subsection (14) may be allowed by the
Commissioner-General, such expenses as are reasonably incurred by him in so
attending.
(16) A Commissioner or
an Assessor or Assistant Commissioner with the approval of a Commissioner, may
retain in his custody, as long as such retention is necessary for any purposes
of this Act, any deeds, plans, instruments, books, registers, accounts, trade
lists, cheques, paying-in-slips, auditors' reports or other documents which are
or have been produced before him or transmitted to him under subsection (14) or
produced before an Assessor or Assistant Commissioner or transmitted to an
Assessor or Assistant Commissioner under subsection (13) or which otherwise
come or have come into his possession:
Provided however, such
retention by an Assessor or Assistant Commissioner shall not be valid after the
expiry of a period of five years from the end of the relevant year of
assessment.
(17)A return, statement
or form purporting to be furnished under this Act by or on behalf of any
person, shall be deemed for all purposes to have been furnished by that person
or by his authority, as the case may be, unless the contrary is proved, and any
person signing any such return, statement or form shall be deemed to be
cognizant of all matters contained therein.
(18) For the purpose of
this section, the expression "document" includes any diskette, tape,
compact disc or any other thing in which any computer programme or data is
stored or recorded in codified form or electronic, magnetic or other medium.
(19) The
Commissioner-General may close any record maintained by him of any individual
subsisting on or after April 1, 2011 if he is satisfied on application made by
such individual, that all profits and income of such individual are derived
only from sources from which whose taxes are paid at sources and such taxes are
treated as final.
(20) For the purposes of
this Act, the Commissioner-General may give notice in writing or electronic
means to any person requiring him to furnish within the period specified in
such notice, any information in relation to any transaction between such person
and any other person or class of persons.
107 AUDIT REPORTS TO BE FURNISHED BY PARTNERS ETC.
107. (1) An Assessor or
Assistant Commissioner may give notice in writing or electronic means to a
partner of a partnership or to any other person, who carries on or exercises
any trade, business, profession or vocation, requiring such person to furnish within
the period specified in such notice, all particulars as may be necessary for
the ascertainment of the statutory income in respect of any year of assessment,
including a statement of accounts and any schedules containing such particulars
as may be specified in the notice of such trade, business, profession or
vocation, for that year of assessment or for any period in respect of which the
statutory income for that year of assessment is computed:
Provided that -
(a) where such trade,
business, profession or vocation is being carried on or exercised by any quoted
public company, any other company which is a member of a group of companies of
which at least one company is a quoted public company, or any other company
having an annual turnover of not less than two hundred and fifty million rupees
or net profit of not less than one hundred million rupees for that year, then,
notwithstanding that a notice under this section has not been given to such
quoted public company, other member company of the group, or other company,
furnish for that year of assessment or for that other period, in respect of
which the statutory income for that year of assessment is computed, such
statement and such schedules as may be specified by the Commissioner-General,
by notice published in the Gazette or official website of the Department of
Inland Revenue."
The provisions of this
sub-paragraph shall not apply to any company other than a quoted public
company, or any other company having a turnover of not less than two hundred
and fifty million rupees or net profit of not less than one hundred million
rupees for the year;
(b) where such trade,
business, profession or vocation is carried on or exercised by any partnership,
or by any person other than any company having a turn over of not less than
fifty million rupees or in the case of a partnership, a divisible profit of not
less than twenty-five million rupees or in the case of any other person, a net
profit of not less than twenty-five million rupees for the year, such partner
or such person shall notwithstanding that a notice under this section has not
been given to him, furnish for such year of assessment or for such period , as
the case may be, such statements and such schedules as may be specified by the
Commissioner-General by notice published in the Gazette or official website of
the Department of Inland Revenue."
(2) Provided that a
statement of accounts in support of a return of income for any year of
assessment or for any other period on the profits of which the statutory income
for that year of assessment is computed-
(a) furnished by any
quoted public company, any other company which is a member of a group of
companies of which at least one company is a quoted public company, in respect
of any trade, business, profession or vocation carried on or exercised by such
quoted public company;
(b) furnished by any
other company in respect of any trade, business, profession or vocation carried
on or exercised by such company, where the turnover from such trade, business,
profession or vocation, for that year of assessment or for that other period,
is not less than two hundred and fifty million rupees or the statutory income
from that trade, business, profession or vocation for that year of assessment
or for that other period. is not less than one hundred million rupees; or
(c) furnished by any
partner of any partnership or by any person other than a company, in respect of
any trade, business, profession or vocation carried on or exercised by such
partnership or by such person, where the turnover from such trade, business, profession
or vocation, for that year of assessment or for that other period, is not less
than fifty million rupees or the divisible and protits of that partnership or
the statutory income of such person, from that trade, business, profession or
vocation for that year of assessment or for that other period, as the case may
be, is not less than twenty five million rupees,
shall be prepared on the
basis of an audit by an approved accountant.".
The provisions of this
subsection shall apply only to a quoted public company or any other person or
partnership having a turnover of not less than two hundred and fifty million
rupees or a net profit or divisible profit, as the case may be, not less than
one hundred million rupees for the year.
(3)For the purposes of
this section -
(a)"approved
accountant" for any year of assessment commencing prior to April 1, 2014
means -
(i) an accountant who is
a member of the Institute of Chartered Accountants of Sri Lanka;
(ii) an accountant who
is approved by the Commissioner-General for the purpose of the definition of
authorized representative;
(iii) any individual who
is registered as an auditor under the Companies (Auditors) Regulations and
approved by the Commissioner-General for the purpose of the definition of
"authorized representative"; or
(iv) an auditor
authorized to carry out audits of co-operative societies registered under the
Co-operative Societies Law, No. 5 of 1972, in relation to any such co-operative
society where the turnover of such society for the year does not exceed fifty
million rupees;
(aa) "approved
accountant" for any year of assessment commencing on or after April 1,
2014 means:
(i) an accountant who is
a member of the Institute of Chartered Accountants of Sri Lanka; or
(ii) an accountant who
is a fellow member of the Association of Accounting Technicians of Sri Lanka
incorporated under the Companies Act, No. 07 of 2007 in relation to any person
other than a company, or any partnership where the turnover of the business of
such person or partnership for the year does not exceed five hundred million
rupees;
(b) "net
profit" in relation to any trade, business, profession or vocation, means
net profit ascertained in accordance with accepted commercial practices and
accounting standards and the operational profits calculated in accordance with
the Sri Lanka Financial Reporting Standards;
(c) "turnover"
in relation to any trade, business, profession or vocation and to any period,
means the total amount received or receivable from transactions entered into,
or, for services performed, during that period in carrying on or exercising
such trade, business, profession or vocation (excluding any amount received or
receivable from the sale of capital assets).
108 RETURNS AND OTHER DOCUMENTS TO CONTAIN THE NATIONAL
IDENTITY CARD NUMBER OR PASSPORT NUMBER.
108. (1) Every
individual who is chargeable with income tax under this Act, for any year of
assessment shall, for the purposes of this Act, -
(a) indicate in his
return of income for such year of assessment -
(i) his identity card
number, if he is a person liable for registration under the Registration of
Persons Act, No. 32 of 1968; or
(ii) the number in his
current passport, if he is not liable to registration under the aforesaid Act;
(b) indicate in the
documents relating to any transaction specified by the Minister by notice
published in the Gazette, having regard to the need to ensure the equitable
administration of the provisions of this Act-
(i) his identity card
number, if he is a person liable to registration under the aforesaid Act; or
(ii) the number in his
current passport, if he is not liable to registration under the aforesaid Act.
(2) Every company or
partnership or body of persons which is chargeable with income tax under this
Act, for any year of assessment, shall for the purposes of this Act, indicate
its registration number under the Business Names Act No. 7 of 1987 or the Companies
Act, No. 7 of 2007, as the case may be, in -
(a) its return of income
for that year of assessment; and
(b) all such documents
relating to all such transactions as are specified by the Minister under
paragraph (b) of subsection (1).
109 RETURNS TO BE FURNISHED OF INCOME RECEIVED ON ACCOUNT
OF OR PAID TO OTHER PERSONS.
109. Where any person in
any capacity whatever-
(a) receives any profit
or income liable to tax within the meaning of this Act, and which have accrued
or arisen to some other person; or
(b) pays to some other
person, or to his order, any such profits or income,
an Assessor or Assistant
Commissioner may give notice to such first-named person requiring him to
furnish within the period specified in such notice, a return containing-
(i) a true and correct
statement of all such profits and income; and
(ii) the name and
address of every person to whom such profits and income have accrued or arisen.
110 OCCUPIERS TO FURNISH RETURNS OF RENT PAYABLE.
110. An Assessor or
Assistant Commissioner may give notice in writing to any person who is the
occupier of any land or building, requiring him to furnish within the period
specified in such notice, a return containing_
(a) the name and address
of the owner of such land or building;
(b) any improvements
effected to such land or building;
(c) a true and correct
statement of the rent payable and any other consideration passing in relation
thereto.
111 RETURN OF LODGERS AND INMATES.
111. An Assessor or
Assistant Commissioner may give notice in writing or electronic means to any
person requiring him within the period specified in such notice, to furnish a
return containing the name of every lodger or inmate who is at the date of the notice
resident in his house, hotel or institution and has been so resident, except
for temporary absences, throughout the period of three months preceding that
date.
112 POWER OF COMMISSIONER-GENERAL TO IMPOSE PENALTY FOR
FAILURE TO FURNISH RETURN.
112. (1) Where -
(a) any person fails to
comply with a notice in writing or electronic means given to him a Commissioner
under subsection (7) of section 106 requiring him to furnish, within the time
specified in such notice, a return of his income, and if he has a child, the
income of such child;
(b) any person fails to
furnish within the time specified in subsection (1) of section 106, a return
which he is required to furnish under that section;
(c) any employer fails
to comply with any requirement of the provisions of section 120;
(d) any individual fails
to furnish within the time specified in sub section (5) of section 106, a
return which such individual is required to furnish under that section; or
(e) where any precedent
partner of a partnership fails to furnish within the time specified in a notice
given under subsection (3) of section 76, a return which such precedent partner
is required to furnish under that subsection,
the Commissioner
-General may-
(i) impose on such
person or on such employer, a penalty of a sum not exceeding fifty thousand
rupees, and give notice in writing to such person or employer, of the
imposition of such penalty; and
(ii) by notice in
writing require such person or such employer-
(a) to pay such penalty;
and
(b) to furnish such
return where such return has not been furnished, or to comply with such
requirement where such requirement has not been complied with,
within such period as
may be specified in such notice.
(2) The
Commissioner-General may reduce or waive any penalty imposed on any person or
on any employer under this section, if such person or such employer, as the
case may be, proves to the satisfaction of the Commissioner-General that the
failure to furnish such return or to comply with such requirement, as the case
may be, was due to circumstances beyond his control and that he has furnished
such return or has complied with such requirement, as the case may be.
(3) Where a penalty is
imposed on any person or on any employer under subsection (1), such person or
such employer shall not be liable to prosecution for any offence under
paragraph (a) or paragraph (d) of subsection (1) of section 202 or under
paragraph (b) of subsection (2) of section 202 relating to that notice or
requirement.
CHAPTERXIII
Payment of Tax by
Self-Assessment
113 PAYMENT OF TAX BY SELF ASSESSMENT.
113. (1) Any income tax
which any person or partnership is liable to pay under this Act for any year of
assessment shall be paid by such person or partnership to the
Commissioner-General in four instalments on or before the fifteenth day
respectively of August, November and February in that year of assessment and
the fifteenth day of May of the next succeeding year of assessment,
notwithstanding that no assessment has been made on him or it by an Assessor or
Assistant Commissioner. Each such instalment is hereinafter referred to as a
"quarterly instalment".
(2)The quarterly
instalment of a tax payable by any person or partnership for any year of
assessment, shall be one-quarter of the tax payable by him or it for that year
of assessment.
(3) Notwithstanding
anything contained in sub section (1) and subsection (2) of this section, the
entirety of the tax payable :-
(a)
(i) by any company
resident in Sri Lanka, under sub-paragraph (i) of paragraph (b) of subsection
(1) of section 61; or
(ii) by any company not
resident in Sri Lanka, under paragraph (b) of subsection (1) of section 62 in
respect of remittances made by such company,
shall be paid on or
before the thirtieth day succeeding the date of distribution of such dividends
or making such remittances, as the case may be;
(b) by any company
resident in Sri Lanka, under sub-paragraph (ii) of paragraph ((b) of subsection
(1) of section 61, shall be paid on or before the thirtieth day of October, of
that year of assessment for which such tax is payable.
(4) The amount of any
quarterly instalment of income tax payable by any individual for any year of
assessment shall be reduced by ten per centum thereof, if such individual pays
the amount of such quarterly instalment as so reduced, not less than thirty days
prior to the date on or before which such instalment is required to be paid
under subsection (1); where any individual has so paid the amount of any
quarterly instalment as so reduced, such individual shall be deemed for all
purposes to have paid such quarterly instalment without any reduction.
(5) Any bank or
financial institution shall invest five per centum of its taxable income in
such instalment as may be specified by the Commissioner-General on or before
the same dates as specified for income tax purposes in subsection (1) of this
section in the investment fund established in accordance with the guidelines
issued for this purpose by the Central Bank of Sri Lanka with the concurrence
of the Commissioner-General for a period of three years commencing from April
1, 2011 or where such bank or financial institution is established after April
1, 2011, then, from the date of such establishment.
(6) Where any bank or
financial institution which is required to invest in the investment fund
referred to in subsection (5), has not utilized in accordance with the
guidelines issued by the Central Bank of Sri Lanka, any part of the funds lying
to the credit of the fund as at July 1, 2013, such balance shall be deemed to
be a debt due to the Government by such bank or financial institution as the
case may be, and transferred to the Consolidated Fund.
CHAPTER XIV
Deduction of Income Tax from Remuneration of Employees by
Employers
114 EMPLOYERS TO DEDUCT INCOME TAX.
114. (1)Every employer
shall deduct income tax in accordance with the provisions of this Chapter from
the remuneration of his employees for each pay period at the time of payment of
such remuneration.
(2)Income tax deducted
under subsection (1) from the remuneration of an employee and remitted to the
Commissioner-General as provided in this Chapter, shall be deemed to have been
paid by such employee to the Commissioner-General on the date on which such
deduction was made.
For the purpose of this
section, any person who receives a remuneration in cash or kind from an
employer, is deemed to be an employee of such employer.
115 EMPLOYERS TO GIVE NOTICE TO COMMISSIONER - GENERAL.
115. (1)Every employer
who employs -
(a) any resident
individual who -
(i) receives
remuneration:
(A) for any year ending
prior to April 1, 2015, in excess of fifty thousand rupees per month or six
hundred thousand rupees per year: or
(B) for any year
commencing from April 1, 2015, in excess of sixty two thousand and five hundred
rupees per month or seven hundred and fifty thousand rupees per year;
(ii) is a director or
non executive director to whom any payment is made or is due by or from such
employer or who receives any other benefit as an employee or in any other
capacity; or
(b) any non-resident
individual,
who has not given notice
to the Commissioner-General under sub-section (1) of section 107C the Inland
Revenue Act, No. 4 of 1963 or under section 99 of the Inland Revenue Act, No.
28 of 1979 or section 107 of the Inland Revenue Act, No. 38 of 2000 or under
this Act, shall give notice to the Commissioner-General not later than July 1,
2006, that he has in his employment such individual (hereinafter in this
Chapter referred to as a "specified employee").
(2) Where an employer
commences to employ any specified employee or to pay remuneration to any
specified employee, such employer shall within seven days of commencement of
such employment, as the case may be, give notice to the Commissioner-General
that he has in his employment such employee:
Provided that the
preceding provisions of this subsection shall not apply to an employer who has
given notice under subsection (1).
(3) Any notice given by
an employer under subsection (1) or subsection (2) shall be in such form and
contain such particulars as may be specified by the Commissioner-General.
(4) Notwithstanding that
an employer has failed to give notice under subsection (1) or subsection (2),
such employer shall deduct income tax from the remuneration of each of his
specified employees in accordance with the provisions of this Chapter.
116 APPLICATION OF INCOME TAX TABLES.
116. (1)The amount of
income tax to be deducted by an employer for any year of assessment in terms of
section 114, shall be in accordance with the income tax tables specified by the
Commissioner-General and applicable to that year of assessment.
(2) Income tax shall be
deducted in respect of a pay period in accordance with the income tax table
applicable to regular profits from employment from the remuneration for such
pay period of every employee in respect of regular profits from employment, and
all such profits in respect of a pay period shall be aggregated and be deemed
to be one payment for the purposes of the application of the income tax table.
Regular profits from
employment in respect of any pay period shall include-
(a) wages, salary
allowances or pension payable in respect of such pay period or such other
profits from employment, which arise or accrue regularly and are payable in
respect of such pay period;
(b) such profits from
employment as are referred to in paragraph (d) of section 4 and such profits
from employment, in the form of perquisites or benefits other than those
referred to in subsections (3) and (4), as have arisen or accrued in respect of
such pay period; and
(c) such profits from
employment as are not included in paragraph (a) or paragraph (b) or in
paragraph (c) of section 4, if the total of such profits for such pay period
does not exceed five hundred rupees.
(3)Income tax shall be
deducted in respect of such profits from employment as are referred to in
paragraph (c) of subsection (1) of section 4, in accordance with the income tax
table applicable to such profits.
(4) Income tax shall be
deducted in respect of such profits from employment as are received by the
employee by way of bonus, commission or any other benefits of a similar
character, in accordance with the income tax table applicable to such profits.
(5) Where the income tax
tables are altered, the income tax tables as altered shall be applied from the
pay period following the date on which the altered income tax tables take
effect.
(6) Where any profits
from employment are not paid but are credited or applied to the account or
benefit of an employee or to the account or benefit or any other person on
behalf of an employee, such profits shall be deemed to be paid to such employee
when they are so credited or applied.
(7) Where the
remuneration of an employee is not paid monthly, the aggregate of the payments
made in each calendar month shall be deemed to be a monthly payment, and such
employee shall be deemed to be an employee to whom remuneration is paid monthly
and the deduction of income tax appropriate to such monthly payment may be made
from any one or more of the payments made during the month:
Provided that the
Commissioner-General may, on application made by an employer or employee,
specify some other method in which such deduction shall be made.
(8) For the purposes of
this Chapter, the amount of any commission paid to any employee shall be deemed
to be profits from employment arising on the date of such payment.
(9) Where the
Commissioner-General is satisfied on application made by an employer to make
payments for work done overtime by an employee during any pay period at the
same time as the other regular remuneration for such pay period is paid,
payments for such work done over time may, for the purpose of determining the
amount of income tax deduction, be aggregated with the employee's regular
remuneration for a succeeding pay period.
(10) If any remuneration
is paid by the employer after the date of death of an employee in respect of
his employment with such employer, the employer shall on making such payment,
deduct income tax as if the deceased employee were still in his employment.
117 DEDUCTION OF TAX AT SPECIAL RATES.
117. (1) Where an
employer pays any remuneration or provides any benefit to any director, whether
executive or non-executive, or to any Chairperson of the Board of Directors of
any company or to any other person and where such director, chairperson or other
person is not considered to be an employee and where such amounts are not taken
into account in the application of the tax tables referred to in section 116,
such employer shall deduct tax on such amounts or value of such benefits at the
rate of -
(a) ten per centum,
where the aggregate of such amounts or value of such benefits does not exceed
twenty five thousand rupees per month; or
(b) sixteen per centum,
where the aggregate of such amounts or value of such benefits exceeds twenty
five thousand rupees per month,
in terms of the
provisions of this Chapter. No direction shall be issued or entertained under
section 118 in relation to such amounts or value of benefits.
(2) No refund shall be
made under this Act in relation to the income tax deducted in terms of
subsection (1) notwithstanding anything to the contrary in this Act, but such
income tax may be set off against the income tax liability of such person in
respect of the same year of assessment, if such amounts or the value of benefit
has been included in his total statutory income for that year.
(3) Where any employer
who is required to deduct tax on any remuneration using tax tables as referred
to in section 116 omits to do so, and deducts tax at the rate of ten per centum
on such remuneration, such employer shall be liable to pay such tax in default
calculated on the basis of the difference between tax payable under the tax
tables as provided for in section 116 and tax deducted by the employer under
this section, and be liable to a penalty not exceeding ten per centum of such
tax in default, calculated as follows: -
(a) where the tax
payable on a return submitted under subsection (1) of section 106 has not been
paid fully or partly on or before the due date, at the rate of five per centum
for the first month of such default and a further one per centum for each month
or part of a month thereafter, on such amount of tax in default;
(b) where an assessment
has been issued in the absence of a return due from such person and the
relevant tax is in default, at the rate of ten per centum on such amount of tax
in default;
(c) where an assessment
was under appeal and the tax became payable on the settlement of such appeal,
at the rate of ten per centum on such amount of tax that became payable,
and the
Commissioner-General may recover such tax from such employer as tax in default
under this Act.
117A DEDUCTION OF TAX AT SPECIAL RATES WHERE AN
INDIVIDUAL HAS MORE THAN ONE EMPLOYMENT.
117A. (1) Where an
employer pays any remuneration or provides any benefit to any employee who is
also an employee of another employer and such other employer deducts income tax
on the remuneration under section 114 as such employee's main employer, then such
first mentioned employer shall deduct tax at the rate of -
(a) ten per centum -
(i) where the aggregate
of such payments or value of such benefits does not exceed twenty five thousand
rupees per month; or
(ii) where the aggregate
of such payments or value of such benefits does not exceed fifty thousand
rupees per month, if such employee is an individual employed in the public
sector; or
(b) sixteen per centum-
(i) where the aggregate
of such payments or value of such benefits exceeds twenty five thousand rupees
per month; or
(ii) where the aggregate
of such payments or value of such benefits exceeds fifty thousand rupees per
month, if such employee is an individual employed in the public sector;
on such payments or the
value of such benefits in terms of the provisions of this Chapter. No direction
shall be issued or entertained under section 118 in relation to such payments
or value of such benefits.
(2) No refund shall be
made under this Act in relation to the income tax deducted in terms of
subsection (1) notwithstanding anything to the contrary in this Act, but such
income tax may be set off against the income tax liability of such person in
respect of the same year of assessment, if such payments or the value of such
benefits has been included in his total statutory income for that year.
(3) Where any employer
who is required to deduct tax on any remuneration using tax tables as referred
to in section 116 omits to do so, and deducts tax at the rate of ten per centum
on such remuneration, such employer shall be liable to pay such tax in default
calculated on the basis of the difference between tax payable on this basis of
tax tables as provided for in section 116 and tax deducted by the employer
under this section.".
(4) Where an individual
is employed under more than one employer or has more than one employment and
receiving any benefit from the private use of a motor vehicle or any allowance
paid in lieu of the provision of such vehicle or value of any transport facility
from more than one employer or from more than one employment, the excess of
aggregate of such benefit or allowance or such value over fifty thousand rupees
shall form part of such employee's employment income liable to tax.
118 DIRECTIONS TO EMPLOYERS.
118. (1) Any employee
from whose remuneration income tax is deducted by his employer in accordance
with the provisions of this Chapter may, if such remuneration, in full or part,
is exempted from income tax for any year of assessment under any provisions of
this Act, make an application to the Commissioner-General in such form and
containing such particulars as may be specified by the Commissioner- General,
that the direction be issued to his employer to make the necessary adjustments
in the deduction of income tax for that year of assessment.
(2) The
Commissioner-General or any officer authorized by the Commissioner-General may,
on an application made by an employee under subsection (1), issue to the
employer of such employee the necessary direction in writing or electronic
means(a copy of which shall be issued to the employee), and such employer shall
deduct income tax from the remuneration of such employee in accordance with
such direction:
Provided that any such
direction issued may at any time be varied.
(3)The
Commissioner-General or any officer authorized by the Commissioner-General may,
in respect of any employee chargeable with income tax under this Act, issue to
the person who is the employer of that employee, a direction in writing or
electronic means (a copy of which shall be issued to that employee) requiring
such person to deduct in accordance with such direction, the income tax payable
under this Act, from the remuneration of such employee, and such person shall
deduct income tax from such remuneration in accordance with such direction:
Provided that any such
direction may at any time be varied.
For the purpose of this
Chapter, a person in respect of whom a direction has been issued under this
section, shall be deemed to be a "specified employee".
(4) Any employee who is
dissatisfied with a direction issued under subsection (2) or under subsection
(3) in respect of any year of assessment may, within a period of thirty days
after the date of issue of such direction, appeal to the Commissioner-General
in writing or electronic means setting out precisely the grounds of such
appeal. The decision of the Commissioner-General on any such appeal shall be
final and conclusive:
Provided that the
Commissioner-General shall, on a request made in writing or electronic means by
such employee, cause an assessment to be made under section 163 on such
employee for that year of assessment for the purpose of enabling such employee
to prefer an appeal under section 165 against such assessment.
119 EMPLOYERS TO MAINTAIN PROPER RECORDS.
119. Every employer who
makes any payment of remuneration to any specified employee shall -
(a) keep a proper record
of payment of such remuneration in such pay sheet and in such manner as may be
specified by the Commissioner-General;
(b) take all reasonable
precautions for the safe custody of all employees' declarations, pay sheets,
receipts for payment of remuneration to employees and all other accounting
records pertaining to the remuneration of the employees and to the income tax deducted
and paid to the Commissioner-General, and shall retain all such records for a
period of not less than five years after the end of the year of assessment to
which such records relate; and
(c) permit any officer
authorized in writing by the Commissioner-General to inspect any record
maintained by him and referred to in paragraph (a) or (b).
120 DUTIES OF EMPLOYER FOLLOWING DEDUCTION OF INCOME TAX.
120. Every employer who
is required to make income tax deductions from the remuneration paid to his
employees under the provisions of this Chapter, shall -
(a) not later than the
fifteenth day of the month following the month in which he made any such
deductions, pay to the Commissioner-General the amount of such deductions and
at the same time furnish to the Commissioner-General, a monthly declaration in
such form and in such manner as may be specified by the Commissioner-General;
(b) not later than the
thirtieth day of April in such year, give to each employee from whose
remuneration income tax has been deducted under the provisions of this Chapter,
a certificate in such form and containing such particulars as may be specified
by the Commissioner-General, in respect of the deductions so made in the
preceding year of assessment;
(c) within thirty days
after the cessation of employment of any employee, give to such employee a
certificate, in such form as may be specified by the Commissioner-General,
specifying the amount of income tax deducted in respect of the period
commencing from the first day of the year of assessment during which the
cessation of employment took place, and ending on the date of such cessation;
(d) not later than the
thirtieth day of April in each year, furnish to the Commissioner-General in
respect of the preceding year of assessment, an annual declaration in such form
and containing such particulars as may be specified by the Commissioner-General,
together with an income tax deduction card in such form as may be specified by
the Commissioner-General in respect of each employee from whose remuneration
income tax is deducted under the provisions of this Chapter during the year of
assessment to which the annual declaration relates; and
(e) not later than the
last day of the month following the month in any year of assessment in which
the employer ceased to carry on or exercise any trade business, profession or
vocation, comply with the provisions of paragraph (d) in respect of the trade,
business, profession or vacation which he ceases to carry on or exercise, as if
the period from the first day of that year of assessment to the date of such
cessation, were preceding year of assessment referred to in that paragraph.
121 ADJUSTMENTS OF AMOUNT OF INCOME TAX NOT PAID OR PAID
IN EXCESS.
121. (1) Where an
employer fails to deduct the amount of income tax required to be deducted under
the provisions of this Chapter, or part thereof, from the remuneration paid to
any employee, such employer shall on becoming cognizant of such failure, furnish
to the Commissioner-General a declaration in the form specified under section
120, and remit such amount of income tax as was not deducted to the
Commissioner-General together with such amounts as may be due under section
127.
(2) Where during any
year of assessment an employer has remitted to the Commissioner-General in
respect of any pay period, any sum in excess of the amount deducted, the
employer may deduct such excess payment from the remittance in respect of any
subsequent pay period in that year of assessment, and notify the
Commissioner-General accordingly.
(3) Where during any
year of assessment an employer has deducted income tax from the remuneration of
any employee for any pay period any sum in excess of the amount deductible in
respect of such remuneration for such pay period, such employer may reduce such
excess from the amount of income tax deductible in respect of the remuneration
of such employee for any pay period in such year of assessment or in the
mmediately succeeding year of assessment and notify the Commissioner-General
accordingly within two weeks from the date of suchadjustment.
122 EMPLOYEE TO GIVE NOTICE WHEN NECESSARY DEDUCTIONS ARE
NOT MADE.
122. (1)Where for any
reason a deduction of income tax is not made in full at the time of making
payment of remuneration to an employee, such employee shall, if such
remuneration is liable to income tax, give notice in writing or electronic
means to the Commissioner-General within fifteen days of receipt of such
remuneration, that he has received such remuneration without such deduction
having been made.
(2) A notice under
subsection (1) shall contain the full name and address of the person giving
such notice, the full name ad address of his employer, and full particulars
relating to his remuneration.
123 INCOME TAX DEDUCTED NOT TO FORM PART OF ASSETS OF
EMPLOYERS.
123. Notwithstanding
anything in any other law, the amount of every tax deduction made under the
provisions of this Chapter and held by the employer for remittance to the
Commissioner-General, shall not be such property of such employer as is liable
to execution or administration in the event of the bankruptcy, liquidation,
dissolution or death of such employer or to assignment for the benefit of
creditors, and such amount shall remain apart from and form no part of the
estate in bankruptcy, liquidation, assignment of such employer or the estate of
the deceased employer.
124 DEFAULT IN THE DEDUCTION OR PAYMENT OF INCOME TAX.
124. (1) Where any
employer fails to deduct income tax in accordance with the provisions of this
Chapter from the remuneration of any employee, or where any employer deducted
income tax for any pay period from the remuneration of an employee and has not remitted
the full amount of such deduction to the Commissioner-General on or before the
fifteenth day of the following month, such employer shall be personally liable
for the entire amount of the tax he was required to deduct under the provisions
of this Chapter but has not so deducted, or as the case may be, for the entire
amount or part of the amount of the tax deducted which was not remitted to the
Commissioner-General, and such amount not deducted or deducted and not remitted
shall be deemed to be in default from the day following the day or on before
which such amount should have been remitted to the Commissioner-General, and
such employer shall be deemed to be a defaulter and such amount may be
recovered from such employer in the manner provided in this Act.
(2)Notwithstanding the
provisions of subsection (1), the Commissioner-General may recover from the
employee the amount of the income tax or any part thereof which the employer
had failed to deduct from the remuneration of the employee.
(3)Nothing in this
section shall be read and construed as preventing the Commissioner-General from
taking such steps as he thinks fit to recover the amount of income tax referred
to in subsection (2), wholly from the employer or wholly from the employee or
partly from the employer and partly from the employee.
125 ISSUE OF ASSESSMENTS ON EMPLOYERS.
125. (1) Where an
employer who is required under the provisions of this Chapter to deduct income
tax from the remuneration paid to his employees -
(a) fails to deduct the
whole or any part of the income tax for any pay period;
(b) fails remit to the
Commissioner-General the whole or any part of the income tax deducted for any
pay period; or
(c) fails to furnish any
monthly or annual declaration under section 120,
an Assessor or Assistant
Commissioner may at any time during the year of assessment within which that
pay period falls or within three years from the end of that year of assessment,
assess the amount if income tax or the additional amount of income tax which
such employer in the opinion of the Assessor or Assistant Commissioner should
have deducted and paid to the Commissioner-General for such pay period, and
shall, by notice in writing or electronic means require such employer to pay
such amount forthwith together with such amount as may be due under section
127.
(2)Where it appears to
an Assessor or Assistant Commissioner that for any pay period in any year of
assessment an employer has been assessed under subsection (1) at less than the
proper amount of income tax which he should have deducted and paid to the Commissioner
- General, the Assessor or Assistant Commissioner may at any time during that
year of assessment or within three years from the end of that year of
assessment, assess such employer at the additional amount of income tax at
which such employer in the opinion of the Assessor or Assistant Commissioner
should have been assessed and shall, by notice in writing, require such
employer to pay such amount forthwith together with such amount as may be due
under section 127:
Provided that where in
the opinion of the Assessor or Assistant Commissioner any fraud, evasion or
wilful default has been committed by or on behalf of any employer in relation
to any income tax deductible by such employer in any year of assessment, it shall
be lawful for the Assessor or Assistant Commissioner to make an assessment or
an additional assessment on such employer, at any time after the end of that
year of assessment.
126 APPEALS.
126. (1)Any employer
aggrieved by the amount of any assessment made under the provisions of this
Chapter, may appeal in writing against such assessment to the
Commissioner-General within a period of thirty days after the date of the
notice of such assessment :
Provided that the
Commissioner-Genera,l upon being satisfied that owing to the absence from Sri
Lanka, sickness or other reasonable cause, the appellant was prevented from
appealing within such period, shall grant an extension of time for preferring
the appeal.
(2) Where the assessment
appealed against under subsection (1) has been made in the absence of a monthly
declaration, or an annual declaration, as the case may be, required to be
furnished under section 120, the petition of appeal shall be preferred together
with such declaration.
(3) Every employer
preferring an appeal under subsection (1) against the amount of an assessment
for any pay period falling within any year of assessment shall, (unless such
employer has already done so,) remit to the Commissioner-General the whole or
any part of the income tax which such employer was required, under the
provisions of this Chapter to deduct from the remuneration paid to his
employees in respect of such pay period, and to remit to the
Commissioner-General but which has not been remitted, together with any
penalty, under section 127 which accrued thereon upto the date of the notice of
such assessment, and shall attach to the petition of appeal a receipt in proof
of such remittance.
(4) A petition of appeal
which does not conform to the provisions of subsections (2) and (3) shall not
be valid.
(5)The amount of income
tax charged by an assessment made under section 125 shall be paid by the
employer notwithstanding that an appeal against such assessment has been
preferred under subsection (1).
(6)The provisions of
subsection (7) of section 165 to section 170 shall mutatis mutandis, apply to
any appeal preferred under subsection (1).
(7) Where no valid
appeal has been preferred within the period specified in subsection (1) against
an assessment made in accordance with the provisions of this Chapter, or where
agreement is reached under subsection (7) of section 165 as regards an assessment,
or where an assessment had been determined on appeal the assessment as made or
agreed or determined on appeal, as the case may be, shall be final and
conclusive for all purposes of this Act:
Provided that nothing in
this subsection shall be read and construed as preventing an Assessor or
Assistant Commissioner from making, subject to the provisions of section 125,
an assessment or additional assessment, for any pay period in any year of assessment
which does not involve re-opening any matter which has been determined on
appeal.
127 PENALTY FOR DEFAULT.
127. Where any income
tax for any pay period payable by any employer under the provisions of this
Chapter is in default, such employer shall pay in addition to such tax -
(a) a penalty of a sum
equivalent to ten per centum of such tax; and
(b) where such tax is
not paid before the expiry of thirty days after it has begun to be in default,
a further penalty of a sum equivalent to two per centum of the tax in default
in respect of each further period of thirty days or part thereof, during which
it remains in default:
Provided that -
(i) the
Commissioner-General may waive or reduce the amount of any such penalty payable
by any employer, if such employer proves to the satisfaction of the
Commissioner-General that the failure to pay was due to circumstances beyond
his control and that he has paid the amount of the tax in default and has
furnished the declaration required to be furnished at the time of such payment;
(ii) the total amount
payable as penalty under the preceding provisions of this section, shall in
respect of the tax in default for any pay period, not exceed fifty per centum
of the tax in default.
128 PENALTY ON DEFAULT.
128. Notwithstanding the
provisions of section 127, where any income tax payable by any employer under
the provisions of this Chapter is in default in respect of any period, such
employer shall pay in addition to such tax a penalty, not exceeding ten per
centum of such tax in default calculated as follows: -
(a) where the tax
payable on a return submitted under subsection (1) of section 106 has not been
paid fully or partly on or before the due date, at the rate of five per centum
for the first month of such default and a further one per centum for each month
or part of a month thereafter, on such amount of tax in default;
(b) where an assessment
has been issued in the absence of a return due from such person and the
relevant tax is in default, at the rate of ten per centum on such amount of tax
in default;
(c) where an assessment
was under appeal and the tax became payable on the settlement of such appeal,
at the rate of ten per centum on such amount of tax that became payable.
129 CREDIT FOR TAX PAID.
129. Where the
assessable income of an employee for any year of assessment includes any
remuneration in respect of which income tax has been deducted in accordance
with the provisions of this Chapter, such employee shall be entitled on
production of a certificate of deduction of tax relating to such remuneration
issued in accordance with the provisions of paragraph (b) or paragraph (c) of
section 120 to a set-off against the tax payable by him for that year of
assessment, of the amount of tax shown in such certificate to have been
deducted:
Provided however, for
any year of assessment such employee shall be entitled to set-off the tax
deducted under this Chapter on the basis of a tax deduction certificate, if the
income from which such income tax has been deducted forms part of his total statutory
income for that year of assessment.
130 COMPLIANCE WITH THE PROVISIONS OF THIS CHAPTER
RELATING TO FORMS.
130. Where under the
provisions of this Chapter an employer is required to record or furnish
particulars in such form and in such manner as may be specified by the
Commissioner-General, it shall be sufficient compliance with those provisions
if the particulars are recorded or furnished by the employer in such form and
in such manner as may be approved in writing or electronic means by the
Commissioner-General, upon an application in that behalf made by the employer.
131 INTERPRETATION.
131.In this Chapter
unless the context otherwise requires -
"employee"
includes -
(a) any director of a
company or corporation;
(b) any working partner
of a partnership;
(c) any person receiving
remuneration for past services performed by him or performed by any other
person;
"employer"
means any person, partnership, body of persons or any organization -
(a) for whom an
individual performs services as an employee;
(b) paying any profits
from employment within the meaning of section 4; or
(c) paying any pension
or other remuneration to a former employee or to any other person, for the past
services of such employee,
and includes in the case
of a body, institution or a person specified in Column I hereunder, the person
specified in the corresponding entry in Column II - Column I A company or a
body of persons whether corporate or unincorporated A Partnership The Estate of
a deceased person A trust A non-resident person Column II Director, secretary,
manager or other principal officer of such company or body of persons. The
precedent partner or any active partner resident in Sri Lanka, and in the case
of a partnership of which no active partner is resident in Sri Lanka, the agent
of such partnership in Sri Lanka. The executor or administrator of the estate.
The trustee or trustees of the trust. The agent or attorney of such person in
Sri Lanka;
"pay period"
means a month, week or such other period in respect of which remuneration is
calculated and paid by an employer to an employee;
"principal
officer" in relation to any company or body of persons means, any person
to whom a notice has been given under any provision of this Chapter or of
Chapter XXVI on behalf of that company or a body of persons, unless he proves
that he has no connection with that company or body of person or that some
other person, resident in Sri Lanka is the principal officer thereof; and
"remuneration"
means profits from employment within the meaning of section 4.
CHAPTER XV
PROVISIONS RELATING TO THE PAYMENT OF INCOME TAX BY A
GOVERNMENT INSTITUTION AND DEDUCTION FROM TAX ON OFFICIAL EMOULMENTS OF ANY
EMPLOYEE OF ANY GOVERNMENT INSTITUTION
132 PAYMENT OF INCOME TAX BY A GOVERNMENT INSTITUTION OF
ITS EMPLOYEES.
132. (1) Notwithstanding
anything contained in section 2 and in Chapters XIII and XIV of this Act, the
income tax attributable to one half of official emoluments of any employee of a
Government Institution for any year of assessment ending on or before March 31,
2008, shall be paid by such Institution if such part of official emolument of
such employee for that year of assessment exceeds an amount equal to the
allowance referred to in paragraph (a) of subsection (1) of section 33:
"Provided that such
income tax so paid shall neither be refunded to such employee either in whole
or in part or deducted from income tax otherwise payable by such employee, for
that year of assessment.";
(2) Notwithstanding
anything contained in section 4 of this Act, the income tax referred to in
subsection (1), in respect of one half of official emolument of any employee of
a Government Institution shall be deemed not to form part of the profits from employment
of such employee.
(3) For the purposes of
sub section (1), "the income tax attributable to one half of the official
emolument of any employee of a Government Institution" means the income
tax computed at the rates specified in Part I of the First Schedule to this Act
on the one half of emoluments of such employee, after deducting therefrom a sum
equal to the allowance referred to in paragraph (a) of sub section (1) of
section 33.
(4) For the purpose of
this Chapter -
means any institution or
other body which employees individuals holding any paid office under the
Republic, a public corporation, Provincial Council, a Local Authority,
University, Board or Commission referred to in paragraph (b) of sub section (1)
of section 8 of this Act ; and
"official
emoluments" means profits from employment as specified in paragraph (a) of
sub section (1) of section 4 received for services rendered, excluding pension.
"Deduction from
Income tax on the official emoluments of any employee of any Government
Institution.
132A
(1) There shall be
deducted from the income tax payable for any year of assessment commencing on
or after April 1, 2008, but prior to April 1, 2011, by any employee of any
Government Institution, whose assessable income for that year of assessment
includes any official emoluments, such amount as referred to in subsection (2).
(2) The deduction shall
be an amount which bear to the income tax charged on such employee as referred
to in subsection (1) for such year of assessment, the same proportion which the
official emoluments (other than any pension, bonus, incentive payments, reward,
share of fines or other similar payment) of such employee for that year of
assessment, bear to the total statutory income of that employee for that year
of assessment.
For the purpose of
subsections (1) and (2) of this section, "official emoluments" means
profits from employment as specified in paragraph (a) of subsection (1) of
section 4, received for services rendered.
(3) For the purpose of
this Chapter, "Government Institution" means any institution or
person which employs individuals holding any office referred to in paragraph
(b) of subsection (1) of section 8.".
CHAPTERXVI
Deductions from interest
paid by Banks and Financial Institutions
133 BANKS AND FINANCIAL INSTITUTIONS TO DEDUCT INCOME
TAX.
133. (1) Where any bank
or financial institution pays any interest on any sum of money deposited with
it, such bank or financial institution shall, subject to the provisions of
subsection (2), deduct income tax in accordance with the provisions of this section
from the interest payable and such deduction shall be made at the appropriate
rate specified in subsection (4) and at the time such interest is paid.
(2) Where any sum of
money (in this subsection referred to as the "first mentioned sum")
is paid to any bank or financial institution in return for any pledge in
writing or electronic means that such bank or financial institution shall pay
to the bearer of the pledge not identified by name in such pledge, a sum of
money which is in excess of the first mentioned sum (in this subsection
referred to as the "stated sum") at the time such pledge is presented
for redemption or after such date as is stated in such pledge, such bank or
financial institution shall deduct income tax on the excess of the stated sum
over the first mentioned sum. The deduction shall be made at the rate of ten
per centum of such excess and at the time the first mentioned sum is paid to such
bank or financial institution.
(3) The deduction
referred to in subsection (1) from any interest referred to therein shall not
apply to any interest :-
(a) of which the
recipient is :-
(i) any foreign
government;
(ii) the Consolidated
Fund of the Government of Sri Lanka;
(iii) any Provincial
Fund of any Provincial Council;
"(iv) any
registered society referred to in paragraph (h) of section 7, being interest
paid to such society during the period referred to in that paragraph; or
(v) the Api Wenuwen Api
Fund established by the Api Wenuwen Api Fund Act, No.6 of 2008;";
(b) which is exempt from
income tax under this Act;
(c) from which income
tax is deductible under section 37 or section 95; or
(d) which is paid on the
deposits made by any participating institution under the standing deposit
facility with the Central Bank of Sri Lanka.
(4) Where the recipient
of the interest from which income tax is deductible under subsection (1) of
this section is :-
(a)
(i) any company other
than any charitable institution, the deduction shall be made at the rate of ten
per centum of such interest;
(ii)for any year of
assessment ending prior to April 1, 2015, any partnership or body of persons
other than any charitable institution, the deduction shall be made at the rate
of eight per centum of such interest;
(iii)for any year of
assessment commencing on or after April 1, 2015 any partnership, charitable
institution or any individual the deduction shall be made at the rate of two
and a half per centum of such interest; and
(iv) for any year of
assessment commencing on or after April 1, 2015, body of persons the deduction
shall be made at the rate of eight per centum of such interest.
(b) any charitable
institution which tenders to the branch of such bank or financial institution
with which the deposit is made, a declaration in writing in relation to any
year of assessment ending prior to April 1, 2015, that its assessable income:-
(i) does not exceed
500,000 rupees, no deduction shall be made from such interest payable to such
charitable institution for that year of assessment; or
(ii) exceeds 500,000
rupees, deduction shall be made from the interest payable to charitable
institutions at the rate of eight per centum of such interest for that year of
assessment;
(c) any individual then,
in relation to any year of assessment ending prior to April 1, 2015 where such
individual tenders to the branch of the bank or of the financial institution
with which the deposit is made, a declaration in writing that for that year of
assessment his assessable income :-
(i) does not exceed
500,000 rupees, no deduction shall be made from such interest payable for that
year of assessment;
(ii) exceeds 500,000
rupees but does not exceed 1,500,000 rupees, deduction shall be made from such
interest payable for that year of assessment, at the rate of two and a half per
centum of such interest; and
(iii) exceeds 1,500,000
rupees, deduction shall be made from such interest payable for that year of
assessment on every sum of money deposited, at the rate of eight per centum of
such interest;
(d) any charitable
institution which has not tendered the declaration referred to in paragraph (b)
or any individual referred to in paragraph (c) who has not tendered the
declaration referred to in that paragraph, as the case may be, deduction shall
be made for any year of assessment ending prior to April 1, 2015 at the rate of
eight per centum of such interest:
Provided that where such
charitable institution or such individual maintains:-
(a) one savings account,
no deduction shall be made from interest paid for any month; or
(b) more than one
savings account, no deduction shall be made from interest paid for any month in
respect of only one such account,
where the interest paid
is less than five thousand rupees.
For the purpose of this
proviso, "savings account" means an account, whether or not subject
to any condition affecting the right to withdraw money therefrom and which
bears interest at a rate not dependent on the period for which the deposit is
maintained.
(5) where any interest
referred to in subsection (1) or any excess referred to in subsection (2)
payable to any person or partnership is credited to any account maintained by
any bank or financial institution for or on behalf of such person or partnership,
such interest shall be deemed to have been paid to such person or partnership,
at the time such interest is so credited.
(6) The interest payable
by any bank or financial institution on any sum of money deposited with it
jointly by two or more individuals, shall be apportioned among such individuals
in accordance with the mandate given to such bank or financial institution in
relation to the apportionment among such individuals of such sum or the
interest thereon, and such part of the interest as is apportioned to any such
individual, shall be deemed to be the interest payable to such individual on
such part of such sum as is apportioned to him.
(7) Every bank or
financial institution which deducts income tax from the interest paid in.
accordance with subsection (1) or on the excess in accordance with subsection
(2) to any person or partnership, as the case may be, shall issue to such
person or partnership a statement setting out the following particulars:-
(a) the gross amount of
the interest or excess paid;
(b) the rate of tax and
the amount of tax deducted;
(c) the net amount of
interest or excess actually paid; and
(d) the period to which
such interest or excess relates.
(8)
(a) Where income tax is
deductible by any bank or financial institution in accordance with this
section, from the interest payable to any individual or charitable institution,
such individual or charitable institution may, if the amount of income tax payable
by him or it for any year of assessment, had the interest from which tax is
deductible under this section been included in the assessable income of such
individual or such charitable institution, as the case may be, for that year of
assessment, is less than the income tax deductible for that year of assessment
under this section, make an application to the Commissioner-General in such
form and containing such particulars as may be specified by the
Commissioner-General, requesting that a direction be issued to that bank or
financial institution to make the necessary adjustments in the deduction of
income tax for that year of assessment.
(b) The
Commissioner-General or any other officer authorized by the Commissioner-
General may, on an application made by any individual or charitable institution
under paragraph (a), issue to the bank or financial institution specified in
such application, the necessary direction in writing (a copy of which shall be
issued to the applicant) and such bank or financial institution shall comply
with such direction :
Provided that any such
direction issued, may be varied at any time.
(c) Any individual or
charitable institution who or which is not satisfied with a direction issued
under paragraph (b) in respect of any year of assessment may, within thirty
days of the issue of such direction, appeal to the Commissioner-General in writing
setting out precisely the grounds of such appeal. The decision of the
Commissioner-General on any appeal made to him under this paragraph, shall be
final and conclusive:
Provided that the
Commissioner-General shall on request made in writing by such individual or
charitable institution, cause an assessment to be made under section 163 on
such individual or charitable institution for that year of assessment, for the
purpose of enabling such individual or charitable institution to prefer an
appeal under section 165 against such assessment.
(d) Every bank and
financial institution shall:-
(i) keep a proper record
of the interest or excess paid by it in any year of assessment to any person or
partnership and the date or dates on which such interest or excess is paid, in
such manner as may be specified by the Commissioner-General ; and
(ii) permit any officer
authorized in writing by the Commissioner- General, to inspect any record
maintained by it under sub- paragraph (i) .
134 DEDUCTING TAX FROM INTEREST ON SECURITIES, TREASURY
BONDS ETC,.
134. (1) Where any bank
or financial institution issues any -
(a) Security or Treasury
Bond under the Registered Stocks and Securities Ordinance (Chapter 420);
(b) Treasury Bill, under
the Local Treasury Bills Ordinance; (Chapter 417); or
(c) Central Bank
Security, under the Monetary Law Act (Chapter 422),
at a price less than the
face value, such bank or financial institution shall deduct from the excess of
the face value over such price, income tax at the rate of ten per centum of
such excess. Such deduction shall be made at the time of the issue of such
Security, Treasury Bond, Treasury Bill or Central Bank Security, as the case
may be.
(2) The excess referred
to in subsection (1) shall be deemed to be interest accruing from such
Security, Treasury Bond, Treasury Bill or Central Bank Security, as the case
may be.
(3) The deduction
referred to in subsection (1) shall not apply to any interest which is exempt
from income tax under this Act.
135 COMPANIES ISSUING CORPORATE DEBT SECURITIES TO DEDUCT
INCOME TAX.
135. (1) Every company
which issues any corporate debt security shall, subject to the other provisions
of this Act, deduct from the interest payable or creditable or the discount
allowable by it, in respect of such security, income tax at the rate of ten per
centum on the amount of such interest or discount; such deduction shall be made
at the time of the issue of such corporate debt security:
Provided that-
(a) where such corporate
debt security is issued with floating rate of interest payable for reviewing
periods, such deduction shall be made at the time of beginning of each such
reviewing period of interest rate;
(b) where any corporate
debt security issued prior to April 1, 2011 and to which interest is payable on
or after April 1, 2011 and in respect of which no deduction of income tax on
interest has been made, such deduction shall be made at the time such interest
is paid or credited;
(c) no deduction of
income tax under this section shall be made from any interest or discount
referred to in paragraph (aa) or paragraph (o) of section 9.
For the purposes of this
subsection the expression "corporate debt security" means, any
interest bearing or discounted security issued by or on behalf of any company,
and includes any bond, note, paper or mortgage which obligates such company to
pay the holder of such bond, note or paper or the mortgagee, a specified sum of
money on demand or upon such security reaching maturity or thereafter, but does
not include any loan, advance, overdraft or other similar facility obtained
form a bank or any financial institution.
Repealed.
136 CREDIT FOR TAX DEDUCTED.
136. Where the
assessable income of a person for any year of assessment includes a payment of
interest referred to in section 133 -
(a) if the income tax
payable by him for that year of assessment exceeds the total of the deductions
made under section 133, he shall be entitled on production of a statement
relating to such payment made in accordance with that section, to deduct from the
income tax payable by him for that year of assessment, the amount of tax set
out in such statement;
(b) if the income tax
payable by him for that year of assessment is less than the total of the
deductions made under section 133 he shall be entitled, on production of a
statement relating to such payment made in accordance with that section and
subject to the provisions of Chapter XXVIII, to a refund of the amount of the
difference between the income tax payable by him for that year of assessment
and the amount set out in such statement:
Provided however, where
the total income on which tax has been deducted under section 133 accrues over
more than one year of assessment and has not been included in full in computing
the assessable income of such person for any year of assessment, then such
deduction shall be restricted to the proportionate amount of tax so deducted,
which is attributable to the income included in the assessable income of such
person in that year or any subsequent year of assessment:
Provided further, that
where such deduction is in respect of any corporate debt security issued with a
discount without any right to receive any interest or other benefit subsequent
to the original issue, such person shall not be entitled to any refund under
section 200 in respect of the amount of any such deduction which may not be set
off due to the provisions of the first proviso to this paragraph.
137 A NOTIONAL TAX CREDIT ON SECONDARY MARKET
TRANSACTIONS.
137. (1) Where any
person is engaged in any secondary market transaction involving any security or
treasury bond issued under the Registered Stock and Securities Ordinance
(Chapter 420), or Treasury Bill issued under the Local Treasury Bills Ordinance
(Chapter 417), or Central Bank Security issued under the Monetary Law Act
(Chapter 422) referred to in section 134, on which the income tax has been
deducted during any year of assessment at the rate of ten per centum at the
time of issue of such Security, Bond or Bill, such person is entitled to a
notional tax credit at ten per centum of the grossed up amount of interest
income from such secondary market transaction, to an amount of one ninth of the
same, if such interest income forms part of the statutory income of such person
being a company or the assessable income of such person being a person other
than a company, for that year of assessment.
For the purposes of this
section "interest income from secondary market transaction" means
interest income accrued or received on a outright or reverse purchase
transaction on such Security, Bond or Bill, from a date on or after the date of
primary issue of such Security, Bond or Bill, less interest expenses on
repurchase transaction with Securities, Treasury Bonds or Treasury Bills from
which such interest income was earned, which has been certified by an approved
accountant referred to in section 107, of this Act.
(2) Where any person is
engaged in any primary market transaction or any secondary market transaction
involving any corporate debt security issued by or on behalf of any company, on
which income tax has been deducted under section 135 during any year of assessment
at the rate of ten per centum at the time the interest is paid or credited or
the discount is allowed on such security, such person shall be entitled to a
notional tax credit at ten per centum of the grossed up amount of interest
income from such transaction, to an amount of one ninth of the same, if such
interest income forms part of the statutory income of such person being a
company or the assessable income of such person being a person other than a
company, for that year of assessment.
(3) For the avoidance of
doubt, interest income referred to in subsection (1) in relation to any bank or
financial institution means the profits and income earned or accrued from any
Security, Bond or Bill.
(4) Any balance amount
of notional tax credit entitled to be claimed by any business of insurance
prior to segregation, or any bank, financial institution or leasing company
which is acquired, merged or amalgamated, as the case may be, shall
notwithstanding any other provisions of this Act , be deemed to be an allowable
deduction subject to the conditions, if it would have been claimable if not for
such segregation (being a business of an insurance), or acquisition, merger or
amalgamation of such bank, financial institution or leasing company.
138 REFUND OF INCOME TAX PAID ON INTEREST LIABLE TO
WITHHOLDING TAX.
138. (1)Where any person
has proved to the satisfaction of the Commissioner-General that such person has
already paid income tax on any interest subject to income tax at ten per centum
under section 133 of this Act, and any claim is made in writing within twelve
months from the date of payment of such tax, such person shall be entitled to a
refund of such income tax paid by him on such interest income, other than any
tax deducted under section 133 on such interest income.
(2) Where any person
other than an individual who or which has included any interest income referred
to in section 134 of this Act in its total statutory income, has by virtue of
the notional credit referred to in section 137 paid any income tax in excess of
its income tax liability for that year of assessment then such excess may be
carried forward to be set-off against the income tax liability in any future
year of assessment, but such person shall not be entitled to a refund of such
excess or any part thereof.
(3) Any interest accrued
to any person not being a company or any other person or partnership receiving
such interest as business income for any year of assessment, shall not be
included in the total statutory income for such year of assessment, if such person
proves to the satisfaction of the Assessor or Assistant Commissioner that the
total amount of such interest will be liable to the deduction of income tax
under section 133, when such interest is paid or credited.
139 ISSUE OF DIRECTIONS WHERE DEDUCTIONS ARE MADE UNDER
SECTIONS 133 OR 135.
139. (1)For any year of
assessment:
(a) ending prior to
April 1, 2015, any person or partnership from whose interest income the income
tax is deductible by a bank or financial institution, or a company which issues
any corporate debt security in accordance with the provisions of section 133 or
section 135 and such interest income will form part of the assessable income of
such person or divisible profit or income of the partnership, as the case may
be, for any year of assessment, may, if the amount of income tax payable by him
or the relevant partners for such year of assessment is less than the income
tax deductible during that year of assessment under section 133 or section 135,
make an application to the Commissioner-General in such form and containing
such particulars as may be specified by the Commissioner General, requesting
that a direction be issued to that bank or financial institution or any company
which issues corporate debt security, to make the necessary adjustments in the
deduction of income tax in that year of assessment; and
(b)commencing on or
after April 1, 2015 any person (other than an individual or a partnership) from
whose interest income the income tax is deductible by a bank or financial
institution in accordance with the provisions of section 133 and such interest
income will form part of the assessable income of such person for any year of
assessment, may, if the amount of income tax payable by such person for such
year of assessment is less than the income tax deductible during that year of
assessment under section 133, make an application to the Commissioner-General
in such form and containing such particulars as may be specified by the
Commissioner General, requesting that a direction be issued to that bank or
financial institution to make the necessary adjustments in the deduction of
income tax in that year of assessment.
(2) The Commissioner
General or any other officer authorised by the Commissioner General may, on an
application made by any person or partnership under subsection (1), issue to
the bank, financial institution or company, as the case may be, specified in such
application, the necessary directions in writing, a copy of which shall be
issued to the applicant, and such bank, financial institution or company shall
deduct income tax from the interest payable to such person or partnership, in
accordance with such directions:
Provided that any such
direction issued may at any time be varied.
(3) Any person or
partnership, who or which is dissatisfied with a direction issued under this
section in respect of any year of assessment may, within the period of thirty
days after the date of the issue of such direction, appeal to the
Commissioner-General in writing, setting out precisely the grounds on which
such appeal is being made. The decision of the Commissioner General on any such
appeal shall be final and conclusive:
Provided that the
Commissioner General shall, on a request made in writing by such person or
partnership, as the case may be, cause an assessment to be made under section
163 on such person or partnership for that year of assessment, for the purpose
of enabling such person or partnership to prefer an appeal under section 165,
against such assessment.
(4) Every bank,
financial institution or company shall -
(a) keep a proper record
of the interest pad to any person in any year of assessment and the date or
dates on which such interest is paid, in such manner as may be specified by the
Commissioner-General; and
(b) permit any officer
authorised in writing by the Commissioner-General to inspect any record
maintained by it as referred to in paragraph (a).
(5) The
Commissioner-General shall not issue a direction as provided for in subsection
(1) of this section, unless such excess deduction of the income tax arises as a
result of losses incurred by such person or partnership which are deductible
under section 32 and such amount of losses at the commencement of the relevant
year of assessment exceeds the estimated total statutory income for that year,
on the basis of the preceding year, excluding the relevant estimated interest
income which is subject to the deduction of income tax under section 133 or
section 135 or such interest income which is subject to the income tax
deduction is exempt from income tax.
140 DUTIES OF BANKS, FINANCIAL INSTITUTIONS AND COMPANIES
FOLLOWING DEDUCTIONS OF INCOME TAX.
140. Every bank or
financial institution or company issuing corporate debt security, which is
required to deduct income tax from the interest paid or credited or discount
allowed, as the case may be, by it in any year of assessment to any person
chargeable with income tax under this Act, shall deduct such income tax at the
time when such interest is paid or when such security is issued or where such
corporate debt security is issued with floating rate of interest, at the
beginning of each reviewing period, as the case may be, to such person in
accordance with any agreement entered into between such bank or financial
institution or company and such person with respect to such payment, and shall
remit the amount so deducted to the Commissioner-General before the fifteenth
day of the month following the month in which the deduction was made, and at
the same time furnish to the Commissioner-General a declaration in such form
and in such manner as may be specified by the Commissioner-General.
141 PENALTY FOR TAX AVOIDANCE.
141.Where the
Commissioner-General is of the view, that any bank or financial institution
which pays interest or issues any debt security , or a company which issues
corporate debt security, not deducting tax in accordance with the provisions of
section 133 or section 135, as the case may be, he shall after affording such
bank, financial institution or any such company, which pays interest or issues
debt security or corporate debt security, as the case may be, an opportunity to
show cause and where he is satisfied that there has been a contravention of the
provisions of section 133 or section 135, impose on such bank or financial
institution or the company, which pays interest or issues such debt security or
corporate debt security, as the case may be, a penalty of a sum equivalent to
five hundred per centum of the tax avoided by the contravention of the
provisions of such section.
142 DEFAULT IN THE DEDUCTION OF INCOME TAX .
142. (1)Where any bank
or financial institution or company fails to deduct income tax from the
interest paid by it in any year of assessment to a person chargeable with
income tax under this Act in accordance with section 140, or where the bank or
financial institution or company fails to remit to the Commissioner-General any
amount so deducted, such bank or financial institution or company shall be
liable for the entire amount of the tax it was required to deduct under the
provisions of this section but has not so deducted or, as the case may be, for
the entire amount or part of the amount of the tax deducted and not remitted to
the Commissioner-General, and the amount not deducted or deducted and not
remitted, as the case may be, shall be deemed to be in default from the day
following the day on or before which such amount should have been remitted to
the Commissioner-General, and such bank or financial institution or company
shall be deemed to be a defaulter, and such amount may be recovered from such bank
or financial institution or company in the manner provided for in this Act.
(2) Notwithstanding the
provisions of subsection (1), the Commissioner-General may recover from the
person from whom such deduction should have been made, the amount of the income
tax or any part thereof which the bank or financial institution or company has
failed to deduct from the interest paid to such person.
(3) Nothing in this
section shall be read and construed as preventing the Commissioner-General from
taking such steps as he thinks fit, to recover the amount of income tax
referred to in subsection (2) wholly from the bank or financial institution or
company or wholly from the person from whom such deduction should have been
made or partly from the bank or financial institution or company and partly
from that person.
143 ISSUE OF ASSESSMENTS ON BANKS AND FINANCIAL
INSTITUTIONS.
143.Where any bank or
financial institution which is required to deduct income tax from the interest
paid in any year of assessment to any person chargeable with income tax under
this Act, fails to -
(a) deduct the whole or
any part of the income tax which it is required to deduct under this Chapter;
(b) remit to the
Commissioner-General the whole or any part of the income tax so deducted; or
(c) furnish any
declaration under section 140, an Assessor or Assistant Commissioner may at any
time within three years from the end of that year of assessment, assess the
amount of income tax or the additional amount of income tax which in the
opinion of the Assessor or Assistant Commissioner such bank or financial
institution should have deducted and paid to the Commissioner-General for such
year of assessment, and shall by notice in writing, require such bank or
financial institution to pay such amount forthwith together with such amount as
may be due under section 145:
Provided that, where in
the opinion of the Assessor or Assistant Commissioner any fraud, evasion or
wilful default has been committed by or on behalf of any such bank or financial
institution, in relation to any such income tax deductible by such bank or
financial institution, it shall be lawful for the Assessor or Assistant
Commissioner to make an assessment or an additional assessment on such bank or
financial institution, at any time after the end of such year of assessment.
144 APPEALS.
144. (1) Any Bank or
financial institution aggrieved by the amount of any assessment made under the
provisions of section 143 may appeal in writing against such assessment to the
Commissioner-General within a period of thirty days after the date of the notice
of such assessment:
Provided that, the
Commissioner-General upon being satisfied that owing to absence from Sri Lanka,
sickness or other reasonable cause, the appellant was prevented from appealing
within such period, shall grant an extension of time for preferring the appeal.
(2) Where the assessment
appealed against under subsection (1) has been made in the absence of a
declaration required to be furnished under section 140, the petition of appeal
shall be preferred together with such declaration.
(3) Every bank or
financial institution preferring an appeal under subsection (1) against the
amount of an assessment, shall, (unless such bank or financial institution has
already done so), remit to the Commissioner-General the whole or any part of
the income tax (which such bank or financial institution was required under the
provisions of this Chapter, to deduct from the interest paid by such bank or
financial institution in respect of that year of assessment and to remit to the
Commissioner-General, but which has not been remitted) together with any
penalty under section 145 which has accrued thereon up to the date of the
notice of such assessment, and shall attach to the petition of appeal a receipt
in proof of such remittance.
(4) A petition of appeal
which does not conform to the provisions of subsection (2) and (3) shall not be
valid.
(5)The amount of income
tax charged by an assessment made under section 143 shall be paid by the bank
or financial institution, notwithstanding that an appeal against such
assessment has been preferred under subsection (1).
(6)The provisions of
subsection (7) of sections 165 to 170 shall, mutatis mutandis, apply to any
appeal preferred under subsection (1).
(7)Where no valid appeal
has been preferred within the period specified in subsection (1) against an
assessment made in accordance with the provisions of this Chapter, or where an
agreement is reached under subsection (6) of section 165 as regards the assessment,
or where an assessment has been determined on appeal, the assessment as made or
agreed or determined on appeal, as the case may be, shall be final and
conclusive for all purposes of this Act.
145 PENALTY FOR DEFAULT.
145. (1)Where any income
tax for any year of assessment payable by a bank or financial institution under
the provisions of this Chapter is in default, such bank or financial
institution shall pay in addition to such tax -
(a) a penalty of a sum
equivalent to ten per centum of such tax; and
(b) where such tax is
not paid before the expiry of thirty days after it has begun to be in default,
a further penalty of a sum equivalent to two per centum of the tax in default
in respect of each further period of thirty days or part thereof, during which
it remains in default:
Provided that -
(i) the
Commissioner-General may waive or reduce the amount of any such penalty payable
by such bank or financial institution, if such bank or financial institution
proves to the satisfaction of the Commissioner-General that the failure to pay
was due to circumstances beyond its control and that it has paid the tax in
default and has furnished the declaration required to be furnished at the time
of such payment; and
(ii) the total amount
payable as penalty under the preceding provisions of this section shall, in
respect of the tax in default for any year of assessment, not exceed fifty per
centum of the tax in default.
146 PENALTY AND INTEREST ON DEFAULT.
146.Where any income tax
payable by a bank or financial institution under the provisions of this Chapter
is in default, such bank or financial institution shall pay in addition to such
tax a penalty and interest in the manner provided in subsection (3) of section
173, notwithstanding the provisions of section 145.
147 INTERPRETATION.
147.In this Chapter,
"financial institution" means any person or body of persons,
corporate or unincorporate, whose business or part of whose business consists
in the acceptance of money by way of deposit, or loan in the form of debenture
or bond or in any other form, and the payment of interest thereon, whether such
acceptance is on its own behalf or on behalf of any other person.
148 PERSON OR PARTNERSHIP CHARGEABLE WITH INCOME TAX.
148.Where any tax has
been deducted from any person or partnership in accordance with the provisions
of sections 133, such person or partnership, as the case may be, shall be a
person or partnership chargeable with income tax.
149 REGISTRED CO-OPERATIVE SOCIETIES DEEMED TO BE
COMPANIES.
149.For the purposes of
this Chapter, any Co-operative Society registered under the Co-operative
Societies Law, No. 5 of 1972, shall be deemed to be a company.
150 REGISTRATION OF BANKS AND FINANCIAL INSTITUTIONS.
150. (1)Any bank or
financial institution which is liable to deduct income tax from interest paid
by such bank or financial institution under this Chapter, shall apply for and
obtain a registration number from the Commissioner-General, thirty days prior to
the commencement of such deduction of tax,and shall furnish a return to the
Commissioner-General:
(a) on a monthly basis,
for any year of assessment commencing prior to April 1, 2015; and
(b) on a quarterly
basis, for any year of assessment commencing on or after April 1, 2015,
containing such particulars as may be specified by the Commissioner-General in
relation to such deductions.
(2) Any bank or
financial institution which does not so register or does not furnish any return
shall be liable to a penalty not exceeding fifty thousand rupees, which may be
imposed by the Commissioner-General.
CHAPTERXVII
151 DEDUCTION OF INCOME TAX FROM SPECIFIED FEES PAID BY
SPECIFIED PERSONS.
151. Repealed
152 REGISTRATION OF PERSONS LIABLE TO DEDUCT TAX FROM
RENT, LEASE RENT OR OTHER SIMILAR PAYMENTS.
152. (1) Any person or
partnership who or which is liable to deduct income tax from rent, lease rent
or other payments made by such person or partnership under this Chapter, shall
apply for and obtain a registration number from the Commissioner-General thirty
days prior to the commencement of such deduction of tax, and shall furnish a
return on a monthly basis containing such particulars as may be specified by
the Commissioner-General in relation to such deductions.
(2) Any person or
partnership who or which does not so register or does not furnish any return
shall be liable to a penalty not exceeding fifty thousand rupees, which may be
imposed by the Commissioner General.
153 SPECIFIED PERSONS TO DEDUCT INCOME TAX FROM SPECIFIED
FEES.
153. (1) Every specified
person shall, subject to the provisions of this Chapter, deduct from any
specified fee payable and paid prior to April 1, 2011, to any person or to any
partnership, at the time such specified fee is paid, income tax at the rate of
five per centum of such specified fee :-
Provided that where the
specified fee for any year of assessment commencing on or after April 1, 2007,
consists of fees in respect of any construction work, the rate at which income
tax is deductible from such fees, shall be one pre centum.
"Provided further
that where it is proved to the satisfaction of the Commissioner-General that
any person or partnership is registered with the Department of Inland Revenue
as a person or partnership chargeable with the Economic Service Charge under
the Economic Service Charge Act, No. 13 of 2006, the Commissioner-General shall
direct that the provisions of this section relating to the deduction of income
tax shall not apply, in relation to any specified fee payable on or after April
1, 2008 to such person or partnership.";
(2) For the purposes of
subsection (1)-
"specified
person" in relation to any year of assessment, means any person,
partnership or body of persons, who or which either on his or it's own behalf
or on behalf of any other person or persons or partnership or partnerships, is
likely to pay or to credit in that year of assessment or has paid or credited
in the year of assessment immediately preceding that year of assessment,
specified fees aggregating to not less than one million rupees, and
"specified
fee" in relation to any year of assessment means any sum or sums
aggregating to not less than-
(a) fifty thousand
rupees for any month in that year of assessment; or
(b) five hundred
thousand rupees in that year of assessment,
payable by any specified
person in that year of assessment to any person or partnership in consideration
of services rendered by that person or partnership, as the case may be, in the
course of any business, profession, vocation or other activities of an
independent character carried on or exercised by that person or partnership, as
the case may be, and includes any commission, brokerage, a payment made for the
supply of any article on a contract basis through tender or quotation or other
sums of like nature payable by such specified person, but does not include any
sum payable by such specified person to any employee of such specified person
in the course of employment under such specified person or any rent or other
payment payable for the use or occupation, otherwise than as a place of
residence, of any specified land or building, as defined in subsection (2) of
section 156.
154 PROVISIONS OF CHAPTER XVI TO APPLY IN RELATION TO THE
DEDUCTION UNDER THIS CHAPTER OF INCOME TAX FROM SPECIFIED FEES.
154. The provisions of
Chapter XVI relating to the deduction of income tax from interest paid by banks
and financial institutions, credit for income tax so deducted, issue of
directions, duties of banks and financial institutions, default in the deduction
of income tax, issue of assessments on banks and financial institutions,
appeals and penalty for default shall, mutatis mutandis, apply to the deduction
of income tax from specified fees by specified person, credit for income tax so
deducted, issue of directions, duties of specified persons, default in the
deduction of income tax, issue of assessments on specified persons, appeals and
penalty for default under this Chapter, as if there were substituted in Chapter
XVI for the words "banks and financial institutions", of the words
"specified persons" and for the word "interest", of the
words "specified fee", wherever they appear in that Chapter, subject
however to the modification, that credit for income tax deducted under the
provisions of this Chapter by any specified person from any specified fee paid
to any partnership shall, unless the partners of such partnership by mutual
agreement determine otherwise, be distributed among such partners in the ratio
in which such partners share the profits or losses of such partnership.
CHAPTERXVIII
Deduction of Income Tax
from rent, Lease rent or Other Payment Paid by any Person or Partnership for
the use or Occupation of any Land or Building Other than for Residential
Purposes
155 PERSONS PAYING RENT, LEASE RENT ETC. TO DEDUCT INCOME
TAX.
155. Every person or
partnership paying on or before April 1, 2011, any rent lease rent or such
other payment, for the use or occupation otherwise than as a residence, of any
specified land or building, shall deduct at the time of the payment of such rent,
lease rent or other payment, income tax at the rate of ten per centum of such
rent, lease rent or other payment:
Provided that where it
is proved to the satisfaction of the Commissioner-General that any person or
partnership is registered with the Department of Inland Revenue as a person or
partnership, chargeable with the Economic Service Charge under the Economic
Service Charge Act, No. 13 of 2006, the Commissioner-General shall direct that
the provisions of this section relating to the deduction of income tax shall
not apply, in relation to such rent, lease rent or other payment payable on or
after April 1, 2008, to such person or partnership. ".
156 APPLICATION OF THE PROVISIONS OF CHAPTER XVI TO THIS
CHAPTER.
156. (1) The provisions
of Chapter XVI relating to the deduction of income tax from interest paid by
banks and financial institutions, credit for income tax so deducted, issue of
directions, duties of banks and financial institutions, default in the deduction
of income tax, issue of assessments on banks and financial institutions,
appeals and penalty for default shall, mutatis mutandis, apply to the deduction
of income tax from such rent, lease rent or other payments as is mentioned in
section 155, credit for income tax so deducted, duties of persons liable to pay
such rent, lease rent, or other payment, default in the deduction of income
tax, issue of assessments on such persons, appeals and penalty for default
under this Chapter, as if there were substituted in Chapter XVI for the words
"banks and financial institutions" of the words "persons liable
to pay such rent, lease rent or other payment" and for the word
"interest" of the words "rent, lease rent or other payment",
wherever they appear in that Chapter, subject however, to the modification that
credit for income tax deducted under the provisions of this Chapter by any
person from any rent, lease rent or any other payment paid to any co-owners of
such property shall be apportioned among such co-owners in proportion to their
rights of ownership in such property.
(2) For the purposes of
this Chapter "specified land or building" means a land or building in
respect of which the amount of rent, lease rent or other payment payable for
any calendar month or part thereof is not less than fifty thousand rupees or
the aggregate rent, lease rent or other payment payable for any year, is not
less than five hundred thousand rupees.
"(3) Any person or
partnership who or which is liable to deduct income tax from any rent, lease
rent or other payments made by such person or partnership under this Chapter,
shall apply for and obtain a registration number from the Commissioner-General
thirty days prior to the commencement of such deduction of tax and shall
furnish a return on a monthly basis, containing such particulars as may be
specified by the Commissioner-General in relation to such deductions.
(4) Any person or
partnership who or which does not register or does not furnish any return as
required under the subsection (3), shall be liable to a penalty not exceeding
fifty thousand rupees which may be imposed by the Commissioner- General.".
CHAPTER XIX
Deduction of Income Tax from Reward Payments made by any
Government Institution to Informants and Others and shares of Fines paid to any
person and Lottery Prizes, Winnings from Gambling or Winnings from Betting,
Paid by any person or Partnership.
157 GOVERNMENT INSTITUTION PAYING REWARDS OR FINES OR
OTHER PERSON OR PARTNERSHIP PAYING LOTTERY PRIZES ETC. TO DEDUCT INCOME TAX.
157. Notwithstanding
anything to the contrary in any other law. where,
(a) any Government
institution pays a reward or distributes a share of fine other than any such
share of fine paid out of the Consolidated Fund or which will fall under the
profits from employment in terms of section 4 of this Act, in relation to any
individual who holds any paid office under the Republic of Sri Lanka, to any
person;
(b) any person or
partnership pays a lottery prize, winnings from gambling or winnings from
betting to any person, such institution, person or partnership, as the case may
be, shall deduct at the time of the payment of such reward, share of fine, a
lottery prize, winning from gambling or winning from betting, as the case may
be, income tax at the rate of ten per centum on such gross payment:
Provided, however, in
case of any payment referred to in paragraph (b), the tax shall be deducted
only where such payment is not less than five hundred thousand rupees:
Provided further, where
any person or partnership pays a lottery prize, winnings from gambling or
winnings from betting, other than in cash, such person or partnership shall be
liable to pay the relevant amount of income tax on such lottery prize winnings
from gambling or winnings from betting, to the Commissioner-General.
158 PROVISIONS OF CHAPTER XVI TO APPLY IN RELATION TO ANY
DEDUCTION UNDER THIS CHAPTER.
158. (1).The provisions
of Chapter XVI relating to the deduction of income tax from interest paid by
banks and financial institutions, duties of banks and financial institutions,
default in the deduction of income tax, issue of assessments of banks and financial
institutions, appeals and penalty for default, shall, mutatis mutandis, apply
to the deduction of income tax from such payments of rewards, share of fines,
lottery prizes, winnings from gambling or winnings from betting as is mentioned
in section 157, duties of persons or partnerships making such reward payments,
share of fine, lottery prize, winnings from gambling or winnings from betting,
default in the deduction of income tax, issue of assessments on such persons
and partnerships, appeals and penalty for default under this Chapter, as if
there were substituted in Chapter XVI for the words "banks and financial
institutions" of the words "any person or partnership paying any
reward, share of fine, a lottery prize, winnings from gambling or winnings from
betting" and for the word "interest" of the words "any
reward, share of fine, lottery prize, winnings from gambling or winnings from
betting", wherever they appear in that Chapter.
(2)
(a) The aggregate amount
of -
(i) rewards paid to any
person during any calendar month, shall be deemed to be one reward payment and
the income tax on such payment shall be deducted on the last working day of
each month or on the date of the last reward payment in any month;
(ii) shares of fines
paid to any person during any calendar month, shall be deemed to be one share
of fine payment and the income tax on such payment shall be deducted on the
last working day of each month or on the last share of fine payment in any month;
(iii) winnings from
gambling paid or winnings from betting paid per day to any person, shall be
deemed to be one payment of winnings from gambling or winnings from betting and
the income tax on such payment shall be deducted during the course of that day.
(b) In the case of
lottery prizes, each such prize whether paid in cash or otherwise, shall be
considered as a separate prize.
(3)For the purposes of
this Chapter -
"reward" means
any gift made or reward paid by the Government under any scheme for the payment
of rewards to the informants and others;
"share of
fine" means any share of fine collected and distributed or paid by the
Government in accordance with any scheme for the payment of fines;
"lottery
prize" means any prize either in money or otherwise, offered and won in
any lottery conducted by any person in Sri Lanka;
"winnings from
gambling" means any payment received for winning in any gambling or gaming
activity from any party, including a casino;
"winnings from
betting" means any payment received for winning in any on-course or
off-course betting.
(4) Notwithstanding the
provisions of section 140 the total amount of the tax deducted -
(a) from lottery prizes
shall be remitted, to the Commissioner-General, on the first day of the week
and where such first day of the week is not a working day, on the following
working day, which amount shall be the total tax deducted during the week ending
on the Sunday immediately preceding the date of such remittance;
(b) from the winnings
from gambling or winnings from betting shall be remitted to the
Commissioner-General, on the first day of the week and where such first day of
the week is not a working day, on the following working day, and the amount to
be remitted shall be the total tax deducted during the week ending on the
Sunday immediately preceding the date of such remittance.
159 REGISTRATION OF PERSONS CONDUCTING LOTTERIES OR
BETTING OR GAMBLING ACTIVITIES.
159. (1) Any person or
partnership who or which is conducting any lottery or betting or gambling
activity within the meaning of this Chapter, shall apply for and obtain a
registration number from the Commissioner-General thirty days prior to the
commencement of such activity, if the prizes awarded or payments made are
liable to the deduction of income tax under this Chapter, and shall furnish a
return:
(a) on a monthly basis,
for any year of assessment commencing prior to April 1, 2015 ; and
(b) on a quarterly
basis, for any year of assessment commencing on or after April 1, 2015,
containing such particulars as may be specified by the Commissioner-General in
relation to such activity.
(2) Any person or
partnership who or which does not so register or does not furnish any return,
shall be liable to a penalty not exceeding fifty thousand rupees, which may be
imposed by the Commissioner-General.
CHAPTER XX
Deduction of Income Tax from any Annuity or Royalty paid or
any Management Fee Paid or Similar Payment made by any Person or Partnership
160 PERSONS PAYING ANNUITY, ROYALTY, MANAGEMENT FEE OR
SIMILAR PAYMENT TO DEDUCT INCOME TAX.
160. Notwithstanding
anything to the contrary in any other law, where any person or partnership pays
-
(a) an annuity or
royalty other than any such annuity or royalty referred to in section 95; or
(b) any management fee,
such person or
partnership, as the case may be, shall deduct at the time of such payment of
annuity, royalty or management fee, income tax at the rate of -
(i) ten per centum of
the gross annuity or royalty paid; and
(ii) five per centum of
any management fee paid:
Provided however, that
in case of any payment referred to in paragraph (a), the tax shall be deducted
only where each such payment of annuity or royalty to any person or partnership
is in excess of rupees fifty thousand in any month, or rupees five hundred
thousand in any year.
"Provided further
that where it is proved to the satisfaction of the Commissioner-General that
any person or partnership is registered with the Department of Inland Revenue
as a person or partnership chargeable with the Economic Service Charge under
the Economic Service Charge Act, No. 13 of 2006. the Commissioner-General shall
direct that the provisions of this section relating to the deduction of income
tax shall not apply, in relation to any annuity, royalty or management fee
payable on or after April 1, 2008, to such person or partnership.".
161 APPLICATION OF THE PROVISIONS OF CHAPTER XVI TO THIS
CHAPTER.
161. (1) The provisions
of Chapter XVI relating to the deduction of income tax from interest paid by
banks or financial institutions, credit for income tax so deducted, issue of
directions, duties of banks and financial institutions, default in the deduction
of income tax, issue of assessments on banks and financial institutions and
appeals and penalty for default, shall, mutatis mutandis apply to the deduction
of income tax from such payments of any annuity, royalty, management fee or
such other similar payment as is mentioned in section 160, duties of persons or
partnership making such payments of any annuity, royalty, management fee or
similar payments, credit for income tax so deducted, issue of directions,
default in the deduction of income tax, issue of assessments on such persons
and appeals and penalty for default under this Chapter, as if there were
substituted in Chapter XVI for the words "banks and financial
institutions" of the words "persons or partnerships liable to pay
such annuity, royalty management fee or such similar payment" and for the
word "interest" of the words "annuity, royalty, management fee
or such similar payment", wherever they appear in that Chapter.
(2) Any person or
partnership who or which is liable to deduct income tax under this Chapter,
shall apply for and obtain a registration number from the Commissioner General
thirty days prior to the commencement of such deduction of tax, and shall
furnish a return on a monthly basis containing such particulars as specified by
the Commissioner-General.
(3) Any person or
partnership who or which does not so register or does not furnish any return,
shall be liable to a penalty not exceeding rupees fifty thousand, which may be
imposed by the Commissioner-General.
"CHAPTER XXA
DEDUCTION OF INCOME TAX
FROM THE SALE PRICE OF ANY GEM SOLD AT ANY AUCTION CONDUCTED BY THE NATIONAL
GEM AND JEWELLERY AUTHORITY.
161A NATIONAL GEM AND JEWELLERY AUTHORITY TO DEDUCT
INCOME TAX FROM THE SALE PRICE OF ANY GEM SOLD AT ANY AUCTION.
161A. (1) The National
Gem and Jewellery Authority established by the National Gem and Jewellery
Authority Act, No. 50 of 1993, shall deduct from the sale price of any gem sold
at any auction conducted by it, income tax of an amount equal to 2.5 per centum
of the sale price of such gem from the sum payable to the seller of such gem
and at the time such sum is paid to the seller.
(2) The provisions of
Chapter XVI relating to the deduction of income tax from interest paid by banks
and financial institutions, duties of banks and financial institutions, default
in the deduction of income tax, issue of assessments on banks and financial
institutions, appeals and penalty for default, shall, mutatis mutandis apply to
and in relation to the deduction of income tax from the sale price of any gem,
duties of the National Gem and Jewellery Authority making such sale, default in
the deduction of income tax, issue of assessments on the National Gem and
Jewellery Authority, appeals and penalty for default under this Chapter, as if
there were substituted in Chapter XVI for the words "banks and financial
institutions", of the words "National Gem and Jewellery
Authority", and for the word "interest", of the words "sale
price of any gem sold", wherever they appear in that Chapter.".
CHAPTER XXI
Retention of Moneys in Certain Provident Funds
162 RETENTION OF TEN PER CENTUM OF MONEYS LYING TO THE
CREDIT OF A CONTRIBUTOR TO A SPECIFIED PROVIDENT FUND, TO MEET ANY TAX PAYABLE.
162. The person having
custody of the moneys lying in any provident fund to the credit of a
contributor to such fund who is liable to income tax on any part of such
moneys, shall, when he makes payment of these moneys to that contributor,
retain in his custody an amount equal to ten per centum of those moneys, other
than such part thereof as represents the contributions made by that
contributor. The person who retains in his custody such amount shall notify the
Commissioner-General of the amount so retained, and deduct there from the sum
which the Commissioner-General by notice in writing or electronic means directs
him to deduct in respect of any tax payable under any law administered by the
Commissioner-General, and the sum so deducted shall be paid to the
Commissioner-General. Any balance left after such deduction shall be paid to
such contributor.
CHAPTER XXII
Assessments
163 ASSESSMENTS AND ADDITIONAL ASSESSMENTS.
163. (1) Where any
person who in the opinion of an Assessor or Assistant Commissioner is liable to
any income tax for any year of assessment, has not paid such tax or has paid an
amount less than the proper amount which he ought to have paid as such tax for
such year of assessment, an Assessor or Assistant Commissioner may, subject to
the provisions of subsection (3) and (5) and after the fifteenth day of
November immediately succeeding that year of assessment, assess the amount
which in the judgment of the Assessor or Assistant Commissioner ought to have
been paid by such person, and shall by notice in writing require such person to
pay forthwith -
(a) the amount of tax so
assessed, if such person has not paid any tax for that year of assessment; or
(b) the difference
between the amount of tax so assessed and the amount of tax paid by such person
for that year of assessment, if such person has paid any amount as tax for that
year of assessment:
Provided that an
Assessor or Assistant Commissioner may, subject to the provisions of
subsections (3) and (5), assess any person for any year of assessment at any
time prior to the fifteenth day of November immediately succeeding that year of
assessment, if he is of opinion that such person is about to leave Sri Lanka or
that it is expedient to do so for the protection of revenue, and require such
person to pay such tax to the Commissioner-General earlier than as required
under subsection (1) of section 113:
Provided further that
any assessment in relation to the tax payable by a company under sub-paragraph
(i) of paragraph (b) of subsection (1) of section 61 or paragraph (c) of
subsection (1) of section 61 or paragraph (b) of subsection (1) of section 62,
shall be made after the expiry of thirty days from the due date for payment of
such tax.
(2) Where it appears to
an Assessor or Assistant Commissioner that any person liable to income tax for
any year of assessment, has been assessed at less than the proper amount, the
Assessor or Assistant Commissioner may, subject to the provisions of subsection
(3) and subsection (5), assess such person at the additional amount at which
according to his opinion such person ought to have been assessed, and the
provisions of this Act as to notice of assessment, appeal and other proceedings
shall apply to such additional assessment and to the tax charged thereunder.
(3) Where a person has
furnished a return of income, the Assessor or Assistant Commissioner may in
making an assessment on such person under subsection (1) or under subsection
(2), either -
(a) accept the return
made by such person; or
(b) if he does not
accept the return made by that person, estimate the amount of the assessable
income of such person and assess him accordingly:
Provided that where an
Assessor or Assistant Commissioner does not accept a return made by any person
for any year of assessment and makes an assessment or additional assessment on
such person for that year of assessment, he shall communicate to such person in
writing his reasons for not accepting the return.
(4) Where a person has
not furnished a return of income and the Assessor or Assistant Commissioner is
of the opinion that such person is liable to pay income tax, the Assessor or
Assistant Commissioner may, in making an assessment on such person under subsection
(1) or subsection (2), estimate the amount of the assemble income of such
person and assess him accordingly, but such assessment shall not affect the
liability of such person to a penalty under this Act for failure or neglect to
furnish a return.
(5) Subject to the
provisions of section 72, no assessment of the income tax payable under this
Act by any person or partnership -
(a) who or which has
made a return of his or its income on or before the thirtieth day of November
of the year of assessment immediately succeeding that year of assessment,
Provided, that nothing
in this subsection shall apply to the assessment of income tax payable by any
person in respect of any year of assessment, consequent to-
(i) the receipt by such
person of any arrears relating to the profits from employment of that person
for that year of assessment;
(ii) any adjustment made
in line with the adoption of the Sri Lanka Financial Reporting Standards for
the year of assessment in which such adoption was made; or
(iii) any profits and
income or the loss ascertained in accordance with the provisions referred to in
section 104 or section 104A, as the case may be, for any year of assessment
commencing on or after April 1, 2013, for any period before the expiry of five
years from the date of receipt of such return, where the Commissioner General
is in the opinion that:
(A)the profits and
income or the loss referred to in section 104, of any person, has not been
ascertained having regard to the arm’s length price, and issue of such
assessment is not contrary to any provision of an agreement in force for the
relief of double taxation between the Government of Sri Lanka and the
Government of any territory in which such person is resident; or
(B)the profits and
income or the loss referred to in section 104A, of any person, has not been
ascertained having regard to the arm’s length price:
(b) who has failed to
make a return on or before such date as referred to in paragraph (a), shall be
made after the expiry of a period of four years from the thirtieth day of
November of the immediately succeeding year of assessment:
Provided, that nothing
in this subsection shall apply to the assessment of income tax payable by any
person in respect of any year of assessment consequent to -
(i) the receipt by such
person of any arrears relating to the profits from employment of that person
for that year of assessment; or
(ii) any adjustment made
in line with the adoption of the Sri Lanka Financial Reporting Standards for
the year of assessment in which such adoption was made:
Provided further that,
where in the opinion of the Assessor or Assistant Commissioner, any fraud,
evasion or wilful default has been committed by or on behalf of, any person in
relation to any income tax payable by such person for any year of assessment,
it shall be lawful for the Assessor or Assistant Commissioner to make an
assessment or an additional assessment on such person at any time after the end
of that year of assessment.
(6) Notwithstanding the
provisions of subsection (5), where the Court annuls any assessment on the
ground that the provisions of the proviso to subsection (3) have not been
complied with, it shall be lawful for an Assessor or Assistant Commissioner to
make, where necessary, a further assessment in place of the assessment so
annulled:
Provided that such
further assessment shall be limited to only one assessment in place of the
assessment so annulled, and no further assessment or additional assessment
shall be made.
(7) An assessment under
subsection (1) or an additional assessment under subsection (2) on any person
for any year of assessment, shall not affect the liability of such person to
the penalty specified in subsection (2) of section 173 and for the purposes of
that section, the amount so assessed shall be deemed to be the income tax which
such person ought to have paid for that year of assessment.
(8)Where any individual
has for any year of assessment (hereinafter in this subsection referred to as
the "first-mentioned year of assessment") furnished a return of his
income and has, in relation o each year of assessment within the period of
three years of assessment immediately preceding the first-mentioned year of
assessment, complied with the requirements of subsection (1) of section 106 and
of subsection (1) of section 113, and has -
(a)
(i) paid as income tax,
on the basis of the return so furnished for the first-mentioned year of
assessment, a sum not less than one hundred and twenty per centum of the income
tax for the year of assessment immediately preceding the first mentioned year of
assessment; or
(ii) specified as
assessable income, in the return so furnished for the first mentioned year of
assessment, a sum not less than one hundred and twenty five per centum of the
assessable income for the year of assessment immediately preceding the first
mentioned year of assessment, and
(b) sworn an affidavit
that no fraud, evasion or willful default has been committed in relation to the
income tax payable for the first mentioned year of assessment,
then such return shall
be accepted and no assessment or additional assessment shall be made on such
individual.
(9) Where any individual
whose assessable income for any year of assessment does not exceed one million
rupees, and who has -
(a) not been given
notice by a Commissioner under subsection (7) of section 106 in relation to
that year of assessment or any previous year of assessment; or
(b) not furnished a
return of his income, and if he has a child, the income of such child for any
previous year of assessment,
furnishes for that year
of assessment, under subsection (1), a return of his income and if he has a
child the income of such child, and pays the tax on the basis of such return
together with any penalty due under Chapter XXV, such return shall be accepted
and no assessment or additional assessment shall be made on such individual for
that year of assessment, notwithstanding that such return is not accompanied by
a statement of accounts.
(10) Notwithstanding
anything to the contrary in any other provisions of this Act, where the annual
total turnover of any person other than a company for any year of assessment
commencing prior to April 1, 2011 from every trade or business did not exceed
rupees three hundred million and such person has not complied with the
provisions of any tax law administered by the Commissioner - General, invests
earnings so made by such person prior to April 1, 2011, in any trade or
business, on or before March 31, 2014, and furnishes the return of income for
any year of assessment commencing prior to April 1, 2014 together with an
undertaking in writing that he shall comply with the requirements of this Act
for any subsequent period, such return shall be accepted and no assessment or
additional assessment shall be made on such person in respect of such year of
assessment for which a return of income is so furnished and for five years of
assessment immediately succeeding that year of assessment.
164 NOTICE OF ASSESSMENT.
164. An Assessor or
Assistant Commissioner shall give notice of assessment to each person and each
partnership who or which has been assessed, stating the amount of income
assessed and the amount of tax charged: Provided that where such notice is
given to an employer under the provisions of Chapter XIV, it shall be
sufficient to state therein the amount of the tax charged.
CHAPTER XXIII
Appeals
A-appeals
to the commissioner-general
165 APPEALS TO THE COMMISSIONER-GENERAL.
165. (1)Any person who
is aggrieved by the amount of an assessment made under this Act or by the
amount of any valuation for the purposes of this Act may, within a period of
thirty days after the date of the notice of assessment, appeal to the
Commissioner-General against such assessment or valuation:
Provided that the
Commissioner-General, upon being satisfied that owing to absence from Sri
Lanka, sickness or other reasonable cause, the appellant was prevented from
appealing within such period, shall grant an extension of time for preferring
the appeal.
(2) Every appeal shall
be preferred by a petition in writing addressed to the Commissioner-General and
shall state precisely the grounds of such appeal.
(3) Where the assessment
appealed against has been made in the absence of a return, the petition of
appeal shall be sent together with a return duly made.
(4)Every person
preferring an appeal under subsection (1) against the amount of an assessment
for any year of assessment shall, (unless such person has done so already), pay
to the Commissioner-General the amount of tax payable by such person on the
basis of the return furnished by him for that year of assessment, together with
any penalty thereon accrued up to the date of such notice of assessment and
shall attach, to the petition of appeal, a receipt in proof of such payment:
Provided that the
Commissioner-General, upon being satisfied that owning to serious financial
hardship suffered by the appellant at or about the time of such notice of
assessment or, owning to other reasonable cause, the appellant was prevented
from paying such tax and such penalty, may grant an extension of time for the
payment of such tax and penalty thereon accrued up to the date of payment, and
accordingly a receipt in proof of payment of such tax and penalty thereon
accrued up to the date of payment, furnished within such extended time shall,
for the purposes of this subsection, be deemed to have been attached to the
petition of appeal.
(5) Every petition of
appeal, which does not conform to the provisions of subsections (2), (3) and
(4), shall not be valid.
(6) The receipt of every
appeal shall be acknowledged within thirty days of its receipt and where so
acknowledged, the date of the letter of acknowledgement shall for the purpose
of this section, be deemed to be the date of receipt of such appeal. Where however
the receipt of any appeal is not so acknowledged, such appeal shall be deemed
to have been received by the Commissioner General on the day o which it is
delivered to the Commissioner-General.
(7) On receipt of a
valid petition of appeal, the Commissioner-General may cause further inquiry to
be made by an Assessor or Assistant Commissioner, other than the Assessor or
Assistant Commissioner who made such assessment against which the appeal is preferred,
and if in the course of such inquiry an agreement is reached as to the matters
specified in the petition of appeal, the necessary adjustment of the assessment
shall be made.
(8) Where no agreement
is reached between the appellant and the Assessor or Assistant Commissioner in
the manner provided in subsection (7), the Commissioner-General shall, subject
to the provisions of section 168, fix a time and place for the hearing of the
appeal.
(9) Every appellant
shall attend before the Commissioner-General at the time and place fixed for
the hearing of the appeal. The appellant may attend the hearing of the appeal
in person or by an authorized representative. The Commissioner-General may if he
thinks fit, from time to time adjourn the hearing of an appeal for such time
and place as he may fix for the purpose. In any case in which an authorized
representative attends on behalf of the appellant, the Commissioner-General may
adjourn the hearing of the appeal and may, if he considers that the personal
attendance of the appellant is necessary for the determination of the appeal,
require that the appellant shall attend in person at the time and place fixed
for the adjourned hearing of the appeal. If the appellant or his authorized
representative fails to attend at the time and place fixed for the hearing or
any adjourned hearing of the appeal, or if the appellant fails to attend in
person when required so to attend by the Commissioner-General, the Commissioner-General
may dismiss the appeal:
Provided that, if the
appellant shall within a reasonable time after the dismissal of an appeal
satisfy the Commissioner-General, that he or his authorized representative was
prevented from due attendance at the hearing or at any adjourned hearing of such
appeal by reason of absence from Sri Lanka, sickness, or other unavoidable
cause, the Commissioner-General may vacate the order of dismissal and fix a
time and place for the hearing of the appeal.
(10) The
Commissioner-General shall have power to summon any person whom he may consider
able to give evidence respecting the appeal to attend before him, and may
examine such person on oath or otherwise. Any person so attending may be
allowed by the Commissioner-General any reasonable expenses necessarily
incurred by such person in so attending.
(11) Before making his
determination on any appeal, the Commissioner-General may if he considers it
necessary so to do, by notice given in writing to any person, require that
person to produce for examination, or to transmit to the Commissioner-General within
the period specified in such notice, any such deeds, plans, instruments, books,
accounts, trade lists, stock lists, registers, cheques, paying-in-slips,
auditors' reports or other documents in his possession, as may be specified in
such notice.
(12) Where the
Commissioner-General hears the evidence of the appellant or of any other person
in respect of the appeal, he shall maintain or cause to be maintained a record
of such evidence.
(13) In determining an
appeal under this section, the Commissioner-General may confirm, reduce,
increase or annul the assessment appealed against and shall give notice in
writing to the appellant, of his determination on the appeal.
(14) Every petition of
appeal preferred under this section, shall be agreed to or determined by the
Commissioner-General, within a period of two years from the date on which such
petition of appeal is received by the Commissioner-General, unless the agreement
or determination or such appeal depends on -
(a) the decision of a
competent court on any matter relating to or connected with or arising from
such appeal and referred to it by the Commissioner-General or the appellant; or
(b) the furnishing of
any document or the taking of any action -
(i) by the appellant,
upon being required to do so by an Assessor or Assistant Commissioner or the
Commissioner-General by notice given in writing to such appellant (such notice
being given not later than six months prior to the expiry of two years from the
date on which the petition of appeal is received by the Commissioner-General);
or
(ii) by any other
person, other than the Commissioner-General or an Assessor or Assistant
Commissioner. Where such appeal is not agreed to or determined within such
period, the appeal shall be deemed to have been allowed and tax charged
accordingly.
(15) For the purposes of
this Chapter, there shall be a panel of adjudicators appointed by the Minister.
The remuneration of the members of the panel of adjudicators shall be
determined by the Minister. The Commissioner-General may authorize any such adjudicator
to exercise any of the powers vested in him under this Chapter, as he may
specify in such authorization.
B -
Appeals to the Board of Review
166 REPEALED.
166. Repealed
167 REPEALED.
167. Repealed.
168 REPEALED.
168. Repealed.
169 REPEALED.
169. Repealed.
C -
Appeals to the court of Appeal
170 APPEAL ON A QUESTION OF LAW TO THE COURT OF APPEAL.
170. (1) The decision of
the Board or the Tax Appeal Commission, as the case may be, shall be final:
Provided that either the
appellant or the Commissioner-General may make an application requiring the
Board or the Tax Appeal Commission, as the case may be, to state a case on a
question of law for the opinion of the Court of Appeal. Such application shall
not be entertained unless it is made in writing and delivered to the Secretary
to the Board or the Tax Appeal Commission, as the case may be,, together with a
fee of one thousand and five hundred rupees, within one month of the date on
which the decision of the Board or the Tax Appeal Commission, as the case may
be, was notified in writing to the Commissioner-General or the appellant, as
the case may be.
(2) The case stated by
the Board or the Tax Appeal Commission, as the case may be, shall set out the
facts, the decision of the Board or the Tax Appeal Commission, as the case may
be,, and the amount of the tax in dispute where such amount exceeds five thousand
rupees, and the party requiring the Board or the Tax Appeal Commission, as the
case may be, to state such case shall transmit the case, when stated and signed
to the Court of Appeal, within fourteen days after receiving the same.
(3) For the purpose of
the application of the provisions of the Stamp Duty Act, No. 43 of 1982 -
(a) all proceedings
before the Court of Appeal on any case stated under this section or incidental
to the hearing, determination or disposal of any such case, shall be deemed to
be civil proceedings before the Court of Appeal of the value of five thousand
rupees or of such greater amount as is set out by the Board or the Tax Appeal
Commission, as the case may be, in the stated case as the amount of the tax in
dispute;
(b) every such case
stated shall, together with all books, documents and papers annexed thereto by
the Board or the Tax Appeal Commission, as the case may be,, be deemed to be a
single exhibit in civil proceedings before the Court of Appeal; and
(c) the
Commissioner-General, if he is the appellant, shall be deemed to be a
Government officer suing, or if he is the respondent to the appeal, a
Government officer being sued, in a suit virtue offcii.
(4) At or before the
time when he transmits the stated case to the Court of Appeal, the party
requiring it shall send to the other party, a notice in writing informing him
that a case has been stated on his application and shall supply him with a copy
of the stated case.
(5) Any two or more
Judges of the Court of Appeal may cause a stated case to be sent back to the
Board or the Tax Appeal Commission, as the case may be, for amendment, and the
Board or the Tax Appeal Commission, as the case may be, shall amend the case accordingly.
(6) Any two or more
Judges of the Court of Appeal may hear and determine any question of law
arising on the stated case and may in accordance with the decision of Court
upon such question, confirm, reduce, increase or annul the assessment
determined by the Board or the Tax Appeal Commission, as the case may be,, or
may remit the case to the Board or the Tax Appeal Commission, as the case may
be, with the opinion of the Court, thereon. Where a case is so remitted by the
Court, the Board or the Tax Appeal Commission, as the case may be, shall revise
the assessment in accordance with the opinion of the Court.
(7) The Court of Appeal
may, pending the determination of the case stated to such Court, make an
interim determination as regards the amount of tax recoverable by the
Commissioner-General in respect of the amount of tax in dispute, on the basis
of a report furnished by the Commissioner-General.
(7A) Where the Court of
Appeal makes an interim determination under subsection (7), the Court may make
Order that the full tax in dispute or part thereof, be paid in a manner as the
Court considers reasonable, pending the final determination of the appeal.
Any excess payment of
tax arising as a result of the final determination by the Court on the appeal
shall be refunded to the appellant.
(8) In any proceedings
before the Court of Appeal under this section, the Court may make such order in
regard to costs in the Court of Appeal and in regard to the sum paid under
subsection (1), as the Court may deem fit.
(9) For the purposes of
enabling the Commissioner-General or any other party to appeal to the Supreme
Court against any order of the Court of Appeal under subsection (6), and for
the purpose of the application of the provisions of any written law relating to
appeals to the Supreme Court from the decisions of the Court of Appeal -
(a) an order made by the
Court of Appeal under subsection (6) shall, together with any order of that
Court under subsection (8), be deemed to be a final judgement of the Court of
Appeal in a civil action between the Commissioner-General and such other party;
(b) the value of the
matter in dispute in such civil action shall be deemed to be five thousand
rupees: Provided that where the Board or the Tax Appeal Commission, as the case
may be, has in the stated case, set out an amount higher than five thousand rupees
as the amount of the tax in dispute, the value of the matter in dispute in such
civil action shall be deemed to be that higher amount; and
(c) the
Commissioner-General shall not be required in respect of any such appeal, to
make any deposit or pay any fee or furnish any security prescribed by such
written law.
CHAPTER XXIV
Finality of Assessments and Penalty for Incorrect Returns
171 ASSESSMENTS OR AMENDED ASSESSMENTS TO BE FINAL.
171. Where no valid
appeal has been lodged within the time specified in subsection (1) of section
165 against an assessment as regards the amount of the assessable income
assessed thereby, or where an appeal preferred against such an assessment is
dismissed under subsection (9) of section 165, or where agreement is reached
under subsection (7) of section 165 as to the amount of such assessable income,
or where the amount of such assessable income has been determined on appeal,
the assessment as made or agreed to or determined on appeal, as the case may
be, shall be final and conclusive for all purposes of this Act, as regards the
amount of such assessable income :
Provided that nothing in
this section shall be read and construed as preventing an Assessor or Assistant
Commissioner from making, subject to the provisions of section 163, an
assessment, or additional assessment for any year of assessment, which does not
involve re-opening any matter which has been determined on appeal for that
year.
172 PENALTY FOR INCORRECT RETURN.
172. (1)Where in an
assessment made in respect of any person the amount of the assessable income or
taxable income exceeds the amount specified as his assessable income or taxable
income in the return furnished by him under subsection (1) of section 106 or
subsection (2) of section 106 and the assessment is final and conclusive under
section 171, the Commissioner-General may, unless that person proves to the
satisfaction of the Commissioner-General that there is no fraud or wilful
neglect involved in the disclosure of income or any claim for any deduction or
relief made by that person in such return, in writing order that person to pay
on or before a specified date, a sum not exceeding the aggregate of two
thousand rupees and a sum equal to twice the tax on the amount of the excess as
penalty for making an incorrect return.
(2) Any person in
respect of whom an order is made under subsection (1) may, within twenty-one
days after the notification of the order to him, appeal therefrom in writing to
the Board of Review prior to April 1, 2011 or on or after April 1, 2011, to the
Tax Appeals Commission. The appeal shall state precisely the grounds of
objection to the order.
(3) The provisions of
section 169 shall as far as possible apply prior to April 1, 2011, to the
hearing and disposal of any appeal under the preceding provisions of this
section. The Board of Review prior to April 1, 2011 or after April 1, 2011, the
Tax Appeals Commission, as the case may be, may confirm, reduce, increase or
annul the penalty imposed by the order of the Commissioner-General from which
the appeal is made, but any increase of such penalty shall not be in excess of
the maximum amount which the Commissioner-General may impose, under subsection
(1) as such penalty.
(4) Where in respect of
any person's return of income a penalty is imposed on that person under this
section, he shall not be liable to prosecution for an offence relating to that
return under paragraph (a) of subsection (4) of section 202 or under paragraph
(a) of subsection (1) of section 204
CHAPTER XXV
Tax in Default and Sums Added Thereto
173 TAX IN DEFAULT AND SUMS ADDED THERETO.
173. (1) Where a
quarterly instalment of a tax or a part of such instalment for any year of
assessment is not paid on or before the date specified in subsection (1)
section 113 for the payment of that instalment, such instalment of tax or part
thereof, or where any tax or part thereof assessed by an Assessor or Assistant
Commissioner for any year of assessment and required to be paid on or before
the date specified in the notice of assessment (such date, in the case of any
tax which is required to be paid under subsection (1) of section 113, being a
date earlier than the date before which such tax or part thereof is required to
be paid under that section) is not so paid, such tax or part thereof shall be
deemed to be in default, and -
(a) where such tax is
payable by one person, such person; and
(b) where such tax is
payable by more than one person or by a partnership, each of such persons or
each partner in each partnership,
shall be deemed to be a
defaulter for the purposes of this Act.
(2) Where the entirety
of the tax or part of such tax payable by a company on or before the date
specified for the payment of that tax in subsection (3) of section 113, is not
so paid, such tax or part thereof shall be deemed to be in default and such company
shall be deemed to be a defaulter for the purposes of this Act.
(3)Where any tax payable
by any person for any year of assessment is in default, the defaulter shall in
addition to the tax in default, pay -
(a) a penalty of a sum
equivalent to ten per centum of such tax; and
(b) where such tax is
not paid before the expiry of thirty days after it has begun to be in default,
a further penalty of a sum equivalent to two per centum of the tax in default
in respect of each further period of thirty days or part thereof, during which
it remains in default:
Provided that -
(i) the total amount
payable as a penalty under the preceding provision of this section shall in no
case exceed fifty per centum of the tax in default;
(ii) where any person
has paid as quarterly instalment of tax for any year of assessment a sum which
is not less than one-quarter of the income tax payable by such person for the
year immediately preceding that year of assessment, such person shall not be
liable to any penalty in respect of such quarterly instalment of tax under the
preceding provisions of this section, until the thirtieth day of September
immediately succeeding the end of the year of assessment in respect of which
such quarterly instalment of tax became due.
For the purposes of this
paragraph "income tax":-
(A) in relation to a
company for any year of assessment shall not include tax payable by that
company, under paragraph (b) of subsection (1) of section 61, for that year of
assessment ;
(B) in relation to any
person, for any year of assessment means, the income tax which would have been
payable by such person for the year preceding that year of assessment
(hereinafter referred to as the "preceding year") had any profits and
income, other than the net annual value of a residence and any subsidy exempt
from income tax under this Act, which were exempt from income tax, under this
Act or any other written law and in respect of which such exemption ceased in
such preceding year, been taken into account in computing the assessable income
of that person for that year of assessment;
(iii) the
Commissioner-General may reduce or waive any penalty payable under this
section, if it appears to the Commissioner-General that such reduction or
waiver is just and equitable in all the circumstances ;
(iv) the
Commissioner-General shall waive the penalty accrued on the tax for any year of
assessment ending on or before March 31, 2005, and which remained unpaid as at
October 1, 2005, if the entirety of such tax is paid in accordance with a
scheme agreed to on or before December 31, 2007, with him in that behalf,
within a period of not more than three years succeeding the date of such
agreement. Where any such scheme so agreed to is not adhered to, the
Commissioner- General shall, notwithstanding the provisions of the preceding
paragraph, not reduce or waive such penalty.
(4)Notwithstanding the
provisions of section 96B of the Inland Revenue Act, No. 4 of 1963, where any
tax payable by any person for any year of assessment preceding the year of
assessment commencing on April 1, 1979 is in default on or after April 1, 1981,
the defaulter shall, in addition to the tax in default, pay as a penalty any
sum payable as penalty in terms of subsection (6) of section 96B of the Inland
Revenue Act, No. 4 of 1963 and a further sum equivalent to twenty five per
centum of the amount in default on or after April 1, 1981.
(5)Where any assessment
has been made on any person for any year of assessment by an , the amount of
the tax as specified in the notice of assessment shall, for the purposes of
subsection (3), be deemed to be the tax payable by that person for that year of
assessment.
(6)Tax shall be paid
notwithstanding any appeal against the assessment, unless the
Commissioner-General orders that payment of tax or any part thereof be held
over pending the determination of such appeal, and the amount of the tax or
part thereof so held over shall not be deemed to be in default.
(7) Where the
Commissioner-General is of the opinion either that the tax or any part thereof
held over under subsection (6) is likely to become irrecoverable, or that the
appellant is unreasonably delaying the prosecution of his appeal, he may revoke
any order made under that subsection, and make such fresh order as the case may
appear to him to require and the amount of any tax not paid on or before such
date as may be specified in the fresh order, shall be deemed to be in default.
(8) Where, upon the
final determination of an appeal under Chapter XXIII or upon any order made by
the Commissioner-General, any tax which has been held over under subsection (6)
becomes payable or tax charged by the original assessment is increased, the
Commissioner-General shall give to the appellant a notice in writing, fixing a
date on or before which any tax or balance tax shall be paid. Any tax not so
paid shall be deemed to be in default.
(9) Notwithstanding
anything in this section, where there is an appeal against an assessment and
where the payment of any tax specified in the notice of assessment is held over
on the order of the Commissioner-General, the Commissioner-General may, if the
appellant agrees during the course of the inquiring into or hearing of that
appeal, that a certain sum is due or is likely to be due as tax in respect of
that assessment, by notice in writing given to the appellant, direct the
appellant to pay such sum on or before such date as is specified in the notice.
Any sum not so paid shall be deemed to be in default.
(10) Where upon the
final determination of an appeal under Chapter XXIII, any tax in default to
which any sum or sums has or have been added under subsection (3) is reduced,
then such sum or sums shall be calculated on the tax as so reduced.
(11) Where any person
liable to pay any tax satisfies the Commissioner-General on or before the date
he is required to pay such tax or any instalment thereof, that he has made
arrangements for the payments of such tax or instalments from any sum to be paid
to him by the Government or from moneys lying to his credit in the National
Savings Bank or from moneys to be paid to him from any person or provident fund
approved by the Commissioner-General, the Commissioner-General may grant such
person an extension of time for the payment of such tax or instalment, and such
tax or instalment thereof shall not be deemed to be in default until the
expiration of such extended time.
(12) Where any tax is
due from the estate of a deceased person, and the executor of such deceased
person satisfies the Commissioner-General on or before the date he is required
to pay such tax or any instalment thereof, that such tax or instalment cannot
be paid on or before that date owing to probate or letters of administration
not having been granted to him, such sum or instalment shall not be deemed to
be in default if it is paid within a period of two months after the date of the
grant of probate or letters of administration.
In this subsection, the
expression, "executor" does not include any person who takes
possession of or intermeddles with, the property of a deceased person.
(13) Where any tax held
over by the Commissioner General becomes payable, either wholly or partly on
settlement of the appeal, then any amount payable shall be recovered within one
year from the date of settlement of the appeal, unless a case has been stated
in relation to such appeal to the Court of Appeal under section 170;
(14) In this section,
"tax" means income tax which is payable in respect of the profits and
income of any person for any year of assessment, and the advance company tax
payable for any year of assessment by a company in relation to any qualifying
distribution.
174 PUNISHMENT FOR TAX IN DEFAULT.
174. Where any person,
including a director or a principal officer of a company or a partner of a
partnership or a member or an office-bearer of an un-incorporated body, in
respect of income tax payable by such person, including a company, partnership
or other un-incorporated body respectively, has defaulted in the payment of
such tax due and where such default continues for a period exceeding thirty six
months, the Commissioner-General shall submit to the Magistrate a certificate
containing relevant particulars, including the amount of tax in default, the
period of default and accrued penalty and interest. Such person including a
director, principal officer, partner, a member or an office-bearer, as the case
may be, shall be liable, on conviction after summary trial before a Magistrate,
to a period of imprisonment of either description not exceeding three months:
Provided that in case of
a director or a principal officer of a company, the Magistrate may allow such
person to show cause that he is not responsible for such default or that he has
taken all necessary steps within his power to avoid the non-payment of such
tax.
CHAPTER XXVI
Recovery of Tax
175 TAX TO INCLUDE FINES ETC.
175. In this Chapter,
"tax" includes -
(a) income tax, charged
and levied under this Act;
(b) any income tax,
wealth tax or gifts tax charged and levied under the Inland Revenue Act, No. 28
of 1979 and which was in default or went into default on or after April 1,
2000;
(bb) any income tax
charged and levied under the Inland Revenue Act, No. 38 of 2000 and which was
in default or goes into default on or after April 1, 2006 ;
(c) any income tax which
an employer is required to pay under the provisions of Chapter XIV;
(d) the whole or any
part of any quarterly instalment of income tax referred to in section 97 of the
Inland Revenue Act, No. 28 of 1979 or in section 165 of the Inland Revenue Act,
No. 38 of 2000, or in section 113 of this Act and which any person is liable to
pay for any year of assessment;
(e) any advance company
tax which a company was required to pay under the Inland Revenue Act, No. 28 of
1979 or the Inland Revenue Act, No. 38 of 2000,
and any sums added to
any such tax by reason of default, any sum or sums added to such income tax
under section 173 of this Act or section 144 of the Inland Revenue Act, No. 38
of 2000 or to income tax, wealth tax or gifts tax under subsection (2) or (2A)
of section 125 of Inland Revenue Act, No. 28 of 1979 or under subsection (6) of
section 96B of the Inland Revenue Act, No. 4 of 1963, and any fines, penalties,
fees or costs whatsoever incurred under this Act or the Inland Revenue Act, No.
38 of 2000 or Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No.
4 of 1963.
176 TAX TO BE A FIRST CHARGE.
176. (1)Save as provided
in subsection (2), tax in default shall be a first charge upon all the assets
of the defaulter:
Provided that -
(a) such charge shall
not extend to or affect any assets sold by the defaulter to a bona fide
purchaser for value prior to the seizure of the same in accordance with the
provisions of section 178;
(b) as regards immovable
property, the tax shall not rank in priority to any lease or encumbrance
created bona fide for value and registered prior to the date of seizure of the
property under section 178; and
(c) as regards movable
property, where tax for more than one year of assessment is in default, the tax
for one year only to be selected by the Commissioner-General, shall rank in
priority to any lien or encumbrance created bona fide for value prior to the
date of default.
(2) A receiver shall pay
out of the assets under his control, the tax charged or chargeable for five
complete years of assessment prior to the date of the insolvency, bankruptcy,
or liquidation to be selected by the Commissioner-General as a first charge on
such assets, and any other tax charged or chargeable for periods prior to such
date shall be an unsecured debt:
Provided that where the
receiver proves to the satisfaction of the Commissioner-General that any tax in
default which he is liable to pay is excessive, the Commissioner-General may,
notwithstanding the provisions of section 171, review the assessment in respect
of which the tax is charged and make such adjustments as may appear to him to
be just and equitable in all the circumstances of the case.
177 NOTICE TO DEFAULTER.
177. (1) Before taking
proceedings to recover any tax in default in any manner hereinafter provided,
the Commissioner-General shall subject to the provisions of subsection (2),
issue notice in writing to the defaulter stating -
(a) the particulars of
such tax; and
(b) that action is being
contemplated to recover such tax.
(2) Where the
Commissioner-General is satisfied that compliance with the procedure set out in
subsection (1) for the recovery of any tax in default is inexpedient and that
immediate action is necessary for the recovery of such tax, he may take
proceedings to recover such tax without issuing a notice to the defaulter as
required by that subsection. Where the Commissioner-General takes proceedings
under this subsection to recover any tax in default, he shall, within fourteen
days of the date on which he takes such proceedings, issue a notice to the
defaulter stating the particulars of the tax in respect of which such
proceedings have been taken, and the nature of such proceedings.
(3) If such defaulter
has not appealed within the proper time against the assessment or assessments
in respect of which such tax is charged, he may, within thirty days of the
notice issued under subsection (1) or subsection (2), make any objection to the
tax so charged and the Commissioner-General shall, notwithstanding the
provisions of section 171, consider such objection and give his decision
thereon which shall be final:
Provided that where the
Commissioner-General is satisfied that owing to illness, absence from Sri Lanka
or other reasonable cause, the defaulter was prevented from objecting within
thirty days of the notice issued under subsection (1) or subsection (2), he
shall grant an extension of time for preferring such objections.
(4) Where the tax
recovered as a result of any proceedings taken under subsection (2) is in
excess of the amount of tax determined under subsection (3) to be payable by
the defaulter in respect of any year of assessment, such excess shall,
notwithstanding anything in section 200, be refunded to the defaulter :
Provided that no refund under this subsection shall exceed the tax recovered as
a result of proceedings taken under subsection (2).
177A RECOVERY OF TAX FROM PRINCIPAL OFFICERS AND OTHERS.
177A. (1) Where a body
corporate has not paid any tax on or before the due date, as required under
section 113, it shall be lawful for the Commissioner-General to proceed under
all or any of the provisions of this Act against the manager, secretary, any director
or any other principal officer of such body corporate, as if such manager,
secretary, director of principal officer, as the case may be, is responsible
for such default, unless such manager, secretary, director or principal
officer, as the case may be, proves the contrary to the satisfaction of the
Commissioner - General, notwithstanding anything in any other written law
relating to such body corporate.
(2) Where an
unincorporated body of persons has not paid any tax on or before the due date,
as required under section 113, it shall be lawful for the Commissioner -
General to proceed under all or any of the provisions of this Act against any
partner or office - bearer of such unincorporated body of persons as if he is
responsible for such default, unless such partner of office bearer, as the case
may be, proves the contrary to the satisfaction of the Commissioner General,
notwithstanding anything in any other written law.".
178 RECOVERY OF TAX BY SEIZURE AND SALE.
178. (1) The
Commissioner-General may appoint persons to be tax collectors.
(2)
(a) Where any tax is in
default, the Commissioner-General may issue a certificate to a Government
Agent, Assistant Government Agent, Fiscal, Deputy Fiscal or tax collector,
containing particulars of such tax and the name of the defaulter and the
officer to whom such certificate is issued shall be empowered and is hereby
required, to cause the tax to be recovered from the defaulter named in the
certificate by seizure and sale of his movable property.
(b)A seizure of movable
property shall be effected in such manner as such officer shall deem most
expedient in that behalf, and as soon as any movable property is seized by such
officer, a list of such property shall forthwith be made and signed by him and
shall be given to the defaulter and a copy thereof furnished to the
Commissioner-General.
(c) Where the property
so seized is -
(i) cash in Sri Lanka
currency, such cash shall be first applied in the payment of the cost and
charges of seizing and any balance applied in satisfaction of the tax in
default;
(ii) cash in foreign
currency, such cash shall be deposited in the Central Bank or any commercial
bank and the proceeds therefrom applied in the payment of the costs and charges
of seizing and any balance applied in satisfaction of the tax in default; and
(iii) property other
than cash, such property shall be kept for five days at the cost and charges of
the defaulter. If the defaulter does not pay the tax in default together with
the costs and charges within the five days, the Government Agent, Assistant
Government Agent, Fiscal, Deputy Fiscal or tax collector shall cause such
property to be sold by public auction, or where such property is a negotiable
instrument or a share in any corporation or public company, to be sold through
a broker at the market rate of the day.
(d)The sum realized by a
sale referred in sub-paragraph (iii) of paragraph (c) shall be applied_ (i)
firstly, in payment of the costs and charges of seizing, keeping and selling
the property; and (ii) secondly, in satisfaction of the tax in default, and any
balance shall be paid to the owner of the property seized.
(e) It shall be lawful
for any officer to recover from any defaulter, reasonable expenses incurred by
him in proceeding against such defaulter under this section, notwithstanding
that no seizure of property was effected.
(f) In this subsection
the expression "movable property" includes any plant or machinery
affixed to the ground of a factory.
(3) Where any tax is in
default and the Commissioner-General is of the opinion that the recovery by the
means provided in subsection (2) is impracticable or inexpedient, he may issue
a certificate to a District Court having jurisdiction in any district where the
defaulter resides or in which any property, movable or immovable, owned by the
defaulter is situate, containing particulars of such tax and the name or names
of the person or persons by whom the tax is payable, and the courts shall
thereupon direct a writ of execution to issue to the Fiscal, authorizing and
requiring him to seize and sell all and any of the property, movable or
immovable, of the defaulter, or such part thereof as he may deem necessary for
recovery of the tax, and the provisions of sections 226 to 297 of the Civil
Procedure Code shall, mutatis mutandis, apply to such seizure and sale.
(4) Whenever the
Commissioner-General issues a certificate under this section, he shall at the
same time issue to the defaulter, whether resident or non-resident, a
notification thereof by personal service, registered letter sent through the
post or telegraph; but the non receipt of such notification by the defaulter
shall not invalidate proceedings under this section.
179 PROCEEDINGS FOR RECOVERY BEFORE MAGISTRATE.
179. (1)Where the
Commissioner-General is of opinion in any case that recovery of tax in default
by seizure and sale is impracticable or inexpedient, or where the full amount
of the tax has not been recovered by seizure and sale, he may issue a certificate
containing particulars of such tax and the name and last known place of
business or residence of the defaulter to a Magistrate having jurisdiction in
the division in which such place is situate. The Magistrate shall thereupon
summon such defaulter before him to show cause why further proceedings for the
recovery of the tax should not be taken against him, and in default of
sufficient cause being shown the tax in default shall be deemed to be a fine
imposed by a sentence of the Magistrate on such defaulter for an offence
punishable with fine only or not punishable with imprisonment, and the
provisions of subsection (1) of section 291 (except paragraph (a), (d) and (i)
thereof) of the Code of Criminal Procedure Act, No. 15 of 1979 relating to
default of payment of a fine imposed for such an offence shall thereupon apply,
and the Magistrate may make any direction which, by the provisions of that
subsection, he could have made at the time of imposing such sentence.
(2) The correctness of
any statement in a certificate issued by the Commissioner-General for the
purposes of subsection (1), shall not be called in question or examined by the
Magistrate in any proceeding under this section and accordingly, nothing in that
subsection shall be read and construed as authorizing a Magistrate to consider,
or decide the correctness of any statement in such certificate or to postpone
or defer such proceeding for a period exceeding thirty days, by reason only of
the fact that an appeal is pending against the assessment in respect of which
the tax in default is charged.
(3) Nothing in
subsections (2) to (5) of section 291 of the Code of Criminal Procedure Act,
No. 15 of 1979, shall apply in any case referred to in subsection (1) of this
section.
(4) In any case referred
to in subsection (1) in which the defaulter is sentenced to imprisonment in
default of payment of the fine deemed by that subsection to have been imposed
on him, the Magistrate may allow time for the payment of the amount of that
fine or direct payment of that amount to be made in instalments.
(5) The Court may
require bail to be given as a condition precedent to allowing time under
subsection (1) for showing cause as therein provided, or under subsection (4)
for the payment of the fine; and the provisions of Chapter XXXIV of the Code of
Criminal Procedure Act, No. 15 of 1979, shall apply, where the defaulter is so
required to give bail.
(6) Where a Magistrate
directs under subsection (4) that payment be made in instalments and default is
made in the payment of any one instalment, proceedings may be taken as if
default had been made in payment of all the instalments then remaining unpaid.
(7) In any proceeding
under subsection (1), the Commissioner-General's certificate shall be
sufficient evidence that the tax has been duly assessed and is in default, and
any plea that the tax is excessive, incorrect, or under appeal, shall not be
entertained.
180 RECOVERY OF TAX OUT OF DEBTS & C.
180. (1) Where tax
payable by any person is in default and it appears to the Commissioner-General
to be probable that any other person -
(a) owes or is about to
pay money to the defaulter or his agent;
(b) holds money for or
on account of the defaulter or his agent;
(c) holds money on
account of some other person for payment to the defaulter or his agent; or
(d) has authority from
some other person to pay money to the defaulter or his agent,
the Commissioner-General
may give to such other person notice in writing (a copy of which shall be sent
by post to the defaulter) requiring him to pay any such moneys not exceeding
the amount of the tax in default, to the officer named in such notice. The
notice shall apply to all such moneys which are in his hands or due from him at
the date of receipt of such notice, or come into his hands or become due from
him or are about to be paid by him at any time within a period of three months,
after the date of such notice.
(2) Where a person holds
money for or on account of the defaulter and any other person or persons
jointly (in this section referred to as the "joint account holder or
holder") the Commissioner-General may give a notice under subsection (1)
to such person, requiring him to pay the amount of the tax in default or part
thereof to the officer named in such notice, out of the monies or such part of
such moneys in the joint account which the Commissioner-General is satisfied is
attributable to the contributions made by the defaulter, and is so certified by
the Commissioner-General:
Provided that -
(a) every person
remitting money in compliance with a notice issued under subsection (1), shall
intimate such fact to every other joint account holder;
(b) every joint account
holder other than the defaulter may, within two weeks of the date on which he
received an intimation under paragraph (a), make a claim to the
Commissioner-General in respect of any part of such remittance which represents
his net contribution to the balance in such joint account as at the date of
notice issued by the Commissioner-General, and the Commissioner-General shall
consider such claim and make his order thereon;
(c) every joint account
holder who is aggrieved by the order of the Commissioner-General made under
paragraph (b), may institute an action in the District Court seeking an order
for the recovery of such money or part of money which he claims to be attributable
to the contributions made by him. Notwithstanding any provision in the
Prescription Ordinance (Chapter 68), no action shall be instituted for the
recovery of such money or part of such money after the expiration of three
months from the date of notice issued by the Commissioner-General.
(3)Any person who has
made any payment in pursuance of this section shall be deemed to have acted
under the authority of the defaulter, and of all other persons concerned, and
is hereby indemnified in respect of such payment against all proceedings, civil
or criminal, notwithstanding the provisions of any written law, contract or
agreement.
(4) Any person to whom a
notice has been given under subsection (1), who is unable to comply therewith
owing to the fact that the moneys referred to in that subsection do not come
into his hands or that no such moneys become due from him within the period
referred to in that subsection, shall within fourteen days of expiration
thereof, give notice in writing to the Commissioner-General apprising him of
the facts.
(5) Where any person to
whom a notice has been given under subsection (1) is unable to comply therewith
and has failed to give notice to the Commissioner-General as provided in
subsection (4), or where such person has deducted or could have deducted the tax
to which the notice relates or any part thereof, and has not paid over as
required by the Commissioner-General the amount of such tax or part thereof
within fourteen days after the expiration of the period referred to in
subsection (1), such person shall, if he is an individual be liable, or where
such person is a company or body of persons whether corporate or unincorporate,
the secretary, manager or other principal officer of such company or body shall
be personally liable, for the whole of the tax which such person has been
required to deduct, and such tax may be recovered from such individual,
secretary, manager or other principal officer, as the case may be, by all means
provided in this Act.
(6) For the purposes of
this section, the expression "defaulter" shall be deemed to include
the agent of a person who is in default and the provisions of this section
shall apply in any case where the tax which would have been payable by any person
if he were alive is in default; and for the purposes of the application of
those provisions in any such case, the expression "defaulter" in
subsection (1) means -
(a) the executor or
administrator of a deceased person;
(b) any person who takes
possession of or intermeddles with, the property of a deceased person; or
(c) any person who has
applied or is entitled to apply to a District Court for the grant or resealing
of a probate or letters of administration, in respect of the estate of a
deceased person.
181 TRANSFER OF IMMOVABLE PROPERTY TO GOVERNMENT IN LIEU
OF PAYMENT OF TAX IN CASH.
181. (1) Any person
liable to pay any tax under the provisions of this Act or of the Inland Revenue
Act, No 38 of 2000 or of the Inland Revenue Act, No. 28 of 1979 or of the
Inland Revenue Act, No. 4 of 1963, may apply to the Commissioner-General to
transfer any immovable property owned by such person to the Government, in lieu
of payment of such tax in cash at such value as is placed on such property by
agreement between such person and the Commissioner-General, and the
Commissioner-General may allow such application having regard to the
feasibility of managing such property after it is transferred to the
Government.
(2) Where the
Commissioner-General allows an application made under subsection (1) and the
amount agreed to in accordance with the provisions of that subsection as the
value of the property in respect of which the application is made, exceeds the
amount of the tax payable by the applicant, the excess shall be deemed to be a
donation within the meaning of paragraph (b) of subsection (2) of section 34,
made to the Government of Sri Lanka by the applicant.
182 TAX IN DEFAULT TO BE RECOVERED FROM REMUNERATION OF
EMPLOYEE.
182. (1) The
Commissioner- General may, by notice in writing given to any employer of an
employee or to the person responsible for the payment of remuneration of an
employee, direct such employer or person to deduct during such period as may be
specified in such notice, from the remuneration of such employee, the amount of
tax which is payable by such employee and which is in default, in such number
of monthly instalments as may be specified in such notice, The amount so
deducted each month from the remuneration of an employee shall be paid to the
Commissioner-General by such employer or such person, as the case may be.
(2) Where any tax is
deducted under subsection (1) from the remuneration of an employee by his
employer or by the person responsible for the payment of such remuneration,
such employee shall for the purposes of this Act, be deemed to have paid such
tax or part thereof on the date on which the deduction is made.
(3) The
Commissioner-General may at any time after he has made a direction under
subsection (1), withdraw such direction wholly or partly by notice given in
writing to the employer or the person responsible for the payment of the
remuneration of the employee, if the employee has made arrangements to the
satisfaction of the Commissioner-General, for the payment of his tax in
default.
(4) Where any employee
from whose remuneration any tax is to be deducted under the preceding
provisions of this section by his employer or the person responsible for the
payment of such remuneration, is about to leave or leaves his employment, the
employer or such person shall deduct the whole amount of such tax or any
balance thereof which he has been directed to deduct by the notice given to him
by the Commissioner-General, from all or any payments payable by him to such
employee, after he becomes aware that such employee is leaving, or has left,
his employment.
(5) Where a direction
for the deduction of any tax from the remuneration of an employee is given
under subsection (1) to his employer or to the person responsible for the
payment of such remuneration, and such employer or person is unable to deduct
the whole or any part of such tax for the reason that such employee has left
his employment or for any other reason, such employer or person shall forthwith
give notice in writing to the Commissioner-General apprising him of the facts
of the matter, and any tax which such employer or person has not deducted or
cannot deduct, shall immediately become payable by the employee.
(6) Where the employer
or the person responsible for the payment of remuneration to an employee has
failed to deduct from such remuneration any tax which he has been directed to
deduct under subsection (1), and such employer or person has failed to give notice
to the Commissioner-General as required by subsection (5) within fourteen days
of the date on which such deduction should have been made, or where such
employer or person has deducted or could have deducted tax in any month from
such remuneration in accordance with a direction under subsection (1) but has
not paid the amount of such tax to the Commissioner-General by the fifteenth
day of the following month, such employer or person, if he is an individual,
shall be liable, or where such employer or person is a company or a body of
persons, whether corporate or unincorporate, the secretary, manager or other
principal officer of such company or body shall be personally liable, for the
whole of the tax which such employer or such person has been directed to deduct
under this section, and such tax may be recovered from such individual,
secretary, manager or other principal officer by all means provided in this
Act, and such tax shall be deemed to be in default.
(7) Every employer or
other person who deducts tax from the remuneration of any employee in
accordance with a direction under subsection (1) ,shall on request made by such
employee, issue to him a certificate in such form as is specified by the
Commissioner-General, of the amount of tax deducted.
183 TAX IN DEFAULT OF PARTNER TO BE RECOVERED FROM THE
ASSETS OF A PARTNERSHIP.
183. Where for any year
of assessment the statutory income of any person who is a partner in a
partnership includes his share of the divisible profits of a partnership and
the tax payable by that person is in default, such part of the tax in default
as is, in the opinion of the Commissioner-General, attributable to his share of
such divisible profits may be recovered out of the assets of the partnership,
and accordingly, for the purposes of section 178, the assets of the partnership
shall be deemed to be the assets of the partner:
Provided that the amount
so recovered shall not exceed the interest of the partner in the partnership.
184 RECOVERY OF INCOME TAX FROM THE INCOME OF A CHILD.
184. Where the total
statutory income of a child is aggregated with and deemed to form part of the
total statutory income of parent of such child, and where any tax cannot be
collected from that parent, such portion of such tax as appears to the Commissioner-General
to be attributable to the income of such child, may be recovered from such
child, notwithstanding that no assessment has been made upon such child and the
provisions of this Act as to collection and recovery of tax, shall apply
accordingly.
185 RECOVERY OF INCOME TAX PAYABLE BY A BENEFICIARY FROM
THE TRUSTEE.
185. The income tax or
any part thereof with which a beneficiary to a trust, not being any unit trust,
is chargeable in respect of his income to which he is entitled from the trust,
may be recovered from the trustee of the trust, notwithstanding that no assessments
have been made upon the trustee, and the provisions of this Act relating to
collection and recovery of tax shall apply to such trustee. Such trustee shall
be entitled to deduct the amount of such tax or part thereof, from the income
which will be payable to such beneficiary from the trust.
186 RECOVERY OF INCOME TAX PAYABLE BY A BENEFICIARY FROM
THE EXECUTOR.
186. The income tax or
any part thereof with which a beneficiary is chargeable in respect of his
income to which he is entitled from the estate of a deceased person, may,
notwithstanding that no assessment has been made upon the executor of the
deceased person, be recovered from such executor, and accordingly, the
provisions of this Act as to collection and recovery of tax shall apply to such
executor. Such executor shall be entitled to deduct the amount of such tax or
part thereof from the income which will be payable to such beneficiary from the
estate of such deceased person.
187 GIFT TAX TO BE RECOVERED FROM THE DONEE IN CERTAIN
CIRCUMSTANCES.
187. Where the gifts tax
charged under Chapter XI of the Inland Revenue Act No. 28 of 1979 cannot be
recovered from the donor, it may be recovered from the donee, notwithstanding
that no assessment has been made upon the donee, and the provisions of this Act
as to collection and recovery of tax shall apply accordingly:
Provided that the amount
which may be recovered from the donee shall not exceed that portion of such tax
which appears to the Commissioner-General to be attributable to the value of
the gift made to the donee by the donor, as at the date of the gift.
188 RECOVERY OF TAX FROM PERSONS LEAVING SRI LANKA.
188. (1) Where the
Commissioner-General is of opinion that any person who is a defaulter is about
to or likely to leave Sri Lanka without paying all income tax, wealth tax or
gift tax, which have become default as assessed upon him or otherwise, he may issue
a certificate containing particulars of such tax and the name of such person to
a Magistrate, who shall on receipt thereof issue a direction to the
Inspector-General of Police to take such measures as may be necessary to
prevent such person from leaving Sri Lanka without paying the tax or furnishing
security to the satisfaction of the Commissioner-General, for payment thereof.
(2) At the time of issue
of his certificate to the Magistrate, the Commissioner-General shall issue to
such person a notification thereof by personal service, registered letter sent
through the post or telegraph, but the non-receipt of any such notification by
such person shall not invalidate proceedings under this section.
(3) The production of a
certificate signed by the Commissioner-General or a Commissioner, stating that
the tax has been paid or that security has been furnished to the payment of the
tax, or payment of the tax to a police officer in charge of a police station,
shall be sufficient authority for allowing such person to leave Sri Lanka. Any
police officer to whom the amount of any tax has been paid shall forthwith pay
such amount to the Commissioner-General.
189 USE OF MORE THAN ONE MEANS OF RECOVERY.
189. Where the
Commissioner-General is of the opinion that the application of any of the
provisions of this Chapter has failed or is likely to fail to secure payment of
the whole of any tax due under this Act from any person, it shall be lawful for
him to proceed to recover any sum remaining unpaid by any other means of
recovery provided in this Chapter, notwithstanding that an order has been made
by a Magistrate under section 179 in respect of that person and carried into
effect.
190 POWER OF COMMISSIONER-GENERAL TO OBTAIN INFORMATION
FOR THE RECOVERY OF TAX.
190. The
Commissioner-General may by notice given in writing to any person, require that
person within the period specified in such notice, to furnish any information
which the Commissioner-General may require for the purpose of recovering any
tax, due from such person or any other person.
191 LIABILITY OF DIRECTORS OF PRIVATE COMPANY IN
LIQUIDATION.
191. (1) Notwithstanding
anything in the Companies Act, No. 7 of 2007, where any private company is
wound up and where any income tax to which that company is liable cannot be
recovered, then, every person who was a director of the company at any time during
the year of assessment in respect of which such tax is payable, shall be
jointly and severally liable for the payment of such tax, unless he proves that
the default in payment of tax cannot be attributed to any gross neglect,
misfeasance or breach of duty on his part in relation to the affairs of the
company.
(2) In this section the
expression "private company" has the same meaning as in the Companies
Act, No. 7 of 2007.
192 DELEGATION OF COMMISSIONER- GENERAL'S POWERS AND
FUNCTIONS.
192. (1)The
Commissioner-General may by writing under his hand, delegate to any Assessor or
Assistant Commissioner any of the powers or function conferred on or assigned
to the Commissioner-General by this Chapter.
(2)Every Assessor or
Assistant Commissioner to whom any power or function has been delegated under
subsection (1), shall exercise or discharge that power or function subject to
the general or special directions of the Commissioner-General.
193 ACTION NOT TO COMMENCE AFTER EXPIRY OF FIVE YEARS IN
CERTAIN CIRCUMSTANCES.
193. The Commissioner
General shall not, subject to the provisions of section 4 of the Inland Revenue
(Regulations of Amnesty ) Act No. 10 of 2004, commence any action under
sections 178, 179, 180, 181, or 182 of this Act for the recovery of tax in
default, after the expiry of five years from the end of the year of assessment
in which the assessment by which such tax was charged or levied becomes final
and conclusive under section 171 .
CHAPTER XXVII
Miscellaneous
194 SIGNATURE AND SERVICE OF NOTICE.
194. (1) Every notice to
be given by the Commissioner-General, a Commissioner, or an Assessor or
Assistant Commissioner under this Act, shall bear the name of the
Commissioner-General or Commissioner or Assessor or Assistant Commissioner, as
the case may be, and every such notice shall be valid if the name of the
Commissioner-General, Commissioner, or Assessor or Assistant Commissioner is
duly printed or signed thereon.
(2) Every notice given
by virtue of this Act may be served on a person either personally or by being
delivered at, or sent by post to, his last known place of abode or any place at
which he is, or was during the year to which the notice relates, carrying on
business: Provided that a notice of assessment under section 163 shall be
served personally or by registered letter sent through the post to any such
place as aforesaid.
(3) Any notice sent by
post shall be deemed to have been served on the day succeeding the day on which
it would have been received in the ordinary course by post.
(4) In proving service
by post, it shall be sufficient to prove that the letter containing the notice
was duly addressed and posted.
(5) Every name printed
or signed on any notice or signed on any certificate given or issued for the
purposes of this Act, which purports to be the name of the person authorized to
give or issue the same, shall be judicially noticed.
195 VALIDITY OF NOTICES, ASSESSMENTS ETC.
195. (1) No notice,
assessment, certificate, or other proceeding purporting to be in accordance
with the provisions of this Act shall be quashed, or deemed to be void or
voidable for want of form or be affected by reason of a mistake, defect or
omission therein, if the same is in substance and effect in conformity with, or
according to the intent and meaning of this Act, and if the person assessed or
intended to be assessed or affected thereby, is designated therein according to
common intent and understanding.
(2) Without prejudice to
the generality of subsection (1), an assessment shall not be affected or
impugned by reason of-
(a) a mistake as to the
name or surname of the person chargeable, the amount of income assessed, or the
amount of tax charged; or
(b) any variance between
the assessment and the notice thereof, if the notice of such assessment is duly
served on the person intended to be charged and contains in substance and
effect the particulars mentioned in paragraph (a) of this subsection.
(3) Without prejudice to
the generality of subsection (1) and subsection (2), no notice, assessment,
certificate, or other proceeding purporting to be in accordance with the
provisions of this Act shall be quashed, or deemed to be void or voidable or be
affected by reason of any variance in the designation of the officer who signed
or executed such notice, assessment, certificate or other proceeding as the
case may be, due to the implementation of the Minutes of the Sri Lanka Inland
Revenue Service as published in the Gazette, if the same is in substance and
effect in conformity with, or according to, the intent and meaning of this Act
or any other Act administered by the Commissioner-General, and if the person
assessed or intended to be assessed or affected thereby, is designated therein
according to common intent and understanding.
196 PRECEDENT PARTNER TO ACT ON BEHALF OF A PARTNERSHIP.
196. (1) Wherever two or
more persons in partnership act in the capacity of trustees or executors or as
agents or are employers, or are persons in receipt of money, value or profits
to whom section 109 applies, or act in any other capacity whatever, either on
behalf of themselves or of any other person, the precedent partner of such
partnership shall be liable to do all such acts, matters and things as are
required to be done under the provisions of this Act by an individual acting in
any such capacity :
Provided that any person
to whom a notice has been given under the provisions of this Act as precedent
partner of a partnership, shall be deemed to be the precedent partner thereof,
unless he proves that he is not a partner in such partnership, or that some
other person resident in Sri Lanka is the precedent partner thereof.
(2) Where two or more
persons who are not in partnership act jointly in any capacity mentioned in
subsection (1), they shall be jointly and severally liable to do all such acts,
matters and things as are required to be done under the provisions of this Act,
by an individual acting in any such capacity.
197 PRINCIPAL OFFICER TO ACT ON BEHALF OF COMPANY OR BODY
OF PERSONS.
197. (1) The secretary,
manager, director or other principal officer of every company or body of
persons, corporate or unincorporate, shall be liable to do all such acts,
matters, or things as are required to be done under the provisions of this Act,
by such company or body of persons:
Provided that any person
to whom a notice has been given under the provisions of this Act on behalf of a
company or body of persons, shall be deemed to be the principal officer
thereof, unless he proves that he has no connection with that company or body
of persons or that some other person resident in Sri Lanka is the principal
officer thereof.
(2) Where an offence
under this Act is committed by a company or body of persons, corporate or
unincorporate, every person who at the time of the commission of that offence
was the secretary, manager, director or other principal officer of that company
or body of persons, shall be deemed to be guilty of that offence, unless he
proves that the offence was committed without his knowledge and that he
exercised all such diligence to prevent the commission of that offence as he
ought to have exercised, having regard to the nature of his functions in such
capacity and to all the other circumstances.
198 WHO MAY ACT FOR INCAPACITATED OR NON-RESIDENT PERSON.
198. Any act or thing
required by or under this Act to be done by any person shall, if such person is
an incapacitated or non-resident person, be deemed to be required to be done by
the trustees of such incapacitated person or by the agent of such non-resident
person, as the case may be.
199 INDEMNIFICATION OF REPRESENTATIVE.
199. (1) Every person
chargeable with tax under this Act as trustee, executor, or agent, or from whom
such tax is recoverable in respect of the income or wealth of another person,
may retain out of any assets coming into his possession or control on behalf of
such other person or in his capacity as trustee, executor, or agent, such
portion of such assets as shall be sufficient to pay the amount of such tax,
and he shall be and is hereby indemnified against any person whomsoever, in
respect of his retention of such assets and payment of such amount.
(2) Where any person
acting as trustee or executor has paid tax, and no assets of the trust or
estate come into his possession or control out of which he could retain the tax
so paid, such tax shall be a debt due from the beneficiaries of the trust or estate,
to the trustee or executor.
(3) Where a person
chargeable with tax or from whom tax is recoverable in respect of the income of
another person, pays such tax, and no assets of such other person come into his
possession or control out of which he could retain the amount of the tax so
paid, such tax shall be a debt due to him from such other person.
CHAPTER XXVIII
Repayment
200 TAX PAID IN EXCESS TO BE REFUNDED.
200. (1) If it is proved
to the satisfaction of the Commissioner-General by any claim duly made in
writing within three years of the end of a year of assessment, that any person
has paid any income tax, by deduction or otherwise, in excess of the amount which
he was liable to pay for that year, such person shall be entitled to a refund
of the amount paid in excess:
Provided that -
(a) nothing in this
section shall operate to extend or reduce any time limit for appeal or
repayment specified in any other section or to validate any objection or appeal
which is otherwise invalid, or to authorize the revision of any assessment or
other matter which has become final and conclusive;
(b) where any person has
paid income tax by deduction in respect of a dividend in accordance with
section 65 or in respect of interest, rent, ground rent, royalty, or other
annual payment in accordance with section 95, he shall not be entitled by
virtue of this section to any relief greater than that he would be entitled to
under subsection (3), (4) or under subsection (5) of section 65 or subsection
(3) of section 95; and
(c) where the
Commissioner-General is satisfied that a person who has paid any income tax, by
deduction could not have made a claim within the aforesaid three years, such
person shall be entitled to a refund of the amount paid in excess, if such
claim is made within one year from the end of the year of assessment in which
such deduction was made.
(2) Where through death,
incapacity, bankruptcy, liquidation or other cause, a person who would but for
such cause have been entitled to make a claim under subsection (1), is unable
to do so, his executor, trustee or receiver, as the case may be, shall be
entitled to a refund of any tax paid in excess within the meaning of subsection
(1) by such person, for the benefit of such person or his estate.
(3) Where it is proved
to the satisfaction of the Commissioner-General by claim made in writing within
three years of the end of a year of assessment, that any person has paid income
tax in excess of the amount which he was liable to pay for that year of
assessment and that the excess is due to any error in the assessment or the
return of the income of that person (other than an error in the application or
construction of any provision of this Act in the making or revision of the
assessment), such person shall be entitled to a refund of the amount paid in
excess.
(4) Where it is proved
to the satisfaction of the Commissioner-General by claim made in writing, that
any person has paid the amount of any penalty referred to in subsection (3) of
section 173 which is in excess of the sum which he should have paid if such sum
were calculated in accordance with the provisions of subsection (8) of section
173, such person shall be entitled to a refund of the amount paid in excess, if
such claim is made within three years of the end of the year of assessment in
which the amount of the penalty referred to in the aforesaid subsection (3) of
section 173 was paid.
(5) Where it is proved
to the satisfaction of the Commissioner-General by a claim made in writing by
any employer within three years of the end of a year of assessment, that he has
paid to the Commissioner-General under the provisions of Chapter XIV for that
year of assessment, a sum in excess of the amount which he should have paid for
that year of assessment, such employer shall be entitled to a refund of the
amount paid in excess: Provided that the preceding provisions of this
subsection shall not apply where payment of income tax has been made on as
assessment made on an employer under section 125.
(6)Notwithstanding
anything to the contrary in section 63 and section 61, any tax deducted in
accordance with section 65 in respect of a dividend paid by a resident company
to a non-resident shareholder, in excess of the rate of tax on dividends
specified in an agreement referred to in subsection (1) of section 97, between
the Government of Sri Lanka and the Government of the country in which such
shareholder is resident, shall be refunded to such shareholder on a claim duly
made in writing, within three years of the end of the year in which such tax
was deducted or within one year of the date on which such agreement comes into
force, whichever is later.
(7)Notwithstanding
anything to the contrary in section 63, any tax deducted in accordance with
section 65 in respect of a dividend distributed and paid by a resident company
to any person whose profits and income are exempt from income tax under
paragraph (a) section 7, shall be refunded to such person on a claim duly made
by him in writing, within three years of the end of the year of assessment in
which such tax was deducted.
(8) Nothing in the
preceding provisions of this section shall apply in relation to the income tax
paid by deduction or otherwise, by any person for any year of assessment in
respect of the whole or any part of his income, if such income is not included
in his assessable income for that year of assessment.
(a) income tax paid by a
primary dealer by way of deductions made under section 133 or section 134, on
primary market transactions;
(b) income tax paid by
any person by way of deductions from interest under section 133 or section 134
where such interest is not included in his assessable income, or on any
dividends under subsection (1) of section 65;
(c) income tax paid by
any person as provided for under section 36 or on any rewards or share of fines
received, a lottery prize or winnings from betting or gaming taxable under
section 157.
(9) Any refund arising
to any person, as provided for in this section, shall be credited directly to a
bank account of such person.
201 INTEREST PAYABLE ON THE AMOUNT OF A REFUND IN CERTAIN
CIRCUMSTANCES.
201. Where for any year
of assessment any person is entitled to a refund of the amount of any income
tax, paid by him by deduction or otherwise, and where such amount has not been
refunded to him by the Commissioner-General -
(a) if such refund
arises in consequence of the reduction of the amount of an assessment on
agreement with an Assessor or Assistant Commissioner under subsection (7) of
section 165 or on the determination of an appeal in respect of such assessment,
within a period of six months from the date of such agreement or from the date
on which such determination was communicated to such person ; or
(b) in any other case,
within a period of six months from the date on which a claim in writing was
made by such person to the Commissioner-General for such refund, or from the
thirty-first-day of March of that year of assessment, whichever is the later date,
such person shall be
entitled to interest on the amount of the refund which remains unpaid,
calculated at the rate of one per centum for each complete period of one month
for which such amount remains unpaid after the period of six months referred to
in paragraph (a) or (b).
CHAPTER XXIX
Penalties and Offences
202 PENALTIES FOR FAILURE TO MAKE RETURNS MAKING
INCORRECT RETURNS &C.
202. (1)Every person who
fails to -
(a) comply with the
requirements of a notice given to him under subsection (1) of section 70 or
subsection (1) of section 73 or subsection (4) of section 76 or subsection (1)
of section 95 or subsection (7) of section 106 or subsection (12) of section 106
or subsection (13) of section 106 or subsection (14) of section 106 or
subsection (1) of section 107 or section 109 or section 110 or section 111 or
section 190;
(b) comply with a
requirement imposed on him by the Commissioner-General under sub-paragraph (ii)
of subsection (1) of section 112;
(c) attend in response
to a notice given to him under subsection (13) of section 106 or subsection
(14) of section 106 or subsection (9) of section 165 or subsection (7) of
section 169 or having attended in response to any such notice, fails without
sufficient cause to answer any questions lawfully put to him ; or
(d) comply with the
requirements subsection (3) of section 70 or subsection (3) of section 73 or
subsection (4) of section 76 or subsections (1), (2), (3) or (4) of section 106
or subsection (1) of section 107 or section 108 or subsection (2) of section 176
or subsection (7) of section 182,
shall be guilty of an
offence under this Act and shall be liable on conviction after summary trial
before a Magistrate, in the case of a failure to comply with subsection (1) of
section 106 or with the requirement of a notice given under subsection (7) of
section 106, to a fine not exceeding fifty thousand rupees and in any other
case, to a fine not exceeding seven thousand five hundred rupees.
(2)Every person who,
being an employer for the purpose of Chapter XIV, fails to -
(a) give notice to the
Commissioner-General in terms of subsection (1) of section 115 or subsection
(2) of section 115;
(b) deduct the whole or
any part of the income tax required to be deducted under the provisions of
subsection (1) of section 114; or
(c) comply with the
requirements of subsection (1) of section 112 or subsection (2) of section 118
or paragraphs (a), (b) or (c) of section 119 or paragraph (a), (b), (c), (d) or
(e) of section 120 or subsection (7) of section 133,
shall be guilty of an
offence under this Act and shall be liable on conviction after summary trial
before a Magistrate, to a fine not exceeding ten thousand rupees or to
imprisonment of either description for a term not exceeding six months, or to
both such fine and imprisonment.
(3)Every person who,
being an employee for the purposes of Chapter XIV, fails to comply with the
requirements of subsection (1) of section 122 shall be guilty of an offence
under this Act, and shall be liable on conviction after summary trial before a
Magistrate, to a fine not exceeding seven thousand five hundred rupees.
(4) Every person who
without reasonable excuse -
(a) makes or furnishes
an incorrect return by omitting or understating any income, of which he is
required by this Act to make or furnish a return, either on his own behalf or
on behalf of another person or a partnership;
(b) makes an incorrect
statement in connection with a claim for a deduction or allowance under Chapter
VII; or
(c) gives an incorrect
information in relation to any matter or thing affecting his own liability to
tax or the liability of any other person or of a partnership,
shall be guilty of an
offence under this Act, and shall be liable on conviction after summary trial
before a Magistrate, to a fine consisting of-
(i) a sum equal to the
amount of tax which had been undercharged in consequence of such incorrect
return, statement, or information or would have been so undercharged if such
return, statement, or information had been accepted as correct, and
(ii) a sum not exceeding
ten thousand rupees,
or to imprisonment of
either description for a term not exceeding six months, or to both such fine
and imprisonment.
(5) Every person who
being an employer for the purposes of Chapter XIV, without reasonable cause
makes an incorrect declaration by omitting or understating the amount of
remuneration of any employee in his employment or omits or understates the
amount of income tax deducted from the remuneration of any employee, shall be
guilty of an offence under this Act, and shall be liable on conviction after
summary trial before a Magistrate to a fine not exceeding ten thousand rupees
or to imprisonment of either description for a term not exceeding six months,
or to both such fine and imprisonment.
(6)Every person who,
being an employee for the purposes of Chapter XIV, makes an incorrect statement
in any notice given by him under subsection (1) of section 122 to the
Commissioner-General, shall be guilty of an offence under this Act and shall be
liable on conviction after summary trial before a Magistrate, to a fine not
exceeding ten thousand rupees or to imprisonment of either description for a
term not exceeding six months, or to both such fine and imprisonment.
(7) No person shall be
liable to any penalty under this section unless the complaint concerning such
offence was made in the year of assessment in respect of or during which, the
offence was committed or within five years after the expiration thereof.
(8) The
Commissioner-General may compound any offence under this section and may before
judgement, stay or compound any proceedings thereunder.
203 BREACH OF SECRECY AND OTHER MATTERS TO BE OFFENCES.
203. Every person who -
(a) being a person
required to take an oath of secrecy under subsection (2) of section 209, acts
under this Act without taking such oath;
(b) acts in
contravention of the provisions of subsection (1) of section 209 or an oath
taken under subsection (2) of section 209; or
(c) aids, abets, or
incites another person to act in contravention of any of the provisions of this
Act,
shall be guilty of an
offence under this Act and shall be liable on conviction after summary trial
before a Magistrate, to a fine not exceeding two thousand rupees, or to
imprisonment of either description for a term not exceeding six months or to
both such fine and imprisonment.
204 PENAL PROVISIONS RELATING TO FRAUD &C.
204. (1)Any person who -
(a) omits from a return
made or furnished under this Act any income, which he should have included in
such return;
(b) makes any false
statement or entry in any return made or furnished under this Act;
(c) makes a false
statement in connection with a claim for a deduction or allowance under Chapter
VII;
(d) signs any statement
or return made or furnished under this Act without reasonable grounds for
believing the same to be true;
(e) gives any false
answer, whether verbally or in writing, to any question or request for
information asked or made in accordance with the provisions of this Act;
(f) prepares or
maintains or authorises the preparation or maintenance, of any false books of
account or other records, or falsifies or authorises the falsification of any
books of account or records; or
(g) makes use of any
fraud, art or contrivance whatsoever, or authorizes the use of any such fraud,
art or contrivance,
and thereby evades or
attempts to evade income tax, assists any other person to evade or to attempt
to evade such tax, shall be guilty of an offence under this Act, and shall be
liable on conviction after summary trial before a Magistrate, to fine consisting
of-
(i) a sum equal to the
amount of tax so evaded or attempted to be evaded for which he, or as the case
may be, the other person so assisted, is liable under this Act, for the year of
assessment in respect of or during which the offence was committed; and
(ii) a sum not exceeding
ten thousand rupees or to imprisonment of either description for a term not
exceeding six months,
or to both such fine and
imprisonment.
(2) Every person who,
being an employer for the purposes of Chapter XIV -
(a) omits from a
declaration made under paragraph (a) or paragraph (d) or paragraph (e) of
section 120 any remuneration or omits or understates in such declaration the
amount of income tax deducted from such remuneration; or
(b) gives a false
certificate of income tax deduction under paragraph (b) or paragraph (c) of
section 120,
and thereby evades or
attempts to evade income tax or assists any other person to evade or to attempt
to evade such tax, shall be guilty of an offence under this Act, and shall be
liable on conviction after summary trial before a Magistrate, to fine not exceeding
ten thousand rupees or to imprisonment of either description for a term not
exceeding six months or to both such fine and imprisonment.
(3) The
Commissioner-General may compound any offence under this section and may before
judgement stay or compound any proceedings thereunder, subject to the recovery
of an amount that is not less than one third of the fine that may be imposed
under sub paragraphs (i) and (ii) of subsection (1). Such fine recovered shall
be credited to the Consolidated Fund.
204A PENAL PROVISION RELATING TO MISINTERPRETATION OF
PROVISIONS OF THIS ACT OR ANY OTHER ACT ADMINISTERED BY THE
COMMISSIONER-GENERAL BY AUDITORS AND TAX PRACTITIONERS.
204A. Any auditor or tax
practitioner who in the discharge of his professional duty, deliberately
misinterprets any provisions of this Act or any other Act administered by the
Commissioner- General, or regulation, rule or order made thereunder shall be guilty
of an offence under this Act and on conviction after summary trial before a
Magistrate, be liable to a fine not exceeding rupees fifty thousand or to
imprisonment of either description for a term not exceeding six months or to
both such fine and imprisonment.
205 TAX TO BE PAYABLE NOTWITHSTANDING ANY PROSECUTION OR
CONVICTION FOR AN OFFENCE UNDER THIS ACT.
205. The institution of
a prosecution in respect of an offence under this Act or the imposition of a
penalty, fine or a term of imprisonment in respect of any such offence, shall
not relieve any person from liability to assessment or payment, of any tax for
which he is or may be liable.
206 PROSECUTION TO BE WITH THE SANCTION OF THE
COMMISSIONER- GENERAL.
206. No prosecution in
respect of an offence under section 202 or section 204 may be commenced except
at the instance of or with the sanction of, the Commissioner-General.
207 ADMISSIBILITY OF STATEMENTS AND DOCUMENTS IN
EVIDENCE.
207. Where any statement
is made or document is produced in relation to any matter arising under this
Act, by any person who is chargeable with tax under this Act or by his
authorized representative to the Commissioner-General or the Additional
Commissioner-General or a Deputy Commissioner-General or a Senior Commissioner
or a Commissioner or a Commissioner or a Deputy Commissioner or Senior Deputy
Commissioner or an Assessor or Assistant Commissioner, thennotwithstanding
anything in any other law, such statement or document shall be admissible in
evidence in any proceedings against such person in respect of any offence
referred to in section 202 or section 203 or section 204 of this Act.
208 OFFICERS.
208. (1) For the
purposes of this Act, there shall be appointed a Commissioner-General of Inland
Revenue, a Additional Commissioner-General of Inland Revenue and such number of
Deputy Commissioner-Generals of Inland Revenue, Senior Commissioners of Inland
Revenue, Commissioners of Inland Revenue, Commissioners of Inland Revenue,
Deputy Commissioner or Senior Deputy Commissioner of Inland Revenue, Assessor
or Assistant Commissioner of Inland Revenue and Tax Officers of Inland Revenue,
as may be necessary.
(2) A Additional
Commissioner-General or a Deputy Commissioner-General or a Senior Commissioner
or Commissioner or a Commissioner exercising or performing or discharging any
power, duty or function conferred or imposed on or assigned to the
Commissioner-General by any provision of this Act, shall be deemed for all
purposes to be authorized to exercise, perform or discharge that power, duty or
function until the contrary is proved.
(3) A Commissioner may
exercise any power conferred on any Assessor or Assistant Commissioner of
Inland Revenue by any provision of this Act.
(4) Notwithstanding
anything to the contrary in any other provisions of this Act, a Deputy
Commissioner or Senior Deputy Commissioner of Inland Revenue or an Assessor or
Assistant Commissioner of Inland Revenue shall not-
(a) act under section
163; or
(b) reach any agreement
or make any adjustment to any assessment made under subsection (7) of section
165,
except with the written
approval of the Commissioner - General or any Commissioner".
(5) Every person who
holds office on the date of commencement of this Act, as the
Commissioner-General of Inland Revenue or as a Senior Deputy Commissioner -
General of Inland Revenue, or as a Deputy Commissioner-General of Inland
Revenue, or as a Senior Commissioner of Inland Revenue, or as a Commissioner of
Inland Revenue or as a Commissioner of Inland Revenue or as a Deputy
Commissioner or Senior Deputy Commissioner of Inland Revenue or as an Assessor
or Assistant Commissioner of Inland Revenue or a Tax Officer of Inland Revenue,
shall be deemed for all purposes, to have been appointed under subsection (1).
208A COMMITTEE TO INTERPRET PROVISIONS OF ACT AND ISSUE
RULINGS.
208A. The
Commissioner-General shall appoint a Committee comprising senior officers of
the Department of Inland Revenue who shall be mandated to interpret the
provisions of all Acts administered by him, notwithstanding anything to the
contrary in any such Act. Such Committee shall in terms of such mandate issue
all necessary guidelines and instructions as are required in order to ensure
uniformity with regard to such interpretation.
The committee shall
determine any request made to it for interpretation within six months from the
date of receipt of such request.
209 OFFICIAL SECRECY.
209. (1) Except in the
performance of his duties under this Act, every person who has been appointed
or is deemed to be appointed under or who has been employed in carrying out or
in assisting any person in carrying out the provisions of this Act, shall preserve
and aid in preserving secrecy with regard to all matters relating to the
affairs of any person that may come to his knowledge in the performance of his
duties under this Act, and shall not communicate any such matter to any person
other than the person to whom such matter relates or his authorized
representative or to the Minister or the Secretary to the Ministry of the
Minister in charge of the subject of Finance, nor suffer or permit any person
to have access to any records in the possession, custody or control of the
Commissioner-General.
(2) Every person
appointed or deemed to be appointed under or employed in carrying out the
provisions of this Act shall before acting under this Act, and the Minister and
the Secretary to the Ministry of the Minister in charge of the subject of
Finance may before acting under this Act, take and subscribe an oath of secrecy
in the prescribed form before a Justice of the Peace.
(3) No person appointed
or deemed to be appointed under or employed in carrying out the provisions of
this Act, shall be required to produce in any court any return, document or
assessment or to divulge or communicate to any court any matter or thing coming
to his notice in the performance of his duties under this Act, except as may be
necessary for the purposes of giving effect to the provisions of this Act or of
any other written law administered by the Commissioner-General.
(4) Notwithstanding
anything contained in this section, any officer of the Department of Inland
Revenue may communicate any matter which comes to his knowledge in the
performance of his duties under this Act or under any other written law
administered by the Commissioner-General, to-
(a) any other officer of
that Department, if the communication of such matter is necessary for the
performance of any duty under this Act or such other written law;
(b) the Commissioner of
Revenue of any Provincial Council, being a matter which relates to the turnover
for any period commencing on or after January 1, 1991, of any wholesale or
retail trade or business carried on by any person or partnership within the
Province for which such Provincial Council is established, to such an extent as
the Commissioner-General may deem necessary to enable such Commissioner to
ascertain such turnover; For the purposes of this paragraph, the expression,
"turnover" has the meaning assigned to it by paragraph (r) of
subsection (1) of section 26;
(c) the Income Tax
Authority of any territory of the Commonwealth of Nations, to such an extent as
the Commissioner-General may deem necessary to enable such Authority to grant
relief from income tax paid in Sri Lanka; and
(d) the Income Tax
Authority of any country with which an agreement has been entered into for
affording relief from double taxation,
and the
Commissioner-General may produce or cause to be produced in any court in any
proceedings under this Act, a copy of any particulars contained in any return
or document furnished to him under this Act or under any other written law
administered by him or which is otherwise in his possession, certified by him
or on his behalf, to be a correct copy of such particulars and such copy shall,
notwithstanding anything in the Evidence Ordinance relating to the proof of
documents, be admissible in evidence:
Provided that, the
Commissioner-General may produce or cause to be produced the original of any
such return or document in any case where it is necessary to prove the
handwriting or the signature of the person who wrote, made, signed or furnished
such return or document, but only for the purpose of such proof:
Provided further that,
the Commissioner-General shall not in any case be compelled to produce in any
court, either the original of such document or return or a copy of any
particulars contained in such document or return.
(5) Notwithstanding
anything contained in the preceding provisions of this section, the
Commissioner-General shall_
(a) if required by a
Commission established under the Special Presidential Commissions of Inquiry
Law, No. 7 of 1978, furnish as specified in a notice issued by such Commission,
all information available to him relating to the affairs of any person, whose
conduct is being inquired into by the Commission or of the spouse or a son or
daughter of such person, or of any other person specified by the Commission,
and to produce or furnish as so specified in the notice any document relating
to such person, spouse, son or daughter or other person, as the case may be,
which is in the possession or under the control of the Commissioner-General;
(b) if required by the
Attorney-General, in the course of an investigation of an allegation of bribery
against any person or after the commencement of prosecution or an arrangement
of any person for bribery, furnish, as specified in the notice issued to him,
all information available to him relating to the affairs of such person or of
the spouse or a son or daughter of such person, and produce or furnish, as
specified in the notice, any document or a certified copy of any document
relating to such person, spouse, son or daughter, which is in the possession or
under the control of the Commissioner-General;
(c) if required by a
Commission appointed under the Commissions of Inquiry Act, furnish as specified
in a notice issued to him, all information available to him relating to the
affairs of any person whose conduct is being inquired into by the Commission or
of the spouse or a son or daughter of such person and produce or furnish as
specified in such notice, any document or a certified copy of any document
relating to such person, spouse, son or daughter, which is in the possession or
under the control of the Commissioner-General;
(d) report to the
Attorney-General for investigation any case where he suspects from information
available to him, that any person is guilty of bribery.
(e) if required by a
letter in writing by the Director General of Customs, in the course of carrying
out the official duties, furnish as specified in such letter, all information
available to him relating to the affairs of any person in respect of whom an
investigation is being conducted by the Director General of Customs, or of the
spouse or a son or daughter of such person, which is in the possession or under
the control of the Commissioner-General;
(f) if required by a
letter in writing by the Director General of Census and Statistics, in the
course of carrying out the official duties, furnish as specified in such
letter, all information available to him relating to the affairs of any person
in respect of whom information and statistics are being collected by the
Director General of Census and Statistics, or of the spouse or a son or
daughter of such person, which is in the possession or under the control of the
Commissioner- General;
(g) if required in
pursuance to an Order issued by a competent Court, by the Inspector General of
Police, in the course of an investigation of any crime or proceeds of crime
which affects to the public interest, against any person, or after the
commencement of prosecution of any person for bribery or corruption, furnish,
all information available to him relating to the affairs of such person or of
the spouse or a son or daughter of such person, as specified in such order, and
provide a certified copy of any document relating to such person, spouse, son
or daughter, which is in the possession or under the control of the
Commissioner-General.
(6) Notwithstanding
anything contained in the preceding provisions of this section, any officer of
the Department of Inland Revenue shall, at the request of the Land Reform
Commission established under the Land Reform Law, No. 1 of 1972, disclose to
such Commission such particulars relating to the affairs of any person that may
come to his knowledge in the performance of this duties under this Act, as may
be required by such Commission for the exercise of its powers and the discharge
of its functions under that Law.
(7) Notwithstanding any
thing contained in this section, the Commissioner-General may permit the
Auditor-General or any officer of the Department of the Auditor-General duly
authorized by him in that behalf, to have access to any books, records, returns
or other documents as may be necessary for the performance of his official
duties. The Auditor-General or any officer authorised by him under this
subsection shall for the purpose of subsection (2), be deemed to be a person
employed, in carrying out the provisions of this Act.
(8) Notwithstanding
anything in the preceding provisions of this section, the Commissioner-General
or any person authorized in that behalf by the Commissioner-General may, from
time to time, cause to be published in such manner as the Commissioner-General
may consider expedient, -
(a) a list containing
the names and addresses of all the tax payers and the total income declared in
the returns of such tax payers in respect of any year of assessment, and where
the Commissioner-General considers it necessary, their principal sources of
income; and
(b) particulars relating
to any person who has been convicted in any court of law for any offence under
this Act, or on whom a penalty has been imposed by the Commissioner-General
under section 112 or under section 172.
(9) Where for the
purposes of prosecuting any director, manager or other officer or employee of
an insurance business who has acted in a manner prejudicial to the interests of
the holders of policies issued in respect of that business, the Attorney-General
by written notice requires the Commissioner-General to furnish such information
relating to the assets of such director, manager, other officer or employee as
is in the possession of the Commissioner-General, the Commissioner-General
shall, notwithstanding anything in the preceding provisions of this section,
furnish such information to the Attorney-General.
(10) Notwithstanding
anything contained in the preceding provisions of this section, where it
appears to the Commissioner-General from any matter which comes to his
knowledge in the performance of his duties under this Act, that any person has
committed an offence under the Exchange Control Act or the Customs Ordinance,
he may communicate or deliver to the Controller of Exchange or the
Director-General of Customs, as the case may be, any information relating to
the commission of the offence or any articles, books of account or the
documents necessary or useful for the purpose of proving the commission of such
offence.
(11) Where the
Commissioner-General has under subsection (10) communicated or delivered to the
Controller of Exchange or the Director-General of Customs any information
relating to the commission, or any articles, books of account or other
documents necessary or useful for the purpose of proving the commission, by any
person of an offence under the Exchange Control Act or the Customs Ordinance,
as the case may be, the Commissioner-General or any other officer of the
Department of Inland Revenue may, notwithstanding anything to the contrary in
the preceding provisions of this section, in any proceedings against such
person for that offence, give evidence relating to such information, articles,
books of account or other documents and produce or cause to be produced any
returns, books of account, other documents or articles he may be required to
produce in such proceedings. The Commissioner-General or such other officer may
produce or cause to be produced in court for the purpose of such proceedings, a
copy of any particulars contained in any return, books of account or other
document, and such copy shall, notwithstanding anything in the Evidence
Ordinance relating to the proof of documents, be admissible in evidence:
Provided that the
Commissioner-General or other officer-
(a) may produce or cause
to be produced the original of such return, books of account or other document
in any case where it is necessary to prove the handwriting or the signature of
the person who wrote, made, signed or furnished such return, books of account
or other document, but only for the purpose of such proof;
(b) shall not in any
case be compelled to produce in court either the original of such return, books
or account or other document or a copy of the particulars contained in such
return, books of account or other document.
(12) Nothing in the
preceding provisions of this section shall be read or construed, as empowering
the Minister or the Secretary to the Ministry of the Minister to have access to
or to examine any records or documents relating to the affairs of any person,
in the possession, custody or control of the Commissioner-General.
(13) Nothing in the
preceding provisions of this section shall be read or construed as requiring
the Commissioner-General to disclose such particulars relating to the affairs
of any person as may come to his knowledge through the exchange of information in
pursuance of any agreement entered into between the Government of Sri Lanka and
Government of any other territory, and referred to in section 97 of this Act,
to any person or authority other than any person or authority involved in the
assessment or collection of or the enforcement of or the prosecution in respect
of any offence relating to, the taxes which are the subject of that agreement.
210 INLAND REVENUE INCENTIVE FUND.
210. (1) There shall be
established a Fund called the Inland Revenue Incentive Fund (hereinafter in
this section referred to as "the Fund")
(2) There shall be paid
into the Fund in respect of each year, such sums as may be appropriated
annually by Parliament for the purpose of the Fund.
(3) There shall be paid
out of the Fund -
(a) all sums required
for the welfare of officers of the Department of Inland Revenue, in accordance
with any scheme approved by the Minister; and
(b) group incentive
allowances to any class or category of officers of the Department of Inland
Revenue, in accordance with such scheme as may be approved by the Minister, to
ensure efficiency in the administration of any Act administered by the Commissioner-General.
(4) The
Commissioner-General or any officer of the Department of Inland Revenue
specially authorized by him in that behalf, shall administer the Fund in
accordance with the prescribed procedure.
211 COMMISSIONER- GENERAL MAY PAY REWARDS TO INFORMANTS.
211. The
Commissioner-General may pay from sums appropriated for that purpose by
Parliament, such sums of money as he considers reasonable in the circumstances
of the case, to any individual who provides information which result in the
assessment of any income not disclosed by any other person and the collection
of tax from such person.
CHAPTER XXXI
General
212 REGULATIONS.
212. (1)The Minister may
make regulations for the purpose of carrying out or giving effect to the
principles and provisions of this Act.
(2) In particular and
without prejudice to the generality of the powers conferred by subsection (1),
the Minister may make regulations in respect of the following matters:-
(a) the methods by which
an estimate of the income liable to tax may be made, in cases where the amount
of such income cannot be definitely ascertained;
(b) the procedure to be
followed in respect of applications for refunds of any tax paid under this Act
and for any allowance or deduction which may be claimed under this Act;
(c) any matter which is
required or authorized by this Act to be prescribed;
(d) penalties for the
contravention of any regulations made under this section or for failure to
comply therewith, such penalty not exceeding in each case, a sum of five
hundred rupees;
(e) the manner of
computation of profits and income whenever the Financial Accounting Standards
applicable in Sri Lanka are changed;
(f) guidelines for the
calculation of qualifying payment relating to cost of acquisition or merger of
any bank, financial institution or leasing company and the continuation of tax
neutral position after acquisition, merger or amalgamation, as the case may be,
for the purpose of this Act and other Acts administered by the
Commissioner-General.;
(g) rules and guidelines
for the implementation of the use of electronic communication or electronic
records with regard to the Acts administered by the Commissioner-General from
time to time as required.
(3) A regulation made
under this section, other than a regulation-
(a) prescribing a
penalty for; or
(b) enhancing a penalty
prescribed for,
the contravention of or
failure to comply with, a regulation made under this section, may be declared
to take effect from a date earlier than the date of its publication in the
Gazette.
(4) A regulation
prescribing a penalty for the contravention of or failure to comply with a
regulation, shall not come into operation until it is approved by Parliament
and notice of such approval is published in the Gazette.
(5) Every regulation
made by the Minister other than a regulation referred to in subsection (4),
shall come into operation on the date of its publication in the Gazette or on
such other date as may be specified in the regulation.
(6) Every regulation
referred to in subsection (5) shall as soon as convenient after its publication
in the Gazette, be brought before Parliament for approval. Any such regulation
which is not so approved shall be deemed to be rescinded as from the date of
disapproval, but without prejudice to anything previously done thereunder.
Notification of the date on which a regulation is deemed to be rescinded, shall
be published in the Gazette.
213 FORMS.
213. The
Commissioner-General may from time to time specify the forms to be used for all
or any of the purposes of this Act, and any form so specified may from time to
time be amended or varied by the Commissioner-General or some other form may be
substituted by the Commissioner-General, in place of any form so specified. Any
form so specified by the Commissioner-General may be published in the Gazette.
214 POWER TO SEARCH BUILDINGS OR PLACES.
214. (1) Any officer
appointed for the purposes of this Act who is specially authorized by the
Commissioner-General in that behalf may, accompanied by a peace officer, do all
or any of the following acts: -
(a) enter and search any
building or place where he has reason to believe that any articles, books of
account or other documents which in his opinion will be useful for or relevant
to any proceedings under this Act, may be found and examine any such articles,
books of account or other document if found;
(b) seize and deliver to
the Commissioner-General any such articles, books of account or other documents
or place marks of identification thereon or make extracts or copies therefrom;
(c) for the purpose of
effecting such delivery, guard or cause to be guarded, any such articles, books
of account or other documents;
(d) question any person
whom he finds in that building or place with respect to any matter arising
under this Act, or the ownership of any such articles, books of accounts or
other documents;
(e) make a note or an
inventory of any other thing found in the course of any search under this
section, which in his opinion will be useful for or relevant to any proceedings
under this Act,
and the provisions of
the Code of Criminal Procedure Act, No. 15 of 1979 relating to searches shall
apply, so far as may be, to searches under this section.
(2)Before authorizing
any officer to exercise any powers under subsection (1), the
Commissioner-General shall record the circumstances which necessitate the
exercise of those powers by that officer.
(3)
(a) Any article shall be
seized and delivered to the Commissioner-General by the officer carrying out a
search under this section, only if -
(i) any tax payable by
the owner of such article under any written law administered by the
Commissioner-General, is in default; or
(ii) such officer is
satisfied after such investigation as he may deem necessary, that such article
had been purchased by the owner thereof, out of or is profits and income in
respect of which, income tax is payable by such owner but has not been paid by
him.
(b) Where any article is
seized under this section by an officer carrying out a search, the owner of
such article shall be entitled to a receipt from such officer for the article
so seized.
(4) Where any article is
seized and delivered to the Commissioner-General under this section, the
Commissioner-General may-
(a) if such article is
cash and if such cash is less than or is equivalent to the amount of the tax in
default or the tax payable according to the Commissioner-General, in respect of
such article set off such cash in partial or full satisfaction of tax;
(b) if such cash is more
than the amount of such tax, set off so much of the cash as is equivalent to
the amount of such tax, in full satisfaction of such tax and return the balance
to the owner of such article: Provided that where such cash is in foreign
currency, such balance shall be credited in a Bank to the account of the owner
of such article, or
(c) if such article is
not cash, retain, subject to the provisions of subsection (5), such article in
his custody until-
(i) the tax in default,
or the tax payable according to the Commissioner-General on the profits and
income out of which such article had been purchased, as the case may be, is
paid; or
(ii) arrangements are
made to the satisfaction of the Commissioner-General for the payment of such
tax.
(5) Where the tax is not
paid or where arrangements are not made by the owner of the article as
specified in paragraph (c) of subsection (4), within six months after the date
of the seizure of such article, then the Commissioner-General shall cause such article
to be sold by public auction.
(6)The sum realized by
the sale of any article under this section shall be applied-
(a) firstly, in payment
of the costs and charges of seizing, keeping and selling the article; and
(b) secondly, in
satisfaction of the tax payable by the owner of that article, and the balance,
if any, shall be paid to the owner of that article.
(7)In this section -
"article"
includes cash, whether or not in Sri Lanka currency, a postal order, a money
order, a traveller's cheque, a letter of credit, a bill of exchange, a
promissory note, gold, jewellery, a precious stone, and any stock-in-hand;
"document"
includes any diskette, tape, compact disc or any other thing in which any
computer programme or data is stored or recorded in codified form or in
electronic, magnetic or other medium;
"peace
officer" has the same meaning as in the Code of Criminal Procedure Act,
No. 15 of 1979.
215 POWER TO SEARCH BUSINESS PREMISES.
215. (1) The
Commissioner-General or any other officer of the Department of Inland Revenue
who is specially authorized in that behalf by the Commissioner-General in
writing, may do all or any of the following acts : -
(a) enter and inspect
for the purposes of this Act, any place or building where any trade, business,
profession or vocation is carried on or exercised by any person or partnership;
(b) open and examine any
receptacle where any book of account, register, record, or any other document
may be found, and make an inventory of the articles found therein;
(c) examine and take
copies of, or make extracts from, any book of account, register, record or
other document found in such place or building;
(d) operate any computer
found in any such building and take print outs of the whole or part of any
entries recorded or stored therein;
(e) take possession of
any such book of account, register, record or other document, or place marks of
identification thereon;
(f) count and make a
record immediately of the cash found in such place or building;
(g) require any person
whom he finds in such place or building, to give such information as is in his
power to give, with respect to any matter under this Act;
(h) examine either alone
or in the presence of any other person, as he thinks fit, with respect to any
matter under this Act, any person whom he finds in such place or building.
(2) Where an officer
authorized by the Commissioner-General under subsection (1), takes into his
possession any book of account, register, record or other documents from any
person or partnership, such officer shall issue to that person or partnership,
as the case may be, a memorandum specifying the book, register, record or
document he has taken into his possession.
(3) Any book of account,
register, record or other document taken into his possession under subsection
(1) by any officer, may be retained in the possession of such officer as long
as may be necessary for the examination of such book, register, record, or
document or for the institution of legal proceedings against the person to whom
such book, register, record, or other document belongs.
(4)For the purpose of
this section, "article" and "documents" shall have the same
meaning assigned to them by section 214.
216 SINHALA TEXT TO PREVAIL IN CASE OF INCONSISTENCY.
216. In the event of any
inconsistency between the Sinhala and Tamil texts of this Act, the Sinhala text
shall prevail.
CHAPTER XXXII
Interpretation
217 INTERPRETATION.
217. In this Act, unless
the context otherwise requires-
"acquired"
with reference to property, means acquired by purchase, gift, inheritance, or
exchange, or in any other manner, and the expression "acquisition"
shall be construed accordingly;
"active
partner" in relation to a partnership, means a partner who takes an active
part in the control, management, or conduct of the trade or business of such
partnership;
"agent", in
relation to a non-resident person or to a partnership in which any partner is a
non-resident person, includes -
(a) the agent, attorney,
factor, receiver or manager in Sri Lanka of such person or partnership; and
(b) any person in Sri
Lanka through whom such person or partnership is in receipt of any profits or
income, arising in or derived from Sri Lanka;
"agricultural
undertaking" means an undertaking for the purpose of the production of any
agricultural, horticultural or any animal produce and includes any undertaking
for the purpose of rearing livestock or poultry;
"approved by the
Commissioner-General" when used in relation to a pension, provident,
gratuity or savings fund means, approved by the Commissioner-General as
conforming to such conditions as may be specified by him, either generally or
specifically in relation to any such fund, by notice published in the Gazette,
having regard to the need for the protection of the interests of the
contributors to any such fund and the protection of revenue;
"approved by the
Minister" when used in relation to an undertaking or a company or a public
corporation or an institution or any fund means, approved by the Minister as
being essential for the economic progress of Sri Lanka;
"assessable
income" means the residue of the total statutory income of any person,
after deducting the aggregate amount of the deduction to which such person is
entitled under section 32;
"Assessor or
Assistant Commissioner" means an Assessor or Assistant Commissioner of
Inland Revenue appointed or deemed to be appointed under this Act, and includes
a Deputy Commissioner or Senior Deputy Commissioner of Inland Revenue;
"associate
company" means a company over which an investing company has a significant
influence and which is neither a subsidiary of the investing company nor is a
joint venture of which the investing company is a partner;
"authorized
representative" means any individual who is authorized in writing -
(1) by a person to act
on his behalf for the purpose of this Act, and who is -
(a) in any case -
(i) a member of the
Institute of Chartered Accountants of Sri Lanka;
(ii) an accountant
approved by the Commissioner-General;
(iii) Repealed
(iv) an employee
regularly employed by that person, or
(v) a member of the Sri
Lanka Institute of Taxation established under the Sri Lanka Institute of
Taxation Act, No. 21 of 2000;
(b) in the case of an
individual, a relative;
(c) in the case of a
company, a director or the secretary of that company;
(d) in the case of a
partnership, a partner of that partnership;
(e) in the case of a
body of persons, a member of such body; or
(2) from time to time to
act on his behalf for the purpose of this Act in respect of matters relating to
such year of assessment as is specified in the authorization, and who_
(a) being and individual
registered as an auditor under the Companies (Auditors) Regulations, is
approved by the Commissioner-General; or
(b) is an individual
approved by the Commissioner-General under regulations made in that behalf;
"bank" means
any company or body of persons carrying on banking business and includes a
licensed specialised bank, within the meaning of the Banking Act, No. 30 of
1988;
"body of
persons" includes any local or public authority, any body corporate or
collegiate, any fraternity, fellowship, association or society of persons,
whether corporate or unincorporate, and any Hindu undivided family, but does
not include a company or a partnership;
"Board of
Investment" means the Board of Investment of Sri Lanka, established by the
Board of Investment of Sri Lanka Law, No. 4 of 1978;
"business"
includes an agricultural undertaking, the racing of horses, the letting or
leasing of any premises, including any land by a company and the forestry;
"Ceylon Tourist
Board" means the Ceylon Tourist Board established by the Ceylon Tourist
Board Act, No. 10 of 1966;
"Ceylon Chamber of
Commerce" means the Ceylon Chamber of Commerce incorporated by the Chamber
of Commerce Ordinance;
"charitable
institution" means the trustee or trustees of a trust, or corporation or
an unincorporate body of persons established for a charitable purpose only or
engaged solely in carrying out a charitable purpose;
"charitable
purpose" means a purpose for the benefit of the public or any section of
the public in or outside Sri Lanka, of any of the following categories: -
(a) the relief of
poverty;
(b) the advancement of
education or knowledge other than by any institution established for business
purposes or by any institution established under the Companies Act:
(bb) activities for the
protection of the environment or eco-friendly activities;
(c) the advancement of
religion or the maintenance of religious rites and practices or the
administration of a place of public worship;
(d) any other purpose
beneficial or of interest to mankind, not falling within any of the preceding
categories;
"child" in
relation to an individual to whom this Act applies means ,a child under
eighteen years of age, and includes a child adopted under the Adoption of
Children Ordinance by that individual, and where that individual is not a
citizen of Sri Lanka, a child adopted by that individual in accordance with the
law of the country of which he is a subject or citizen, but does not include -
(a) any child adopted
under any other law;
(b) a married child;
(c) an illegitimate
child;
"commercial
bank" has the same meaning as in the Monetary Law Act (Cap 422);
"Commissioner-General"
means the Commissioner-General of Inland Revenue appointed or deemed to be
appointed under this Act, and : -
(a) in relation to any
provision of this Act, includes the Senior Deputy Commissioner-General, a
Deputy Commissioner-General, Senior Commissioner, a Commissioner and
Commissioner who is specially authorized by the Commissioner-General either
generally or for some specific purpose, to act on behalf of the
Commissioner-General;
(b) in relation to
Chapter XXIII, includes an adjudicator appointed by the Minister and authorized
by the Commissioner-General under that Chapter;
"Senior
Commissioner" means a Senior Commissioner of Inland Revenue, appointed or
deemed to be appointed under this Act;
"company"
means any company incorporated or registered under any law in force in Sri
Lanka or elsewhere, and includes a public corporation;
"Controller of
Exchange" means the officer designated as the head of the Department of
Exchange Control of the Central Bank;
"Commissioner"
means a Commissioner of Inland Revenue appointed or deemed to be appointed
under this Act;
"Deputy
Commissioner-General" means a Deputy Commissioner-General of Inland
Revenue appointed or deemed to be appointed under this Act;
"dividend"
includes -
(a) any distribution of
profit by a company to its share holders, in the form of -
(i) money or of an order
to pay money;
(ii) shares in any other
company; or
(iii) debentures in that
company or in any other company; or
(iv) scrip dividend or
dividend in specie ; or
(v) where a company buys
back shares from its shareholders, the excess, if any, paid to any shareholder
over the market price of such share quoted in the Colombo Stock Exchange or the
market value of such share as the case may be, as at the date on which the
shareholders of such company at a meeting approved such share buyback; and
(b) the amount of any
capital returned or distributed to the extent of the paid up value of any
shares distributed by the company to its shareholders within six years
preceding the date of such return or distribution of capital, such paid-up
value representing the capitalization of the whole or any part of the profits
of the company;
"donee" means
any person who acquires any property under a gift, and where a gift is made to
a trustee for the benefit of another person, includes both the trustee and the
beneficiary; "donor" means any person who makes a gift ;
"executive
officer" means a director of a company or corporation, or an employee in
any trade, business, profession or vocation whose monthly emoluments (including
all allowances) are not less than seventy five thousand rupees;
"executor"
means an executor or administrator of a deceased person, and includes -
(a) any person who takes
possession of or intermeddles with the property of a deceased person;
(b) any person who has
applied or is entitled to apply to a District Court for the grant or resealing
of probate or letters of administration in respect of the estate of a deceased
person; or
(c) a trustee acting
under a trust created by the last will of the author of the trust;
"foreign
currency" has the same meaning as in the Exchange Control Act;
"foreign currency
banking unit" means a unit or department of a commercial bank, authorized
by the Central bank of Sri Lanka to operate as a foreign currency banking unit;
"gem" has the
same meaning as in the National Gem and Jewellery Authority Act, No. 50 of
1993;
"gift" means a
gift within the meaning of section 52 of the Inland Revenue Act, No. 28 of
1979;
"Government
institution" means any Department or undertaking of the Government of Sri
Lanka;
"incapacitated
person" means any minor, lunatic idiot or person of unsound mind;
"local
authority" means any Municipal Council, Urban Council, Pradeshiya Sabha
and includes any Authority established by or under any law to exercise, perform
and discharge powers duties and functions, corresponding or similar to the
powers, duties and functions exercised, performed and discharged by any such
Council or Sabha;
"market value"
with reference to any property and any date, means the price which, in the
opinion of an Assessor or Assistant Commissioner, that property would have
fetched on that date, in an open market;
Repealed.
"non-resident"
or "not resident" means not resident in Sri Lanka within the meaning
of section 79;
"owner", in
relation to land and improvements thereon, includes a person who holds such
land and improvements subject to a ground rent or other annual charge;
"partnership"
shall not include any disposition, trust, grant, covenant, agreement,
assignment, settlement, or other arrangement by which the share of the
divisible profits or the divisible loss of a partner of any partnership, is
shared with any other person or partnership;
"person"
includes a company or body of persons or any government;
"precedent
partner" means the partner who, of the active partners resident in Sri
Lanka -
(a) is first named in
the agreement of partnership;
(b) if there is no such
agreement, is specified by name or initials singly or with precedence to the
other partners, in the usual name of the partnership; or
(c) is the first named
in the statement made under section 4 of the Business Names Act, No. 7 of 1987;
"prescribed"
means prescribed by regulation made under this Act;
"primary
dealer" means any financier or bank, appointed , by the Monetary Board of
Sri Lanka, under the Local Treasury Bills Ordinance (Chapter 417) or the
Registered Stocks and Securities Ordinance (Chapter 420), and functioning as a
primary dealer in Treasury Bills, Treasury Bonds, Registered Stock or other
Security;
"profits" or
"income" means the net profits or income from any source for any
period calculated in accordance with the provisions of this Act;
"property"
includes any interest in any movable or immovable property;
"Provincial
Council" means any Provincial Council established for a Province, under
Article 154A of the Constitution;
"public
corporation" means any corporation, board or other body which was or is,
established by or under, any written law, other than the Companies Act, No. 7
of 2007, with capital wholly or partly provided by the Government, by way of
grant, loan or other form;
"quoted public
company" means any company which is resident in Sri Lanka and in respect
of which the Assessor or Assistant Commissioner is satisfied that in relation
to any year of assessment, it is a company the shares of which are quoted throughout
that year of assessment or where such company is incorporated during that year
of assessment, from the date of incorporation to the end of that year of
assessment, in any official list published by any stock exchange licensed by
the Securities and Exchange Commission of Sri Lanka;
"rates" means
any taxation imposed by a local authority in respect of property;
"receiver"
includes any liquidator and any assignee, trustee or other person having the
possession or control of the property of any person, by reason of insolvency or
bankruptcy;
"regulated
provident fund" means any provident fund -
(a) which is established
by a body corporate whose profits and income are exempt from income tax under
any written law; and
(b) which is regulated
and maintained under the written law by which such body corporate is
constituted;
"resident" or
"resident in Sri Lanka" means resident in Sri Lanka within the
meaning of section 79;
"Securities and
Exchange Commission" means the Securities and Exchange Commission of Sri
Lanka established by the Securities and Exchange Commission of Sri Lanka Act,
No. 36 of 1987;
"Additional
Commissioner-General" means the Additional Commissioner-General of Inland
Revenue appointed or deemed to be appointed under this Act ;
" Senior
Commissioner " means a Senior Commissioner of Inland Revenue appointed or
deemed to be appointed under this Act ;
"shareholder"
includes any member of a company having a share or interest in the capital or
profits or income thereof, whether the capital of such company is divided into
shares or not;
"share"
includes any interest in the capital or profits or income of a company;
"statutory
income" means income from any source computed in accordance with section
28;
"taxable
income" means the residue of assessable income of a person after deducting
the aggregate amount of the allowances to which such person is entitled under
section 33;
"Tax Appeals
Commission" means the Tax appeals Commission established by the Tax
Appeals Commission Act, No. 23 of 2011;
"trade"
includes every trade and manufacture and every adventure and concern in the
nature of trade;
"transfer of
property" means any disposition, conveyance, assignment, settlement,
delivery, payment or other alienation of property, and includes -
(a) the creation of a
trust in property; and
(b) the grant or
creation of any interest in any property;
"trustee"
includes any trustee, guardian, curator, manager or other person having the
direction, control or management of any property on behalf of any person and in
relation to any unit trust, the person appointed as the trustee of that unit trust
by the instrument creating such unit trust, but does not include an executor;
"unit trust"
means any unit trust licensed as a unit trust by the Securities and Exchange
Commission of Sri Lanka;
"with the approval
of the Central Bank of Sri Lanka" when used in relation to the opening of
an account or the making of an investment, means with the approval of the
Central Bank of Sri Lanka as being essential for the economic progress of Sri
Lanka;
"year of
assessment" means the period of twelve months commencing on the first day
of April of any year and ending on the thirty-first day of March in the
immediately succeeding year;
"year preceding a
year of assessment" means the period of twelve months ending on the
thirty-first day of March immediately prior to a year of assessment.
CHAPTER XXXIII
218 APPLICATION OF THE INLAND REVENUE ACT, NO. 38 OF
2000.
218. (1) The Inland
Revenue Act, No. 38 of 2000 shall not apply to any income tax, for any year of
assessment commencing on or after April 1, 2006.
(2) Where the whole or
any part of the profits and income of a person are exempt from income tax under
any provisions of the Inland Revenue Act, No. 28 of 1979 or of the Inland
Revenue Act, No. 38 of 2000, as the case may be, for a period as specified in
any of those provisions and there remains on March 31, 2006, in relation to any
person, an unexpired part of any such period, the whole or part, as the case
may be, of the profits and income which would but for the provisions of
subsection (1) have been exempt from income tax, the whole or part, as the case
may be, of the profits and income of that person for that part of the period
shall, notwithstanding anything in subsection (1) continue to be exempt from
income tax as if such provisions continued to have application:
Provided however that,
where a company approved by the Minister for the purposes of section 22 DDD of
the Inland Revenue Act No. 28 of 1979 had given notice in writing to the
Commissioner-General before December 31, 2000 that such company had elected not
to conform to the conditions subject to which approval was granted the profits
and income from any undertaking of such company as is referred to in subsection
(2) of that section for any year of assessment commencing on or after April 1,
2006, shall, notwithstanding the provisions of subsection (1) of that section
be liable to income tax.
(3) Where the Board of
Investment of Sri Lanka has entered into an agreement with an enterprise under
section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978 prior to
April 1, 2006 providing for the exemption of the whole or a part of the profits
and income of that enterprise from income tax payable under the Inland Revenue
Act No. 28 of 1979 or under the Inland Revenue Act, No. 38 of 2000, as the case
may be, for a specified period, and there remains on March 31, 2006 an
unexpired part of such specified period, the whole or part as the case may be,
of the profits and income of that enterprise which but for the provisions of
subsection (1) would have been exempt from income tax, shall be exempt from
income tax payable under this Act, for such unexpired part of the specified
period.
(4) Where any provision
of the Inland Revenue Act No. 28 of 1979 or of the Inland Revenue Act, No. 38
of 2000 provides for the deduction of-
(a) any loss in
ascertaining the assessable income ;
(b) any allowance in
ascertaining the taxable income,
of any person for any
year of assessment, and there remains outstanding on March 31, 2006 any balance
of such loss or allowance as the case may be, which, but for the provisions of
subsection (1), would have been deductible from the assessable income or taxable
income as the case may be, of that person in any year of assessment commencing
on or after April 1, 2006, such balance shall, notwithstanding anything in
subsection, (1) but subject to any conditions specified in the provisions
enabling such deductions, be deductible from the assessable or taxable income
as the case may be, of that person in any year of assessment commencing on or
after April 1, 2006, as if such provision continued to have application.
(5) Where an
individual:-
(a) pays on or after
April 1, 2006, to the Government of Sri Lanka or to any institution referred to
in paragraph (ee) of subsection (2) of section 31 of the Inland Revenue Act,
No. 28 of 1979, any amount:-
(i) in the repayment of
the capital of any loan ; or
(ii) as monthly payments
in terms of any rent purchase agreement, referred to in that paragraph ; or
(b) has incurred prior
to April 1, 2006, any expenditure referred to in paragraph (i) of subsection
(2) of section 31 of the Inland Revenue Act, No. 38 of 2000, and apportioned to
any year of assessment commencing on or after April 1, 2006,
the amount so paid or
the expenditure so apportioned, as the case may be, shall, notwithstanding
anything in subsection (1) but subject to the conditions specified in the
respective paragraphs referred to in paragraph (a) and (b), be deductible from
the assessable income of that individual for any year of assessment commencing
on or after April 1, 2006, as if the Inland Revenue Act, No. 28 of 1979 or the
Inland Revenue Act, No. 38 of 2000, as the case may be, continues to be in
force.
(6) The allowance for
depreciation in respect of any :-
(a) capital asset
acquired prior to April 1, 2000, or any qualified building constructed prior to
April 1, 2000 ; or
(b) capital asset
acquired on or after April 1, 2000, but prior to April 1, 2006, or any
qualified building constructed on or after April 1, 2000, but prior to April 1,
2006,
shall, notwithstanding
the non-application referred to in subsection (1), be computed in accordance
with the respective provisions of the Inland Revenue Act, No. 28 of 1979 or the
Inland Revenue Act, No. 38 of 2000, as the case may be.
(7) Any undertaking,
company, public corporation, institution or any fund approved by the Minister
or any accountant or any individual (for the purposes of the definition of
authorised representative) or any provident or pension fund approved by the
Commissioner-General under any provision of the Inland Revenue Act No. 28 of
1979 or of the Inland Revenue Act, No. 38 of 2000, as the case may be, shall be
deemed to have been and to be approved by the Minister or by the
Commissioner-General as the case may be, under the respective provisions of
this Act.
Comments
Post a Comment