As enacted

Contents

13. Exemptions

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

(1)

There shall be exempt from debits tax –

(a)

debits made from any current account maintained by the Government of Sri Lanka, the Central Bank of Sri Lanka any Provincial Council any local authority, any Foreign Government, by the mission of any State or any organisation to which the provisions of the Diplomatic Privileges Act, No. 9

of 1996 applies, or any diplomatic personnel of such mission or organization, or any International or

Foreign Organization, approved by the Minister by

Order published in the Gazette;

(b)

debits made from any current account, being a special account opened by any person in a commercial bank on the basis of a declaration and an undertaking by the account holder that such account is solely for the purpose of making —

(i)

payment of any loan or interest thereon, to the

Deputy Secretary to the treasury ;

(ii)

payment of any tax to the Commissioner-General of Inland Revenue ;

(iii)

payment of tax, duty, levy or cess to the

Director-General of Customs ;

(iv)

payment of any tax or duty to the

Commissioner of Excise or the Director-General of Excise; or

(v)

any other payment which may be approved by the Minister by Order published in the

Gazette ;

(c)

debits made from any current account, being a special account opened by any person specified hereunder, in a commercial bank on the baisis of a declaration and undertaking by the account holder that such account is solely for the purpose of making —

(i)

payments that represent benefits to contributors from any fund or scheme such as the Employees Provident Fund, the Employees

Trust Fund or any approved provident fund or contributory pension scheme, within the meaning of the Employees Provident Fund Act or non-contributory pension scheme within the meaning of the Payment of Gratuity Act or

Contributory Survivor Pension Scheme ;

(ii)

payments for the purchase of commodities for and on behalf of customers and payments that represent remittance of the sale proceeds of such commodities, made by a licensed produce broker ;

(iii)

payments in relation to trading in government securities made by a primary dealer ;

(iv)

payments in relation to outright (both sales and purchases) and repurchase and reverse repurchase transactions of all debt securities

(government and corporate) in the secondary market, made by a primary dealer or a commercial bank, a finance company, a licensed fiance leasing company or a limited libility comany or a person or a body of persons ;

(v)

payments in relation to the settlement of transactions carried out in the Colombo Stock

Exchange on behalf of a customer, made by a licensed stock broker, or by a limited liability company or a person or a body of persons ;

(vi)

payments to any resident individuals utilizing funds transferred to that account from a foreign banking institution abroad ;

(vii)

payments from any such account maintained at a Commercial Bank by another Commercial

Bank, specialized bank, licensed finance leasing company or other financial intermediary approved by the Commissioner-General —

(a)

being debits made in connection with the activites and the settlement of financial obligations, both interest and principal, arising from such activities as is set out in schedule II of the Banking Act, other than items (o), (p), (v) and (x) of such

Schedule in the case of commercial banks :

Provided however, that in the case of item (u) in Schedule II of the Bnaking

Act, the exemption granted shall be applicable only in relation to factoring activities ;

(b)

being debits made in connection with the activities as are set out in Schedule IV of the Banking Act, other than items (ii),(jj), (ll), (mm) and (nn) of such Schedule and settlement of financial obligaitons both principal and interest, arising from such activities in the case of specialized bank;

(c)

being debits made in connection with the intermediation activities and settlement of financial obligations, both interest and principal, arsing from such activities in the case of licensed finance leasing companies or any other financial intermediaries approved by the

Commissioner-Geneneral, provided the debits in relation to licensed activities of a commercial bank or a specialized bank that are excluded from the exemptions set out in paragraphs (a) and (b) above, would also apply to a licensed finance leasing company or a licensed financial intermediary approved by the

Commissioner-General. (The Deputy

Secretary to the Treasury will be the final authority in detrmining whether an activity amounts to financial intermediation for the purposes of this paragraph) ;

(viii)

debits made from any such account which is maintained by any person at any commercial bank as a collection account, solely for the purpose of receiving funds and facilitating the transfer of funds, to accounts mainatined by such person at other branches or at the head office of such bank ;

(d)

debits made from any current account of an account holder, in relaiton to—

(i)

debits made from such account kept in a commercial bank that represents transfer of funds from that account to another current account in the same or any other commercial bank, maintained in the name of the same account holder ;

(ii)

debits made from such account in respect of sums withdrawn from that account for the payment of debits tax ;

(iii)

debits made in respect of dishonoured cheques, error corrections or contra entries that do not represent withdrawal of funds by the account holder ;

(e)

debits made from any current account in relation to the —

(i)

account of the Head Office in Sri Lanka, of a

Commercial Bank as is maintained in a branch in Sri Lanka, of that bank ;

(ii)

account of a branch in Sri Lanka of a commerceal bank as is maintained in the Head

Office in Sri Lanka, of that bank ;

(iii)

account of a branch in Sri Lanka of a commercial bank as is maintained in another branch in Sri Lanka, of that bank ;

(f)

such other accounts, debits or classes of debits made from current accounts as may from time to time be determined by the Minister, by Order published in the Gazette,having regard to the interests of the national economy.

(2)

To qualify for the exemptions specified in sub-paragraphs (i), (ii) and (iii) of paragraph (d), the account holder shall furnish a declaration to the commercial bank, in a format to be prescribed by the Commissioner-General on or before the fifteenth day of the month, in respect of exempt debits made to any current account of such account holder in the preceding calendar month :

Provided however, that if the fifteenth day falls on a non-working day, such declaration shall be made on the first working day thereafter.

(3)

Where an account holder fails to furnish a declaration within the time specifed in subsection (2), such person may apply for the refund from the Commissioner-General within a period of twelve months from the date of the payment of the debits tax, provided such claim is in writing and evidence acceptable to the Commissioner-General is furnished, to establish the fact that the refund relates to debits tax on an exempt debit.

(4)

A commercial bank shall upon the opening of a collection account or special account report to the

Commissioner-General, on or before the last working day of the calendar month following that in which such account was opened, the name and address of the person or persons in whose name or names the accounts are maintained. A copy of the declaration and undertaking given by such person shall also be sent.

(5)

For the avoidance of doubts it is hereby declared that, other than in the case of a person whose debits in a current account are totally exempt as provided for in paragraph (a), the exemptions granted by paragraphs (b), (c), (d), (e) and (f)

shall not be applicable to payments made by a commercial bank, specialised bank, authorised dealer, finance company, licensed finance leasing company, fiancial intermediary or any other person specified under paragraphs (b), (c), (d), (e)

and (f) for defraying other expenses including expenses of a capital nature such as the cost of purchasing any movable or immovable property or for the construction of any building :

Provided however, in the case of commercial banks, specialized banks, licensed finance leasing company and other financial intermediaries approved by the Commissiioner -

General in terms of paragraph (c) (vii), any interest payment for a liability related to financial intermediation activity, for which exemption is granted shall be excluded from debits tax.

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