Inland Revenue Act 2017 · As enacted · Part I
46. Transfer of asset to an associate or for no consideration
Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.
Official translationFrom Department of Government Printing, unchanged
Subject to this section and sections 44 and 45, where a person realises an asset by way of transfer of ownership of the asset to an associate of the person or by way of transfer to any other person by way of gift –
the person shall be treated as deriving an amount in respect of the realisation equal to the greater of the market value of the asset or the net cost of the asset immediately before the realisation; and
the person who acquires ownership of the asset shall be treated as incurring expenditure of the amount referred to in paragraph (a) in the acquisition.
Where an individual realises an asset by way of transfer of ownership of the asset to an associate of the individual or a charitibale institution and the requirements of subsection (3) are met –
the individual shall be treated as deriving an amount in respect of the realisation equal to the net cost of the asset immediately before the realisation;
and
the associate or the charitable institution shall be treated as incurring expenditure of the amount referred to in paragraph (a) in acquiring the asset.
The requirements specified in subsection (2) shall be–
in the case of a transfer to an associate–
the associate in relation to the individual is the individual’s child by marriage or adoption, spouse, parent, grandparent, grandchild, sibling, aunt, uncle, nephew, niece or first cousin;
and
the asset is an interest in land or a building situated in Sri Lanka; or
in the case of a transfer to a charitable institution, the transfer occurs by way of gift.
Where a person realises an asset, being trading stock, a depreciable asset, an investment asset or a capital asset of a business, by way of transfer of ownership of the asset to an associate of the person and the requirements of subsection (5) are met –
the person shall be treated as deriving an amount in respect of the realisation equal to the net cost of the asset immediately before the realisation; and
the associate shall be treated as incurring expenditure of the amount referred to in paragraph (a) in acquiring the asset.
The requirements specified in subsection (4) are –
the person or the associate is an entity;
the asset or assets are trading stock, depreciable assets, investment assets or capital assets of a business of the associate immediately after transfer by the person;
at the time of the transfer –
the person and the associate are residents; and
the associate or, in the case of an associate partnership, none of its partners is exempt from income tax; and
there is continuity of underlying ownership in the asset of at least fifty per cent.