Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2007
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s 1Short title
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 10 of 2007.
s 2Amendment of section 4 of Act, No. 10 of 2006
Section 4 of the Inland Revenue Act, No. 10 of 2006
(hereinafter referred to as the “principal enactment”) is hereby amended in subsection (1) of that section, as follows :—
in paragraph (d) of that subsection by the substitution for all the words “(ii) the gross rent paid for such place of residence, whichever is higher,” to the end of that paragraph, of the following—
“(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 ;”; and
in paragraph (e) of that subsection by the substitution for the words “at the time of its disposal, of any share”, of the words and figures “at the time of its disposal, where such disposal takes place prior to April 1, 2007, of any share”.
s 3Amendment of section 8 of the principal enactment
Section 8 of the principal enactment is hereby amended in subsection (1) of that section, as follows :-
in paragraph (n) of that subsection, by the substitution for the words, “public corporation or at any subsequent time,”, of the words and figures
“public corporation other than any public corporation referred to in sub-paragraph (ii) of paragraph (b), or at any subsequent time,”;
in sub-paragraph (ii) of paragraph (o) of that subsection, by the substitution for the words “the
Commissioner of Labour”, of the words “the
Commissioner of Labour;”; and
by the addition immediately after paragraph (o) of that subsection, of the following new paragraphs :-
“(p)
the value of any benefit accruing 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 which in the opinion of the Commissioner-General 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
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—
owned or chartered by a company registered as an off-shore company under Part XI of the Companies Act,
No. 7 of 2007 ; or
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.”.
s 4Amendment of section 9 of the principal enactment
Section 9 of the principal enactment is hereby amended as follows :—
in paragraph (j) of that section, by the substitution for the words “such charitable institution.”, of the words “such charitable institution ;”; and
by the addition immediately after paragraph (j) of that section, of the following new paragraph :—
“(k)
the interest accruing to any person from any money deposited in any Treasury Bond
Investment External Rupee Account.”.
s 5Amendment of section 10 of the principal enactment
Section 10 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for paragraph (b) of that subsection, of the following paragraph :–
“(b)
any dividend paid to a unit holder by any unit trust or mutual fund;”.
s 6Amendment of section 13 of the principal enactment
Section 13 of the principal enactment is hereby amended as follows :—
in sub-paragraph (i) of paragraph (b) of that section, by the substitution for the words “outside Sri Lanka
(including services relating to any construction project); and”, of the words and figures “outside Sri
Lanka (including, in relation to the year of assessment commencing on April 1, 2006, services relating to any construction project); and”;
by the insertion, immediately after paragraph (d) of that section, of the following new paragraph :—
“(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 contruction project in the course of any trade, business or vocation, if such profits and income (less any such amount expended by that compnay, 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;”;
in paragraph (t) of that section, by the substitution for the words “any profits and income derived by or accruing to any person or partnership other than any unit trust, mutual fund or any venture capital company, from the sale of any share”, of the words and figures—
“any profits and income—
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
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
by the substitution, for paragraph (x) of that section of the following paragraph :—
“(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 :—
in any new undertaking referred to in subsection (2) of section 20, where such company is a company referred to in that section ; and
in any relocated undertaking referred to in subsection (2) of section 21, where such company is a company referred to in that section;”.
s 7Amendment of section 16 of the principal enactment
Section 16 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “The profits and income of any person”, of the words “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”.
s 8Amendment of section 17 of the principal enactment
Section 17 of the principal enactment is hereby amended as follows :-
in subsection (1) of that section, by the substitution for the words and figures “on or after April 1, 2002”, of the words and figures “on or after April 1, 2006”;
and
in sub-paragraph (ii) of paragraph (a) of subsection (2) of that section, by the substitution for the words
“incorporated with a minimum”, of the words and figures “incorporated on or after April 1, 2002, with a minimum”.
s 9Insertion of new sections 24A and 24B in the principal enactment
The following new sections are hereby inserted immediately after section 24 of the principal enactment and shall have effect as section 24A and section 24B of that enactment :—
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 :—
ten years, where the cinema is a new cinema ; or
five years, where the cinema is an upgraded cinema.
The period of ten years or the period of five 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.
For the purposes of this section :—
“new cinema” means a cinema—
in which the exhibition of cinematographic films commences on or after April 1, 2007 ; and
“Exemption from income tax of the profits and income from any new or upgraded cinema.
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
“upgraded cinema” means a cinema—
in which the exhibition of cinematographic films had commenced prior to April 1,
2007 ;
which was not equipped with digital technology and Digital
Theatre Systems and Dolby
Sound Systems prior to April 1,
2007 ; and
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. (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.
Exemption from income tax of the profits and income from the operation of any re-opened abandoned factory.
For the purpose of subsection (1),
“reopened 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 16, 2006; and
commences to produce or manufacture such commodity or article or any other commodity or article in commercial quantities before
April 1, 2008.”.
s 10Amendment of section 25 of the principal enactment
Section 25 of the principal enactment is hereby amended in subsection (1) of that section as follows:—
by the substitution for paragraph (b) of the proviso to paragraph (a) of that subsection, of the following paragraph :—
“(b)
where:—
any plant or machinery acquired 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
Gezette; or
the asset consists of a ship acquired on or after April 1, 2007, being a ship which is owned or chartered 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;”;
by the insertion immediately after paragraph (b) of the proviso to paragraph (a) of that subsection, of the following new paragraph :-
“(c)
where any plant or machinery is acquired on or after April 1, 2007 and is used in any business of carrying out construction work, the rate shall be twenty five per centum of the cost of acquisition;”;
in paragraph (e) of that subsection, by the substitution for the words “a sum equal to the bad debts incurred”, of the words and figures “for the year of assessment commencing on April 1, 2006, a sum equal to the bad debts incurred”; and
by the insertion immediately after paragraph (e) of that subsection, of the following new paragraphs :-
“(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 :—
such sum so considered reasonable shall not exceed one per centum of the aggregate debts outstanding at the end of that period ;
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
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;”;
in paragraph (h) of that subsection, by the omission of the provisos to that paragraph ;
in the proviso to paragraph (k) of that subsection :—
by the substitution in paragraph (iv) of that proviso, for all the words and figures from “the trade, business, profession or vocation carried on by such employer.”, to the end of that paragraph, of the words, “the trade, business, profession or vocation carried on by such employer ; and”;
by the substitution in pargraph (v) of that proviso, for the words, “place of employment or vice versa;” , of the following words :—
“ 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;”;
and
by the addition, immediately after paragraph (q) of that subsection, of the following paragraph :—
“(r)
the accreditation expenses, where such person is a person carrying on any profession.”.
s 11Amendment of section 26 of the principal enactment
Section 26 of the principal enactment is hereby amended as follows :—
in subsection (1) of that section—
in paragraph (l) of that subsection :—
by the substitution in sub-paragraph (i)
of that paragraph, for the words and figures “paragraph (c) of subsection (1)
of section (97);”, of the words and figures “paragraph (c) of subsection (1)
of section 97,;”;
by the substitution in sub-paragraph (iii) of that paragraph, for the words “tax or levy; and”, of the words “tax or levy;
or”;
by the substitution in sub-paragraph (iv)
of that paragraph, for the words and figures “Economic Service Charge Act,
No. 13 of 2006;”, of the words and figures “Economic Service Charge Act,
No. 13 of 2006 ; or”;
by the substitution in sub-paragraph (v)
of that paragraph, for the words and figures “Value Added Tax Act, No. 14 of 2002;”, of the words and figures, “Value
Added Tax Act, No. 14 of 2002 ; or”;
by the substitution in sub-paragraph (vi)
of that paragraph, for the word and figure “item iv”, of the word and figure
“item 4”;
in paragraph (x) of that subsection, by the substitution in paragraph (B) of sub-paragraph (iv) of that paragraph, for the words “any previous year.”, of the following words :—
“any previous year ; and
“loan” includes the collection of funds from the issue of any debt instrument.”;
and
by the addition immediately after paragraph (x) of that subsection, of the following new paragraph :—
“(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—
the expressions “subsidiary company”
and
“holding company” shall have the same respective meanings assigned to them in the Companies Act,
No. 7 of 2007;
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 ;
“reserves” do not include reserves created for the purpose of accounting for any surplus from the revaluation of any asset ; and
“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:—
any sum included in such total amount, being proceeds from the disposal of any capital asset ;
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
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
“loan” includes the collection of funds from the issue of any debt instrument.”; and
by the substitution for subsection (4) of that section, of the following subsection:—
“(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, 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 an assessment for that year of assessment is made:
Provided that, if it is proved to the satisfaction of the Assessor 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 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.”.
s 12Amendment of section 32 of the principal enactment
Section 32 of the principal enactment is hereby amended as follows:—
in subsection (1) of that section, by the substitution for paragraph (c) of that subsection, of the following paragraph :—
“(c)
statutory income from interest arising or accruing to any individual, being interest from which income tax has been deducted under section 134 or section 135, as the case may be ;”;
in subsection (3) of that section, by the addition immediately after paragraph (c) of that subsection the following new paragraph :—
“(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.”; and
in subsection (4) of that section by the substitution for the words and figure from “in sub-paragraph (xvii) of that paragraph,”, to the end of that subsection, of the following words and figures :–
“in sub-paragraph (xvii) of that paragraph, shall not include :—
any interest from which tax has been deducted under section 133 or section 134; or
any dividend from which tax has been deducted under subsection (1) of section 65.”;
in subsection (5) of that section:—
by the substitution in paragraph (a) of that subsection for the words and figure “referred to in paragraph (x) of subsection (1)”, of the words and figures, “referred to in paragraph (x) or paragraph (y) of subsection (1)”;
in paragraph (b) of that subsection:—
by the substitution for the words “the amount of a loss incurred”, of the words
“the amount of a loss, other than a loss referred to in paragraph (c), incurred”;
by the substitution for all the words and figures from “this section previously and any deemed loss,”, to the words
“forward to the next year of assessment and so on:”, of the following :–
“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 :—
statutory income from interest and dividends referred to in subsection (1) ;
any interst income referred to in subsection (2) ; and
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:”;
by the substitution in paragraph (B) of the proviso to that paragraph, for the words “no loss can be carried forward”, of the words, “no loss shall be carried forward”;
in paragraph (D) of the proviso to that paragraph:—
by the substitution for the words
“no loss can be deducted”, of the words “no loss shall be deducted”; and
by the substitution for all the words from “that in which the loss was incurred.”, to the end of that proviso, of the following words:—
“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.
by the addition, at the end of paragraph (b) of that subsection, of the following new paragraph:—
“(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.
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.”; and
in subsection (6) of that section, by the substitution in paragraph (b) for the words and figures “provided for paragraph (b) of subsection (2).”, of the words and figures “provided for in paragraph (b) of subsection (5).”.
s 13Amendment of section 34 of the principal enactment
Section 34 of the principal enactment is hereby amended as follows:—
in paragraph (b) of subsection (2) of that section :—
by the substitution in sub-paragraph (viii) of that paragraph, for the words “approved by the Minister :”, of the words “approved by the
Minister.”; and
by the omission of the proviso to that paragraph; and
in paragraph (a) of subsection (4) of that section, by the substitution in sub-paragraph (iii) of that paragraph, for the words “in that year of assessment shall not exceed ten million rupees;”, of the following words and figures :—
“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)
twenty five million rupees, where such year of assessment is any year of assessment commencing on or after April 1, 2007;”; and
in paragraph (b) of subsection (4) of that section, by the substitution in sub-paragraph (ii) of that paragraph, for the words “in that year of assessment shall not exceed ten million rupees; ”, of the following words and figures:—
“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)
twenty five million rupees, where such year of assessment is any year of assessment commencing on or after April 1, 2007;”.
s 14Amendment of section 37 of the principal enactment
Section 37 of the principal enactment is hereby amended in paragraph (d) of subsection (2) of that section, by the substitution for the words, “fifteen per centum”
wherever it occurs in that paragraph, of the words “ten per centum”.
s 15Amendment of section 42 of the principal enactment
Section 42 of the principal enactment is hereby amended as follows:—
by the renumbering of that section as subsection (1)
of that section;
in the renumbered subsection (1), by the substitution for the words “The profits and income arising in Sri
Lanka”, of the words and figures “The profits and income, for the year of assessment commencing on
April 1, 2006, arising in Sri Lanka”; and
by the addition at the end of the renumbered subsection (1), of the following new subsection:—
“(2) The profits and income for any year of assessment commencing on or after April 1, 2007, 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.”.
s 16Amendment of section 44 of the principal enactment
Section 44 of the principal enactment is hereby amended by the substitution for the words, “unit trust or mutual fund, from the sale of any share or a right to any share”, of the words and figures “unit trust or mutual fund, from the sale on or before March 31, 2007, of any share or right to any share”.
s 17Amendment of section 45 of the principal enactment
Section 45 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “such specified profits shall be chargeable with tax at the appropriate rate specified in the Fifth Schedule to this Act, notwithstanding anything to the contrary in any other provision of this Act.”, of the words “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.”.