Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2011
Official English translation. The Sinhala text prevails.
Official translationFrom Department of Government Printing, unchanged
s 1Short title
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 22 of 2011.
s 2Amendment of section 4 of the Inland Revenue Act, No. 10 of 2006
Section 4 of the Inland Revenue Act, No. 10 of 2006
(hereinafter referred to as the "Principal enactment")
as amended by Act, No. 10 of 2007, is hereby further amended in paragraph (c) of subsection (1) as follows:—
by the substitution in sub-paragraph (ii), for the words
"his contributions to that fund;", of the words and figures "his contributions to that fund, where such retirement took place prior to April 1, 2011;"; and
by the substitution in sub-paragraph (iii) (b), for the words "such contribution and interest;", of the following words and figures:—
"such contribution and interest, where such employee retires from the employment prior to April 1, 2011; ".
s 3Amendment of section 7 of the principal enactment
Section 7 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended as follows:—
in paragraph (b) of that section, by the addition immediately after sub-paragraph (lx), of the following new sub-paragraph:—
“(lxi)
the profits and income of the Insurance
Board of Sri Lanka, established by the
Regulation of the Insurance Industry Act,
No. 43 of 2000." ;
by the substitution in paragraph (e) of that section for the words " the profits and income of a charitable institution, of the words and figures" the profits and income accruing prior to April 1, 2011, of a charitable institution”;
by the repeal of paragraph (h) of that section, and substitution therefor, of the following paragraph:—
"(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.";
by the substitution in paragraph (i) of that section, for the words and figures "Apiwenuwen Api Fund
Act, No. 6 of 2008.", of the words and figures
“Apiwenuwen Api Fund Act, No. 6 of 2008;";
by the addition immediately after paragraph (i) of that section, of the following new paragraphs:-
"(j) the profits and income for every year of assessment within the period of ten years commencing on April 1, 2011, of-
Sri Lankan Airlines Limited;
Mihin Lanka (Pvt.) Limited;
the profits and income for every year of assessment within the period of five years commencing on April 1, 2011, of -
Ceylon Electricity Board;
National Water Supply and Drainage
Board;
Ceylon Petroleum Corporation;
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 such year of assessment is paid as dividend to the
Government.".
s 4Amendment of section 8 of the principal enactment
Section 8 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended in subsection (1) as follows:—
by the substitution in paragraph (p), of that sub section for the words "value of any benefits accruing to”, of the words and figures" value of any benefits accruing before April 1, 2011, to";
in paragraph (q) of that subsection, by the substitution in sub-paragraph (ii), for the words and figures " the Merchant Shipping Act, No. 52 of 1971.", of the words and figures "the Merchant
Shipping Act, No. 52 of 1971; " and
by the addition, immediately after paragraph (q) of that subsection, of the following new paragraphs:-
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;
either the value of benefit from private use of one motor vehicle provided by the employer or any allowance paid in lieu of the provision of such vehicle, subject to a maximum of fifty thousand rupees for a calendar month;
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, then-
such part of such profits in excess of five hundred thousand rupees; or
one hundred thousand rupees, whichever is lower;
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;
official emoluments arising in Sri Lanka to any non-citizen individual from the participation in any international event conducted in Sri Lanka;
such part of official emoluments as does not exceed one hundred thousand rupees, arising in Sri Lanka to any individual who is not a citizen of Sri Lanka and not resident in Sri Lanka.”.
s 5Amendment of section 9 of the principal enactment
Section 9 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended in paragraph (h) of that section, by the substitution for the words
"such part of any interest as does not exceed two hundred thousand rupees accruing or arising in any year of assessment to any individual", of the words and figures "such part of any interest as does not exceed-
two hundred thousand rupees accruing for, or arising in, any year of assessment ending prior to April 1, 2011; and
five hundred thousand rupees accruing for, or arising in, any year of assessment commencing on or after April 1, 2011, to any individual".
s 6Amendment of section 13 of the principal enactment
Section 13 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended as follows:-
by the substitution in sub-paragraph (i) of paragraph (b) of that section, for the words
"services relating to any construction project;
and", of the words "services relating to any construction project;";
by the substitution in sub-paragraph (ii) of paragraph (b) of that section, for the words "any goods imported into Sri Lanka,'', of the following words and figures:-
"any goods imported into Sri Lanka; and
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,'';
by the insertion immediately after paragraph (b) of that section, of the following new paragraph:-
“(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;'';
by the substitution in paragraph (ddd) of that section, for all the words commencing from "from services rendered in or outside Sri Lanka," to
"the national economy of Sri Lanka, ", of the words "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,'';
by the insertion immediately after paragraph (xxxxx) of that section, of the following new paragraph:-
"(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
an amount equal to the interest payable to any bank or other financial institution in Sri Lanka, in respect of any loan granted-
to any company for investing in full in an undertaking referred to in section 17C;
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.'';
by the insertion, immediately after paragraph (yyy) of that section, of the following new paragraphs:-
"(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
by the insertion, immediately after paragraph (zzzz)
of that section, of the following new paragraph:-
"(zzzzz)
the profits and income arising or accruing to any person from any undertaking for the construction of any
Port in Sri Lanka.''.
"Exemption from income tax of the profits and income of any undertaking for fishing.
s 7Insertion of new sections 16A, 16B and 16C in the principal enactment
The following new sections are inserted immediately after section 16 of the principal enactment and shall have effect as section 16A, section 16B and section 16C respectively, of that enactment:—
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.
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.
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. (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.
Exemption from income tax of the profits and income of any under-taking for producing agricultural seeds or planting materials.
Exemption from income tax of the profits and income of any new undertaking investing not less than fifty million rupees.
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.
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. (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 exempted from income tax for a period of three 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 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.
For the purpose of subsection (1), "new undertaking'' means an undertaking-
which is engaged in the manufacture of any article other than any liquor or tobacco product;
"Exemption from income tax of the profits and income from any new undertaking engaged in any pre-scribed activities.
in which the sum invested in the acquisition of fixed assets after
November 22, 2010 but before March 31, 2012 is not less than fifty million rupees; and
which commences commercial operations on or after April 1, 2011.''.
s 8Amendment of section 17 of the principal enactment
Section 17 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended in subsection (2) of that section, by the substitution in sub-paragraph (ii) of paragraph (a), for the words and figures
"incorporated on or after April 1, 2002,”, of the words and figures "incorporated on or after April 1, 2002, but prior to
April 1, 2011,''.
s 9Insertion of new section 17A in the principal enactment
The following new section is hereby inserted immediately after section 17 of the principal enactment and shall have effect as section 17A of that enactment:-
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 exempted 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 reckoned from the date on which such undertaking commences to carry on commercial operations, whichever occurs earlier:
Provided that where the quantum of investment made in such undertaking is more than United State Dollars three million or its equivalent, the Minister may, having regard to the economic development of the country, grant tax exemption on the same basis, for a period not exceeding seven years.
For the purpose of subsection (1), "new undertaking'' means an undertaking engaged in any activity prescribed by the Minister having regard to the development of the national economy, as needed for the economic development of the country and which shall be with an investment of not less than United State
Dollars three million or equivalent in other currencies invested in fixed assets.''.
s 10Amendment of section 20 of the principal enactment
Section 20 of the principal enactment as amended by the Act, No. 9 of 2008, is hereby further amended in subsection (2) of that section as follows:-
by the substitution in paragraph (c) of that subsection, for the words and figures "April 1, 2009-'', of the words and figures "April 1, 2010-''; and
by the substitution in paragraph (e) of that subsection, for the words and figures "prior to April 1, 2009", of the words and figures "prior to April 1, 2010".
s 11Amendment of section 21 of the principal enactment
Section 21 of the principal enactment as amended by
Act, No. 9 of 2008, is hereby further amended in paragraph (b) of subsection (2) of that section, by the substitution for the words and figures "not later that March 31, 2009,", of the words and figures "not later than March 31, 2010,".
s 12Amendment of section 21A of the principal enactment
Section 21A of the principal enactment is hereby amended in paragraph (b) of subsection (2) of that section, by the substitution for the words and figures "not later than
March 31, 2009, of the words and figures "not later than
March 31, 2010".
s 13Amendment of section 23 of the principal enactment
Section 23 of the principal encatment as last amended by Act, No. 9 of 2008, is hereby further amended in subsection (1) of that section by the substitution in the further proviso to that subsection, for the words "be three years.", of the following :-
“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.".
s 14Amendment of section 25 of the principal enactment
Section 25 of the principal enactment as last amended by Act No. 19 of 2009, is hereby further amended in subsection (1) of that section as follows:-
in paragraph (a) of that subsection-
by the substitution in sub-paragraph (iii), for the words "sub-paragraph (v), acquired or assembled by such person, at the rate of twelve and one half per centum on the cost of acqusition or assembly;", of the following words and figures:-
"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;";
in sub-paragraph (v) of that paragraph by the substitution for the words "any qualified building" of the words and figures
"any qualified building constructed prior to
April 1, 2011,";
by the insertion immediately after sub-paragraph (v) of that paragraph, of the following new sub-paragraph:-
"(vi) any qualified building constructed on or after April 1, 2011, at the rate of ten per centum, on the cost of construction;";
in paragraph (b) of the proviso to that paragraph-
"(i) in sub-paragraph (i), by the substitution for the words "machinery acquired is used in any business", of the words and figures "machinery acquired prior to April 1, 2011, is used in any business"; and
in sub-paragraph (ii), by the substitution for the words and figures "acquired on or after April 1, 2007, being a ship", of the words and figures
"acquired on or after April 1, 2007, but prior to
April 1, 2011, being a ship";
by the subsitution in paragraph (i) of that subsection, for the words " the expenditure, including capital expenditure incurred by such person", of the following words and figures:-
"for any year of assessment-
commencing prior to April 1, 2011, the expenditure including capital expenditure; or
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 paragraph (r) of that subsection, by the substitution for the words "carrying on any profession,", of the words "carrying on any profession;"; and
by the addition, immediately after paragraph (r) of that subsection, of the following new paragraph:-
"(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 if 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.",
s 15Amendment of section 26 of the principal enactment
Section 26 of the principal enactment as last amended by Act, No. 9 of 2008, is hereby further amended in subsection (1) as follows:-
by the substitution in sub-paragraph (ii) of paragraph (c) of that subsection, for the words "in foreign currency;", of the following words and figures :-
“in foreign currency:
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, other than-
such expenses incurred solely in connection with the promotion of export trade of any article or goods or the provision of any services for payment in foreign currency ; or
such expenditure incurred in carrying out an approved programme as referred to in paragraph (d); or
(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;”;
by the substitution in sub-paragraph (i) of paragraph (r) of that subsection for the words “one million rupees or”, of the words “two million rupees or”;
by the substitution in paragraph (v) of that subsection, for the words “one half of such person’s cost of advertisement”, of the following words and figures:-
“for any year of assessment-
commencing prior the April 1, 2011, one half;
and
commencing on or after April 1, 2011, one fourth, of such person’s cost of advertisement”;
by the substitution in paragraph (y) of that subsection, for the words “debt instrument.”, of the words “debt instruments;”; and
by the addition immediately after paragraph (y) of that subsection, of the following new paragraph:-
“(z) the income tax paid by any employer in respect of the employment income of any individual employed by such employer.”.
s 16Amendment of section 32 of the principal enactment
Section 32 of the principal enactment as last amended by Act, No. 9 of 2008, is hereby further amended as follows:-
in subsection (3) of that section-
by the substitution in paragraph (g), for the words
“Sri Lanka currency for such purchase; and”, of the words “Sri Lanka currency for such purchase;”;
by the substitution in paragraph (h), for the words and figures “section 161A of this Act.”, of the words and figures “section 161A of this Act;
and”;and
by the addition immediately after paragraph (h) of that subsection, of the following new paragraph:-
“(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.”.
in subsection (5) of that section, by the addition immediately after sub-paragraph (iv) of the proviso to paragraph (a) of that subsection, of the folowing new sub-paragraph:—
“(v) no deduction under this section shall be made from any employment income included in the total statutory income;".
s 17Amendment of section 33 of the principal enactment
Section 33 of the principal enactment is hereby amended in subsection (1) of that section, as follows:-
by the substitution in paragraph (a) of that subsection for the words “an allowance of three hundred thousand rupees; and”, of the following words and figures:-
“an allowance of-
three hundred thousand rupees in respect of any year of assessment commencing prior to
April 1, 2011; and
five hundred thousand rupees in respect of any year of assessment commencing on or after April 1, 2011, and”;
by the substitution in the proviso to that subsection, for the words ‘as such trustee, receiver, executor or liquidator.”, of the following words and figures :-
“as such trustee, receiver, executor or liquidator:”
Provided further, that for any year of assessment commencing on or after April 1, 2011—
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
an individual shall not be entitled to deduct any part of any allowance under section 34
from any employment income which is included in such assessable income.”.
s 18Amendment of section 34 of the principal enactment
Section 34 of the principal enactment as last amended by Act, No. 19 of 2009, is hereby further amended as follows:—
in subsection (2) of that section-
by the substitution in paragraph (a), for the words
“made by any person in money to an approved charity;”, of the words “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;”;
by the substitution in paragraph (d), for the words
“amount paid by an individual as a contribution”, of the words and figures “amount paid prior to
April 1, 2011, by an individual as a contribution”;
by the substitution in paragraph (e), for the words
“contribution made by an individual”, of the words and figures “contribution made prior to April 1,
2011, by an individual”;
by the substitution in paragraph (f), for the words
“donation made by any person”, of the words and figures “donation made prior to April 1, 2011, by any person”;
by the substitution in sub-paragraph (ii) of paragraph (g), for the words "policy of medical insurance,", of the following words and figures:-
“policy of medical insurance other than any policy referred to in paragraph (gg),”;
by the insertion immediately after paragraph (g)
of that subsection, of the following new paragraph:-
“(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”;
by the substitution in paragraph (i), for the words
“any expenditure incurred”, of the word and figures “any expenditure incurred prior to April 1, 2011”; and
by the substitution in paragraph (j), for the words
“any expenditure incurred”, of the words and figures “any expenditure incurred prior to April 1, 2011”; and
in subsection (4) of that section, by the substitution in sub-paragraph (i) of paragraph (a), for the words
“paragraphs (a), (b), (c), (e), (g), (h)”, of the words
“Paragraphs (a), (b), (c), (e), (g), (gg), (h)”.
s 19Amendment of section 42 of the principal enactment
Section 42 of the principal enactment as amended by Act, No. 10 of 2007 is hereby further amended in subsection (2) of that section by the substitution for the words “arising in Sri Lanka”, of the words and figures “but prior to April 1, 2011 arising in Sri Lanka”.
s 20Amendment of section 45 of the principal enactment
Section 45 of the principal enactment as amended by Act, No. 10 of 2007 is hereby further amended in subsection (1) thereof, by the insertion immediately after paragraph (a), of the following new paragraph:-
“(aa)
undertaking for the manufacture of animal feed;”.
s 21Amendment of section 46 of the principal enactment
Section 46 of the principal enactment as amended by Act, No. 9 of 2008 is hereby further amended in subsection (1) thereof, by the insertion immediately after paragraph (a), of the following new paragraph:-
“(aa)
undertaking for the manufacture of animal feed;”.
s 22Amendment of section 47 of the principal enactment
Section 47 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “any year of assessment includes”, of the words and figures “any year of assessment commencing prior to
April 1, 2011 includes”.
s 23Insertion of new section 48A in the principal enactment
The following new section is hereby inserted immediately after section 48 of the principal enactment and shall have effect as section 48A of that enactment:-
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.”.
“Rate of income tax after the expiry of tax exemption under section 16.