Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2003
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
s 1Short title
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 37 of 2003.
s 2Amendment of section 2 of Act, No. 38 of 2000
Section 2 of the Inland Revenue Act, No. 38 of 2000
(hereinafter referred to as the “principal enactment”) is hereby amended by the substitution for the words “specified in the
First, Second and Third Schedules to this Act, ”, of the words
“specified in the First, Second, Third, Fourth, Fifth and Sixth
Schedules to this Act,”.
s 3Amendment of section 4 of the principal enactment
Section 4 of the principal enactment is hereby amended in subsection (1) of that section as follows :—
in the proviso to paragraph (d) of that section by the substitution for the words “shall be disregarded.”, of the words “shall be disregarded ; ” ; and
by the insertion immediately after paragraph (d) of the proviso to that subsection of the following paragraph :—
“(e) the value at the time of its disposal, 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 a 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 —
in the case of a sale, the sale price or the market value, of such share as at the date of sale, whchever is higher ;
in the case of a disposal, otherwise than by way of sale, the market value of such share as at the date of disposal ;
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 preceeding 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 from 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 further, 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.”.
s 4Amendment of section 8 of the principal enactment
Section 8 of the principal enactment as amended by
Act, No. 10 of 2002 is hereby further amended in paragraph (f) of that section, by the substitution for the words “for any year of assessment”, of the words and figures “for any year of assessment commencing prior to April 1, 2003”.
s 5Amendment of section 9 of the principal enactment
Section 9 of the principal enactment as amended by
Act, No. 8 of 2001 is hereby further amended in subsection (1) of that section as follows : —
in paragraph (j) of that subsection, by the substitution for the words “any year of assessment”, of the words and figures “any year of assessment commencing prior to April 1, 2003”; and
in paragraph (k) of that subsection, by the substitution for the words “from all sources other than employment,”, of the words and figures “from all sources other than employment for any year of assessment commencing prior to April 1, 2003.”.
s 6Amendment of section 11 of the principal enactment
Section 11 of the principal enactment as amended by Act, No. 10 of 2002, is hereby further amended as follows :—
in paragraph (f) of that section by the substitution for the word and figure “or 21B”, of the word and figures “21B, 21C, 21D, 21E, 21F, 21G or 21H”;
in paragraph (h) of that section by the substitution for the words “within one year thereafter.”, of the words “within one year thereafter ;” ; and
by the addition at the end of that section of the following paragraph :—
“ (i)
any dividend paid to a share holder of a unit trust or a mutual fund, on or after April 1, 2003, out of the taxable profits and income of such unit trust or mutual fund.”.
s 7Amendment of section 12 of the principal enactment
Section 12 of the principal enactment is hereby amended as follows :–
in paragraph (b) of subsection (1) of that section, by the substitution for the words “income accruing to the owner of a house”, of the words and figures
“income accruing to the owner of any house constructed prior to April 1, 2003”;
by the insertion immediately after subsection (1) of that section of the following subsection :—
There shall be exempt from income tax the income accruing to the owner of any house constructed on or after April 1, 2003, for the year of assessment, in which the construction of such house was completed and for the four years of assessment immediately succeeding that year of assessment if such house is used solely for residential purposes. ”.
s 8Amendment of section 15 of the principal enactment
Section 15 of the principal enactment, amended by Act. No. 8 of 2001, is hereby further amended as follows :—
in paragraph (aa) of that section, by the substitution for the words and figures “in any year of assessment commencing on or after April 1, 2001, in respect of services rendered by that company or partnership in that year of assessment outside Sri Lanka (including services relating to any construction project)” of the following–
“in any year of assessment commencing–
on or after April 1, 2001, in respect of services rendered by that company or partnership in that year of assessment out side Sri Lanka
(including services relating to any construction project) ; and
on or after April 1, 2003, in respect of any off-shore business which does not any way involve any goods manufactured or produced in
Sri Lanka or any goods imported into Sri
Lanka.”; and
in paragraph (d) of that section by the substitution for the words “by an informer as a reward”, of the words and figures “by an informer prior to April 1,
2003 as a reward”.
s 9Amendment of section 21A of the principal enactment
Section 21A of the principal enactment as amended by Act, No. 19 of 2003, is hereby further amended by the repeal of subsection (2) of that section, and the substitution therefor of the following subsection :—
‘(2)
For the purposes of subsection (1) “specified undertaking” in relation to a company means—
an undertaking carried on by a company incorporated on or after April 1, 2002, or by any company incorporated prior to April 1,
2002 as a new undertaking commenced on or after April 1, 2002 with an investment of not less than rupees two and onehalf of million and which is engaged in agriculture, agroprocessing, industrial and machine tool manufacturing, electronics, export of non-traditional goods or information technology and allied services ;
(i)
any designated project carried on by a company, incorporated on or after April 1, 2002, or by any company incorporated prior to April 1, 2002 as a new undertaking commenced on or after April 01, 2002 with an investment of not less than rupees two and onehalf of million ;
or
an undertaking having an investment in excess of rupees two hundred and fifty million, and which confirms to the prescribed guidelines :
Provided however, the amount of investment referred to in sub-paragraph (i) of paragraph (b) shall not be applicable to any Export Production Village
Company.”.
In the case of a company receiving income from any other trade or business in addition to the income from any specified undertaking, the exemption provided under this section shall be applicable only in respect of the profits and income from the relevant specified undertaking.
For the purpose of this subsection–
“agriculture” means the cultivation of land with plants of any description and the rearing of fish ;
“export of non-traditional goods” means the export of any goods, as defined in section 52
including deemed export of such goods within the meaning of section 49, not less than eighty per centum of the total turnover of such undertaking for any year of assessment.’.
s 10Insertion of new sections 21H and 21I in the principal enactment
The following new sections are hereby inserted immediately after section 21G of the principal enactment and shall have effect as sections 21H and 21I of the principal enactment :—
“21H. (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 23) of any venture capital company 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 project which is of a pioneering nature and the operation of which results in, value addition and the promotion of economic development;
“Exemption from income tax of any venture capital company.
a project which is engaged in the business of information technology ;
a project which is connected to the rehabilitation of non-performing or under performing industries within the meaning of section 21E ; or
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 -
the venture capital company shall not have commenced commercial operations prior to April 1, 2003 ; and
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 within the meaning of the Companies
Act, No. 17 of 1982.
In order to qualify for the tax exemption provided for in subsection (1), the venture capital company shall have invested a sum-
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 ;
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 ;
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 the exemption afforded to such company shall be withdrawn and the assessment shall be issued for the relevant years.
Investments 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.
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.
For the purposes of this section “a venture capital company” means any company registered under the Companies Act, No. 17 of 1982 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—
which has entered into a Technical
Service Agreement a management company possessing the required experience in the relevant area of investment ; or
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.
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 rupees one hundred million and shall not apply in respect of commercial operations commencing on or after April 1,
2008.
21I. (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 section 2 shall be exempt from income tax, for a period of three years commencing from the year of assessment in
‘Excemption from income tax of any person engaed in the business of providing
Manor Houses or Thematic
Bungalows to tourists.
which such person commences to make profits in such business or any year of assessment not later than two years reckoned from the date of commencement of commercial operation, which ever is earlier.
The provisions of subsection (1) shall apply to any person registered with the Ceylon
Tourist Board established by the Ceylon Tourist
Board Act, No. 10 of 1966 on or after April 1,
2003 under the scheme for providing accommodation to tourist in Manor Houses or
Thematic Bungalows for a period of ten years from the date of registration.”.
s 11Amendment of section 29 of the principal enactment
Section 29 of the principal enactment as last amended by Act, No. 19 of 2003 is herby further amended as follows
:–
in subsection (2) of that section, by the insertion immediately after paragraph (d) thereof of the following paragraph :–
“(e) For any year of assessment commencing on or after April 1, 2003 the amount of a loss (other than any brought forward loss incurred by him from any period prior to April 1, 2003 which is deductible under this section) in any trade, business, profession or vocation shall be deducted as follows :—
any loss from a trade or business to be deducted only from the statutory income from trade and business ;
any loss from a profession to be deducted only from the statutory income from profession ;
any loss from a vocation to be deducted only from the statutory income from vocation.
Any balance loss not deductible may be carried forward and deducted from the next year of assessment and so on from the statutory income as mentioned above subject to the limitations on carry forward of losses under this section :
Provided however, the preceding provisions shall not be applicable to any loss–
if the loss represents any excess payments of annuity, ground rent, royalty or interest not deductible under section 23 ;
if the loss represents any allowance for depreciation or cost of renewal under section 23 ;
if the total statutory income from which such loss is deductible for that year of assessment does not exceed one million rupees.”;
by the insertion immediately after subsection (1B)
of that section of the following new subsection :—
“(1C)
The assessable income of any person shall not include—
any reward received by such person as an informer under any scheme for the payment of such rewards ; or
a share of fine received by such person under any scheme for the distribution of such share of fine, from any Government Institution, on or after
April 1, 2003, from which income tax has been deducted in accordance with Chapter XVIB.”;
in subsection (2) of that section by the substitution for the words “within such period of six years or eleven years as the case may be ;”, of the following :—
“within such period of six years, or eleven years, as the case may be :
Provided however, notwithstanding the provisions of paragraphs (b) or (c) the Minister may determine the maximum period for which a loss may be carried forward in relation to any specific activity considering the importance of such activity for the economic development of Sri Lanka .”; and
in paragraph (a) of subsection (3) of that section, by the substitution for the words and figures “or section 20 of this Act”, of the words and figures “or section 20 or section 21A or section 21B or section 21C or section 21D or section 21E or section 21F or section 21G or section 21H of this Act.”.
s 12Amendment of section 31 of the principal enactment
Section 31 of the principal enactment as amended by Act, No. 10 of 2002 is hereby further amended as follows :–
in subsection (2) of that section –
in paragraph (j) of that subsection, by the substitution for the words “Minister in charge of the subject of Housing,”, of the words
“Minister in charge of the subject of
Housing ;”;
by the addition immediately after paragraph (j) of that subsection, of the following paragraph :–
“(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 21H.”;
and
in subsection (4) of that section :–
in paragraph (a) of that subsection –
in subparagraph (vi) of that paragraph by the substitution for the words “one hundred thousand rupees which ever is less.”, of the words “rupees one hundred thousand whichever is less ;”;
by the insertion immediately after subparagraph (vi), of that paragraph of the following subparagraph –
“(vii)
in respect of all qualifying payments referred to in paragraph (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 which ever is less.”;
in paragraph (b) of that subsection –
in subparagraph (i) of that paragraph by the substitution for the word and letters
“paragraphs (b) and (h)”, of the word and letters “paragraphs (b) and (h) and (k)”;
in subparagraph (ii) of that paragraph by the substitution for the words “ten million rupees.”, of the words “ten million rupees ;”; and
by the addition at the end of sub-paragraph, (ii) of paragraph (b) of the following sub-paragraph :–
“(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 which ever is less.”.
s 13Amendment of section 32 of the principal enactment
Section 32 of the principal enactment as amended by Act, No. 10 of 2002 is hereby further amended in the proviso to subsection (2) of that section by the substitution for the words “such sum shall be treated as a capital gain,”, to the end of that proviso of the following :–
“such sum –
is a capital gain within the meaning of this
Act which is chargeable with tax at the rate of a maximum of twenty five percentum for any year of assessment commencing prior to April 1, 2002 ;
is income from employment which shall be chargeable with tax at the appropriate rate specified in the First Schedule for any year of assessment commencing on or after April 1,
2002.”.
s 14Amendment of section 33 of the principal enactment
Section 33 of the principal enactment is hereby amended in paragraph (a) of subsection (2) of that section, by the substitution for the words “at the rate of ten percentum.”, of the words “at the appropriate rate specified in the Sixth
Schedule to this Act.”.
s 15Amendment of section 34 of the principal enactment
Section 34 of the principal enactment is hereby amended in subsection (2) of that section as follows :—
in paragraph (a) of that subsection by the substitution for the words “at the rate of fifteen per centum”, of the words and figures “at the rate of fifteen per centum for any year of assessment commencing prior to April 1, 2003 and at the appropriate rates specified in the Sixth Schedule to this Act, for any year of assessment commencing on or after April 1, 2003,”
and
In paragraph (b) of that subsection, by the substitution for the words “fifteen per centum” of the words “ten per centum.”.
s 16Amendment of section 35 of the principal enactment
Section 35 of the principal enactment is hereby amended by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the appropriate rate specified in the Sixth Schedule to this Act.”.
s 17Amendment of section 36 of the principal enactment
Section 36 of the principal enactment is hereby amended by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the appropriate rate specified in the Sixth Schedule to this Act.”.
s 18Amendment of section 37 of the principal enactment
Section 37 of the principal enactment is hereby amended as follows :–
in subsection (1) of that section by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the rate specified in Part II of the First
Schedule to this Act.”; and
in subsection (2) of that section by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the rate specified in Part II of the First
Schedule to this Act.”.
s 19Amendment of section 38 of the principal enactment
Section 38 of the principal enactment is hereby amended by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the appropriate rate specified in the Sixth Schedule to this Act.”.
s 20Amendment of section 39 of the principal enactment
Section 39 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “and the rate of income tax” to the end of that subsection, of the words “such specified profits shall be chargeable with tax at the appropriate rates specified in the
Sixth Schedule to this Act notwithstanding anything to the contrary in other provisions of this Act.”.
s 21Amendment of section 40 of the principal enactment
Section 40 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “at the rate of fifteen per centum.”, of the words
“at the appropriate rate specified in the Sixth Schedule to this
Act.”.
s 22Amendment of section 40A of the principal enactment
Section 40A of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “at the rate of twenty per centum.”. of the words
“at the appropriate rate as specified in the Sixth Schedule to the Act.”.
s 23Amendment of section 40B of the principal enactment
Section 40B of the principal enactment is hereby amended as follows :–
in subsection (1) of that section, by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the appropriate rate as specified in the
Sixth Schedule to the Act.”; and
by the addition at the end of that section of the following new subsection :–
“(3) The profits and income within the meaning of paragraph (a) of section 3 of any company referred to in section 21E for any year of assessment commencing after the expiry of the period during which the profits and income of such company were exempt from income tax shall notwithstanding any thing contained in this Act be chargeable with income tax at the rate of –
at the appropriate rate specified in item 7, 12
or 14 of the Sixth Schedule to this Act if such company is a company engaged in any undertaking referred to in section 40 or in the export or deemed export of non-traditional goods ;
at the appropriate rate specified in the Sixth
Schedule to this Act, if such company is a company engaged in any undertaking other than undertakings and activities referred to in paragraph (a).”.
s 24Amendment of section 41 of the principal enactment
Section 41 of the principal enactments is hereby amended as follows :–
in subsection (1) of that section —
in item (ii) of that subsection by the substitution for the words and figures “or of
Chapter VIII.”, of the words and figures “or of Chapter VIII; ”;
by the insertion at the end of that subsection of the following proviso :–
“Provided however, for any year of assessment commencing on or after April 1,
2003, any dividend referred to in sub-paragraphs (a) and (b), shall be chargeable with income tax at the appropriate rate as specified in the Sixth Schedule to this Act.” ;
and
in subsection (2) of that section by the substitution for the words “fifteen percentum”, of the words
“fifteen percentum for any year of assessment commencing prior to April 1, 2003 and at the appropriate rate as specified in the Sixth Schedule to this Act, for any year of assessment commencing on or after April 1, 2003.”.
s 25Amendment of section 42 of the principal enactment
Section 42 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words
“for any year of assessment”, of the words and figures “for any year of assessment commencing prior to April 1, 2003.”.
s 26Amendment of section 43 of the principal enactment
Section 43 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words
“for any year of assessment”, of the words and figures “for any year of assessment commencing prior to April 1, 2003,”.
s 27Amendment of section 44 of the principal enactment
Section 44 of the principal enactment is hereby amended by the substituion for the words “any qualified export profits and income,”, to the end of that section, of the words
“any qualified export profits and income, such income shall by chargeable with tax at the appropriate rate as specified in the Sixth Schedule to this Act. ”.
s 28Amendment of section 45 of the principal enactment
Section 45 of the principal enactment is hereby amended by the substitution for the words “at the rate of fifteen per centum, of the words “at the appropriate rate as specified in the Sixth Schedule to this Act.”.
s 29Amendment of section 46 of the principal enactment
Section 46 of the principal enactment is hereby amended by the substitution for the words “any qualified export profits and income” to the end of that section, of the words “ any qualified export profits and income, such income shall be chargeable with tax at the appropriate rate as specified in the Sixth Schedule to this Act.”.
s 30Amendment of section 47 of the principal enactment
Section 47 of the principal enactment is hereby amended by the substitution for the words “at the rate of fifteen per centum.”, of the words “at the appropriate rate as specified in the Sixth Schedule to this Act.”.
s 31Amendment of section 48 of the principal enactment
Section 48 of the principal enactment is hereby amended as follows :–
in subsection (1) of that section, by the substitution for the words “notwithstanding anything to the contrary in this Act.”, of the words “notwithstanding anything to the contrary in this Act :”;
by the insertion immediately after subsection (1) of that section, of the following proviso :–
“Provided however, any dividend referred to in sub-paragraphs (a), (b) and (c) which are taxable for any year of assessment commencing on or after
April 1, 2003 shall be chargeable with tax at the appropriate rate as specified in the Sixth Schedule to this Act.”;
in subsection (2) of that section, by the substitution for the words “notwithstanding anything to the contrary in this Act.”, of the words notwithstanding anything to the contrary in this Act :”; and
by the addition immediately after subsection (2) of that section, of the following proviso:–
“Provided however, any dividend referred to in sub-paragraphs (a), (b) and (c) which are taxable for any year of assessment commencing on or after
April 1, 2003 shall be chargeable with tax at the appropriate rate as specified in the Sixth Schedule to this Act.”.
s 32Amendment of section 48A of the principal enactment
Section 48A of the principal enactment is hereby amended by the substitution for the words “in the form of shares or debentures”, to the end of that section of the following :–
“(i)
not in the form of money or an order to pay money ;
out of dividend received from another company where such dividend in not exempt from income tax under section 11 without a deduction of tax under subsection (1A) of section 61 irrespective of whether such company is entitled to deduct such tax or not, the income from such dividend shall be charged with tax at the appropriate rate as specified in the Sixth
Schedule to this Act.”.