Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2022
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
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 45 of 2022.
The provisions of this Act (other than the provisions of sections referred to in Table ‘A’, Table ‘B’ and Table ‘C’)
shall come into operation on the date on which the certificate of the Speaker is endorsed thereon.
The provisions of sections referred to in Table ‘A’
shall be deemed to have come into operation on April 1,
2022.
The provisions of sections referred to in Table ‘B’
shall be deemed to have come into operation on October 1,
2022.
The provisions of sections referred to in Table ‘C’
shall be deemed to have come into operation on the respective dates specified in the Table.
s 2Amendment of section 5 of Act, No. 24 of 2017
Section 5 of the Inland Revenue Act, No. 24 of 2017
(hereinafter referred to as the “principal enactment”) is hereby amended as follows: -
in subsection (2) of that section-
in paragraph (c) of that subsection, by the substitution for the words “payments providing” of the words “payments providing”;
in paragraph (f) of that subsection, by the substitution for the words “retirement payments received” of the words “retirement payments received”; and
in paragraph (i) of that subsection, by the substitution for the words “the employment;
and” of the words “the employment; and”;
in subsection (3) of that section-
in paragraph (e) of that subsection, by the substitution for the words “subsection (2));
and” of the words “subsection (2));”;
in paragraph (f) of that subsection, by the substitution for the words “approved by the
Commissioner-General.” of the words
“approved by the Commissioner-General;
and”; and
by the addition immediately after paragraph (f) of that subsection, of the following new paragraph: -
“(g) any retirement payments received at the time of the retirement from employment, subject to the condition that the respective retirement contributions have already been considered for income tax purposes and the employee has paid tax on such contributions in a previous year of assessment.”.
s 3Amendment of section 10 of the principal enactment
Section 10 of the principal enactment is hereby amended in paragraph (b) of subsection (1) of that section as follows: -
in subparagraph (iv) of that paragraph, by the substitution for the word “expenditure” of the words
“expenditure or any other deduction”; and
in subparagraph (x) of that paragraph, by the substitution for the words “the Commissioner-General.” of the words “the Commissioner-General and any tax or levy which is not allowed to be deducted in calculating a person’s income in terms of any other written law.”.
s 4Amendment of section 12 of the principal enactment
Section 12 of the principal enactment is hereby amended in paragraph (a) of that section, by the substitution for the words “where the debt obligation was incurred in borrowing money, the money is used during the year or was used”, of the words “the money borrowed under such debt obligation was used”.
s 5Amendment of section 14 of the principal enactment
Section 14 of the principal enactment is hereby amended as follows: -
by the re-numbering of subsection (4) of that section, as subsection (5) of that section; and
by the insertion immediately after subsection (3) of that section, of the following new subsection: -
“(4) In the event of the written down value referred to in subsection (2) is zero for a depreciable asset, notwithstanding the provisions of subsection (2), the deduction for improvement referred to in subsection (1) shall be deducted in equal amounts apportioned over-
twelve years of assessment, for a Class 4
depreciable asset;
three years of assessment, for other Classes of depreciable assets, commencing from the year of assessment in which the expenditure was incurred.”.
s 6Amendment of section 16 of the principal enactment
Section 16 of the principal enactment is hereby amended as follows: -
in paragraph (a) of subsection (1) of that section, by the substitution for the words “the Capital allowances” of the words and figures “subject to subsections (3) and (3A), the Capital allowances”;
and
by the insertion immediately after subsection (3) of that section, of the following new subsection: -
“(3A) The total of the Capital allowances granted and calculated under the Fourth Schedule to this
Act in respect of a depreciable asset shall not exceed the cost of such depreciable asset in any circumstances.”.
s 7Amendment of section 18 of the principal enactment
Section 18 of the principal enactment is hereby amended as follows: -
by the repeal of subsection (1) and subsection (2)
of that section, and the substitution therefor of the following subsections: -
“(1)
The amount of financial costs deducted in calculating-
the income of an entity (other than a financial institution) from conducting a business or investment, for any year of assessment commencing prior to
April 1, 2021 shall not exceed the amount of financial costs attributable to financial instruments within the limit referred to in paragraph (a) of subsection (2);
the income of a company (other than a financial institution) which is incorporated in or outside Sri Lanka and having an issued share capital as at the date on which the year of assessment ends, from conducting a business or investment for any year of assessment commencing on or after
April l, 2021, shall not exceed the limit referred to in paragraph (b) of subsection (2).
The limit shall be computed according to the following formula: -
A x B
Where:
‘A’ is the total of the issued share capital and reserves of the entity;
and
‘B’ is-
in the case of a manufacturing entity, the number 3; and
in the case of an entity other than a manufacturing entity, the number 4;
A
— XC
B
Where:
‘A’ = financial cost of the year;
‘B’ =value of financial instruments on which the financial cost incurred during the year; and
‘C’ = 4 x total of the issued share capital and reserves of the company as at the end of the year.”;
and
in subsection (3) of that section, by the substitution for the words “for the year.” of the following: -
“for the year:
Provided that, in the case where there is no financial cost incurred during the year, in calculating the unused limitation for the above purpose, the limit referred to in subsection (2)
shall be calculated by using the same amounts of the immediately preceding year and so on.”.
s 8Amendment of section 19 of the principal enactment
Section 19 of the principal enactment is hereby amended as follows: -
in subsection (3) of that section, by the substitution for the words “in calculating exempt amounts.”, of the words as follows: -
“in calculating exempt amounts:
Provided however, where a person had incurred a loss, in relation to a business which if it had been a profit would have been taxable at a rate specified under this Act and such rate is subsequently increased, such loss shall not be considered as being taxable at a reduced rate.”;
in subsection (4) of that section-
in paragraph (b) of that subsection, by the substitution for the words “income from an investment.”, of the words “income from an investment; and”;
by the addition immediately after paragraph (b) of that subsection, of the following new paragraph: -
“(c) unrelieved losses from an investment shall be deducted only within the six years of assessment commencing on the first date of the year of assessment immediately succeeding the year of assessment in which such losses were incurred.”; and
in subsection (5) of that section, by the substitution for the words “by any loss on the disposal of another investment asset.”, of the words “by any loss.”.
s 9Amendment of section 46 of the principal enactment
Section 46 of the principal enactment is hereby amended in subsection (5) of that section by the repeal of paragraph (c) of that subsection and the substitution therefor, of the following paragraph: -
“(c)
at the time of the transfer-
prior to April 1, 2021-
the person and the associate were residents; and
the associate or, in the case of an associate partnership, none of its partners is exempt from income tax; and
on or after April 1, 2021-
(iia) the person and the associates are residents;
(iib) in the case of an associate partnership, any of its partners, or the associate, is not exempt from income tax; and
the tax rate appliable on the person’s gain from the realisation of an asset referred to in subsection (4) is equal or less than the tax rate which is applicable on the gain of the associate from realisation of such asset; and”.
s 10Amendment of section 54 of the principal enactment
Section 54 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words and figures “its business or investment for that year of assessment (sections 6 and 7).” of the words “its business, investment or other income for that year of assessment.”.
s 11Amendment of section 66 of the principal enactment
Section 66 of the principal enactment is hereby amended in paragraph (c) of subsection (4) of that section, by the substitution for the words and figures “issued to make specific provisions relating to bad and doubtful debts under subsection (1) of section 76J”, of the words and figures
“issued for classification, recognition and measurement of credit facilities under the powers conferred by, subsection (1) of section 46, section 46A and subsection (1) of section 76J”.
s 12Amendment of section 69 of the principal enactment
Section 69 of the principal enactment is hereby amended in paragraph (b) of subsection (4) of that section, by the substitution for the words “in Sri Lanka; or” of the words “in Sri Lanka; or”.
s 13Amendment of section 72 of the principal enactment
Section 72 of the principal enactment is hereby amended in paragraph (a) of subsection (1) of that section, by the substitution for the word and figure “subsection (3)”
of the word and figure “subsection (2)”.
s 14Amendment of section 73 of the principal enactment
Section 73 of the principal enactment is hereby amended in paragraph (c) of subsection (1) of that section as follows: -
in sub-paragraph (i) of that paragraph, by the substitution for the words “Sri Lanka; or”, of the words “Sri Lanka;”;
in sub-paragraph (ii) of that paragraph, by the substitution for the words “permanent establishment;” of the words “permanent establishment; or”; and
by the addition immediately after sub-paragraph (ii) of that paragraph, of the following new sub-paragraph: -
“(iii) paid by the Government of Sri Lanka, including such payments made by any institution on behalf of the Government of
Sri Lanka;”.
s 15Amendment of section 83A of the principal enactment
Section 83A of the principal enactment is hereby amended as follows: -
in subsection (1) of that section, by the substitution for the words and figures “from April 1, 2020 on” of the words and figures “from April 1, 2020, but prior to January 1, 2023 on”;
by the insertion immediately after subsection (1) of that section, of the following new subsection: -
“(1A) An employer shall deduct the Advance
Personal Income Tax with effect from January 1,
2023 on any payment which falls under section 5 made to his employee, as specified by the
Commissioner-General.”; and
in subsection (2) of that section, by the substitution for the word and figure “subsection (1)”, of the words and figures “subsection (1) or subsection (1A)”.
s 16Amendment of section 84A of the principal enactment
Section 84A of the principal enactment is hereby amended as follows: -
in subsection (1) of that section, by the substitution for the words and figures “with effect from April 1,
2020, the taxpayer”, of the words and figures “with effect from April 1, 2020 but prior to January 1,
2023, the taxpayer”; and
by the insertion immediately after subsection (1) of that section, of the following new subsection: -
“(1A) Subject to section 83A and subsection (3) of section 84, with effect from January 1,
2023, a person shall deduct Advance Income
Tax from the payment of dividend, interest, discount, charge, natural resource payment, rent, royalty or premium which has a source in Sri
Lanka, at the rate provided in paragraph 10 of the First Schedule to this Act.”.
s 17Amendment of section 85 of the principal enactment
Section 85 of the principal enactment is hereby amended as follows: -
in subsection (1A) of that section, by the substitution for the words “a person shall.”, of the words “a person shall, prior to January 1, 2023”;
by the insertion immediately after subsection (1A)
of that section, of the following new subsections: -
“(1B) Subject to subsections (2) and (3), with effect from January 1, 2023, a person shall withhold tax at the rate of 14% of the payment, where such person pays a service fee or an insurance premium with a source in Sri Lanka to a non-resident person.
Subject to subsection (3), with effect from January 1, 2023, a person shall withhold tax at the rate of 5% of the payment, where such person pays a service fee with a source in Sri
Lanka to a resident individual who is not an employee of the payer –
for teaching, lecturing, examining, invigilating or supervising an examination;
as a commission or brokerage to a resident insurance, sales or canvassing agent; or
for services provided by such individual in the capacity of independent service provider such as doctor, engineer, accountant, lawyer, software developer, researcher, academic or any individual service provider as may be prescribed by regulation:
Provided however, this subsection shall not apply to a service payment which does not exceed Rs.100,000 per month.”; and
in paragraph (a) of subsection (3) of that section, by the substitution for the word and figures “section 83;”, of the words and figures “section 83, section 83A or section 84A;”.
s 18Amendment of section 87 of the principal enactment
Section 87 of the principal enactment is hereby amended in subsection (4) of that section, by the substitution for the word and figures “section 83,”, of the words and figures “section 83 or section 83A,”.
s 19Amendment of section 88 of the principal enactment
Section 88 of the principal enactment is hereby amended in subsection (1A) of that section, by the insertion immediately after paragraph (a) of that subsection of the following new paragraph: -
“(aa)
on or after January 1, 2023, dividends paid by a resident company;”.
s 20Amendment of section 90 of the principal enactment
Section 90 of the principal enactment is hereby amended in paragraph (b) of subsection (1) of that section, by the substitution for the word and figures “section 83.”, of the following: -
“section 83 or section 83A:
Provided however, gains derived or expected to be derived from the realisation of an investment asset, during a year of assessment shall not be considered for the purpose of quarterly installments.”.
s 21Amendment of section 94 of the principal enactment
Section 94 of the principal enactment is hereby amended as follows: -
in subsection (1) of that section-
in paragraph (b) of that subsection, by the substitution for the word and figure “section 2.”, of the words and figure “section 2; or”;
and
by the addition immediately after paragraph (b) of that subsection, of the following new paragraph: -
“(c) an individual whose tax payable for the year of assessment under paragraph (a)
of subsection (1) of section 2 relates exclusively to income from employment where the employer has deducted Advance Personal Income
Tax under section 83A and no tax shall be payable under paragraph (b) or (c) of subsection (2) of section 82.”; and
in subsection (3) of that section, by the substitution for the words “during the year.”, of the words and figures “during the year or where such person’s employer has deducted Advance Personal Income
Tax on his employment income, under section 83A.”.
s 22Amendment of section 120 of the principal enactment
Section 120 of the principal enactment is hereby amended in subsection (1A) of that section, by the substitution for the words “exempted gains and profits.”, of the following: -
“exempted gains and profits:
Provided however, in the case where such person has commonly incurred expenses or commonly used any assets, on all business or investment activities and any expense or deduction cannot be separately identified for the purpose of this subsection, it shall be lawful to divide such expenses or deductions on a proportionate basis (according to the proportion of turnover or proportion of asset usage) in preparing such financial statements.”.
s 23Amendment of section 123 of the principal enactment
Section 123 of the principal enactment is hereby amended as follows: -
in subsection (1) of that section, by the substitution for the words “notice in writing-”, of the words
“notice in writing or by electronic means-”; and
by the addition immediately after subsection (5) of that section of the following new subsections: -
“(6) Notwithstanding anything to the contrary in any other written law, the
Commissioner-General may, by notice, require the Commissioner-General of Elections to provide the names, addresses or National Identity
Card numbers of such persons as may be specified in such notice, and it shall be the duty of the
Commissioner-General of Elections to provide such particulars to the Commissioner-General or provide access to the records under his custody, to a tax official authorized by the
Commissioner-General.
Notwithstanding anything to the contrary in any other written law, the Registrar-General of Companies shall provide information to the
Commissioner-General on any changes or new appointments in relation to the directors of companies registered with the Registrar-General of Companies, including the names and addresses of such directors, once in every six months.”.
s 24Amendment of section 133 of the principal enactment
Section 133 of the principal enactment is hereby amended in subsection (2) of that section, by the substitution for the words “with notice, in writing,” of the words “with notice, in writing or by electronic means,”.
s 25Amendment of section 134 of the principal enactment
Section 134 of the principal enactment is hereby amended in subsection (4) of that section, by the substitution for the words “with notice, in writing,” of the words “with notice, in writing or by electronic means,”.
s 26Amendment of section 135 of the principal enactment
Section 135 of the principal enactment is hereby amended in subsection (5) of that section, by the substitution for the words “with notice, in writing,” of the words “with notice, in writing or by electronic means,”.
s 27Amendment of section 136 of the principal enactment
Section 136 of the principal enactment is hereby amended in paragraph (b) of subsection (2) of that section, by the substitution for the word and figures “section 135.”, of the words and figures “section 135, for any year of assessment ending prior to April 1, 2022 and within a period of twelve months from the date on which the self-assessment return was filed, for any year of assessment commencing on or after April 1, 2022.”.
s 28Amendment of section 151 of the principal enactment
Section 151 of the principal enactment is hereby amended in subsection (3) of that section, by the substitution for the words “in writing”, of the words “in writing or by electronic means”.
s 29Amendment of section 163 of the principal enactment
Section 163 of the principal enactment is hereby amended by the addition immediately after subsection (4)
of that section, of the following new subsections:-
“(5) The amount of tax, any penalty and interest due as at the date of the certificate referred to in subsection (3) and any legal interest due on the amount stated in the certificate from the date of such certificate up to the date of the judgement shall be the tax that is due and payable to the
Commissioner-General.
The proceedings instituted on or after
January 1, 2023, under this section shall be completed within thirty months from the date of production of the certificate referred to in subsection (3).”.
s 30Amendment of section 176 of the principal enactment
Section 176 of the principal enactment is hereby amended as follows: -
by the repeal of subsection (2) of that section, and the substitution therefor of the following subsection: -
“(2) Procedures for the assessment, payment, collection, and dispute of a tax shall apply equally to penalties relating to a tax.”; and
by the insertion immediately after subsection (6) of that section, of the following new subsection: -
“(6A) For the purposes of subsection (6), it shall be lawful to issue a single notice of assessment stating the penalty charged under this Chapter together with the tax and interest payable in complying with the other provisions of this Act.”.
s 31Amendment of section 182 of the principal enactment
Section 182 of the principal enactment is hereby amended as follows: -
in subsection (1) of that section, by the substitution for the words “A person”, of the words and figures
“For any year of assessment ending prior to April 1,
2023, a person”; and
by the insertion immediately after subsection (1) of that section, of the following new subsection: -
“(1A) For any year of assessment commencing on or after April 1, 2023, a person who fails to maintain proper accounts, records or documents as required by this Act shall be liable for a penalty calculated as provided for in subsection (2).”.
s 32Amendment of section 195 of the principal enactment
Section 195 of the principal enactment is hereby amended as follows: -
in the definition of the expression “export” of that section, by the substitution for the word
“undertaking;”, of the words and figures
“undertaking, prior to April 1, 2022;”;
in the definition of the expression “Small and
Medium Enterprise” of that section, by the substitution in paragraph (d) of that definition for the words “the person’s or his” of the words “the person’s and his”; and
in the definition of the expression “specified undertaking” of that section, by the substitution in paragraph (h) of that definition, for the words “in
Sri Lanka in foreign currency;”, of the following: -
“in Sri Lanka in foreign currency:
Provided however, where the exporter was prevented from making payments in foreign currency for services referred to in this paragraph, due to any directive of the Central Bank, the exporter shall issue a confirmation of his foreign currency receipts;”.