7. Amendment of section 18 of the principal enactment

Official English translation. The Sinhala text prevails.

Section 18 of the principal enactment is hereby amended as follows: -

(1)

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-

(a)

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);

(b)

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).

(2)

The limit shall be computed according to the following formula: -

(a)

A x B

Where:

‘A’ is the total of the issued share capital and reserves of the entity;

and

‘B’ is-

(i)

in the case of a manufacturing entity, the number 3; and

(ii)

in the case of an entity other than a manufacturing entity, the number 4;

(b)

— XC

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

(2)

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.”.

Read on from s 8