Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2014
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 and the date of operation
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 8 of 2014, and shall be deemed for all purposes to have come into operation on
April 1, 2014.
s 2Amendment of Act, No. 10 of 2006
The Inland Revenue Act, No. 10 of 2006 (hereinafter referred to as the “principal enactment”) as last amended by
Act, No.18 of 2013 is hereby further amended as follows:-
by the substitution for the words “Senior Deputy
Commissioner-General” wherever such words occur in the principal enactment, of the words “Additional
Commissioner-General”;
by the substitution for the word “Commissioner”
wherever such word occurs in the principal enactment, of the words “Senior Commissioner”;
by the substitution for the words “Deputy
Commissioner” wherever such words occur in the principal enactment, of the word “Commissioner”;
by the substitution for the words “Senior Assessor”
wherever such words occur in the principal enactment, of the words “Deputy Commissioner or
Senior Deputy Commissioner”; and
by the substitution for the word “Assessor”
wherever such word occurs in the principal enactment, of the words “Assessor or Assistant
Commissioner”.
s 3Amendment of section 7 of the principal enactment
Section 7 of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended as follows:-
in paragraph (b) of that section –
by the substitution in sub-paragraph (lxviii), for the words and figures “Companies Act,
No. 17 of 1982; and”, of the words and figures
“Companies Act, No. 17 of 1982;”;
by the substitution in sub-paragraph (lxix), for the words “the circulars issued by such
Ministry.”, of the words “the circulars issued by such Ministry;”; and
by the addition, immediately after sub-paragraph (lxix), of the following new sub-paragraphs:-
“(lxx)
the
National
Enterprise
Development Authority established under the National Enterprise
Development Authority Act, No. 17
of 2006;
the Sri Lanka Institute of Marketing incorporated under the Sri Lanka
Institute of
Marketing
(Incorporation) Act, No. 41 of 1980;
the Institute of Physics, Sri Lanka incorporated under the Institute of
Physics, Sri Lanka (Incorporation)
Act, No. 12 of 1986;”; and
the Lionel Wendt Memorial Fund incorporated under section 114 of the Trusts Ordinance (Chapter 87).”;
by the substitution in paragraph (k) of that section, for the words ''for such year of assessment", of the words ''for the year of assessment immediately preceding such year of assessment";
by the substitution in paragraph (l) of that section, for the words and figures “the Monetary Law Act
(Chapter 422).”, of the words and figures “the
Monetary Law Act (Chapter 422);”; and
by the addition immediately after paragraph (l) of that section, of the following new paragraph :-
“(m)
the profits and income of any institution, established on or after April 1, 2013, by relocating in Sri Lanka the headquarters or regional head offices of institutions in the international network, as specified by the Commissioner-General by Notice published in the Gazette.”.
s 4Amendment of section 8 of the principal enactment
Section 8 of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended in subsection (1) of that section as follows:-
by the substitution in paragraph (s) of that subsection, for the words “any allowance paid in lieu of the provision of such vehicle,”, of the words
“the aggregate of any allowance paid in lieu of the provision of such vehicle and the value of any transport facility as may be specified by the
Commissioner-General by Order published in the
Gazette,”;
by the substitution in paragraph (w) of that subsection, for the words “not resident in Sri Lanka.”, of the words “not resident in Sri Lanka;”; and
by the addition immediately after paragraph (w) of that subsection, of the following new paragraph:-
“(x)
the profits and income not exceeding forty eight thousand rupees for any year of assessment, if the aggregate of such profits and income is not more than forty eight thousand rupees other than any employment income or any profits and income which is taxable at source as final tax, of any individual who is an employee and who is not engaged in any trade, business, profession or vocation, if tax is deducted from his employment income for that year of assessment.”.
s 5Amendment of section 9 of the principal enactment
Section 9 of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended as follows:-
by the substitution in paragraph (a) of that section, for all the words from “to the Government of Sri Lanka” to the words, “to any other undertaking,”, of the words “to any person or partnership in Sri Lanka, notwithstanding whether such company, partnership or body of persons has a permanent establishment or any business connection in Sri
Lanka,”; and
by the substitution in paragraph (k) of that section, for the words “Treasury Bond Investment External Rupee
Account;”, of the words “Securities Investment Account;”.
s 6Amendment of section 10 of the principal enactment
Section 10 of the principal enactment as last amended by Act, No. 8 of 2012 is hereby further amended in subsection (1) of that section as follows :-
by the substitution in the proviso to paragraph (k)
of that subsection, for the words “within one year thereafter.”, of the words “within one year thereafter;”; and
by the insertion immediately after paragraph (k) of that subsection, of the following new paragraph :-
“(l)
any dividend paid to a shareholder of a company out of such dividend as is referred to in paragraph (j), received by that company, if the first mentioned dividend is paid within three months of the receipt of the second mentioned dividend by that company.”.
s 7Amendment of section 13 of the principal enactment
Section 13 of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended as follows:-
by the insertion immediately after paragraph
(yyyyyyy) of that section, of the following new paragraph :-
“(yyyyyyyy)
the profits and income of any person resident in Sri Lanka who acquires any internationally recognized intellectual property on or after April 1, 2014 and who earns profits and income by way of royalty out of such intellectual property, if such royalty is received in foreign currency and remitted to Sri Lanka through a bank;”; and
by the insertion immediately after paragraph
(zzzzzzz) of that section, of the following new paragraph :-
“(zzzzzzzz)
the profits and income arising or accruing to any company, partnership or body of persons in a country outside Sri Lanka, from any payment made for the use of any computer software, by Sri Lankan
Air Lines Ltd or Mihin Lanka (Pvt)
Ltd, as a special requirement of such
Airlines, if a Double Taxation
Avoidance Agreement providing relief for double taxation of such profits and income is not in force between Sri Lanka and that country or tax is not payable in such country on such profits and income.”.
s 8Amendment of section 16D of the principal enactment
Section 16D of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended by the substitution for the words and figures “any new undertaking established on or after April 1, 2012 and”, of the words and figures “any new undertaking established on or after April 1,2012, but prior to April 1, 2015 and”.
s 9Amendment of section 16E of the principal enactment
Section 16E of the principal enactment is hereby amended by the substitution for the words “organic fertilizers,”, of the words “organic fertilizers or biological fertilizers,”.
s 10Amendment of section 17A of the principal enactment
Section 17A of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended in subsection (2) of that section, by the substitution for all the words and figures from “the development of national economy ;” to the end of that section, of the following words and figures:-
“the development of national economy ;
in which the sum invested in the acquisition of fixed assets after March 31, 2011 but prior to April 1, 2015
is not less than the corresponding sum specified in
Column I of the Schedule to subsection (1);
which commences commercial operations on or after April 1, 2011, but prior to April 1, 2016; and
which is not formed by the splitting up or reconstruction or acquisition of any business which was previously in existence.
For the purpose of this section “the investment” means the cost of any land, plant, machinery, equipment and other fixed assets.”.
s 11Amendment of section 22 of the principal enactment
Section 22 of the principal enactment as last amended by Act, No. 9 of 2008 is hereby further amended in subsection (1) of that section, by the substitution for the words “with an investment of not less than two million rupees made within one year from the commencement of such undertaking,”, of the words and figures “with an investment of not less than two million rupees, made within one year from the commencement of such undertaking, but prior to
April 1, 2014,”.
s 12Amendment of section 25 of the principal enactment
Section 25 of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended in subsection (1) of that section as follows:-
by the substitution in paragraph (u) of that subsection, for the words “to the Government.”, of the words “to the Government;”; and
by the addition immediately after paragraph (u) of that subsection, of the following new paragraphs:-
“(v)
the cost of acquisition of any internationally recognized intellectual property used for producing such profits and income;
any royalty or ground rent paid by such person.”.
s 13Amendment of section 26 of the principal enactment
Section 26 of the principal enactment as last amended by Act, No.18 of 2013 is hereby further amended as follows:-
in subsection (1) of that section-
by the substitution in sub-paragraph (vi) of paragraph (l) of that subsection, for the words and figures “Finance Act, No. 5 of 2005,”, of the words and figures “Finance Act, No. 5 of 2005; or”;
by the insertion immediately after sub-paragraph (vi) of paragraph (l) of that subsection, of the following new sub-paragraph:-
“(vii)
any Crop Insurance Levy levied under section 14 of PART IV of the
Finance Act, No. 12 of 2013,”;
by the substitution for paragraph (m) of that subsection, of the following paragraph:-
“(m)
any annuity paid by such person;”;
and
by the substitution in subsection (4) of that section, for all the words from “any part thereof,” to the words “assessment is made:”, of the words “any part thereof, and an assessment shall be made disallowing the entirety or any part of such expenditure notwithstanding anything to the contrary in any other provisions of this Act, 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 such assessment for that year of assessment is made:”.
s 14Amendment of section 32 of the principal enactment
Section 32 of the principal enactment as last amended by Act, No. 8 of 2012 is hereby further amended as follows:-
in subsection (5) of that section –
by the substitution in paragraph (a) of that subsection, for the words and figures
“annuity, ground rent, royalty or interest not deductible under section 25.”, of the words and figures “annuity or interest, not deductible under section 25.”; and
by the insertion immediately after paragraph (c) of that subsection, of the following new paragraph:-
“(cc)
Where any person who is engaged in carrying on both life insurance business and general insurance business segregates such life insurance business and the general insurance business into two separate companies, as required by section 53
of the Regulation of Insurance
Industry (Amendment) Act, No. 3 of 2011, incurred any loss prior to such segregation of which the entirety or any part thereof had not been deducted previously, the balance, if any, as at the date of such segregation shall, notwithstanding anything to the contrary in any other provision of this Act, but subject to the provisions of paragraph (b), be deducted from the total statutory income of the respective companies in the following manner:-
such part of the loss as attributable to the life insurance business, from the total statutory income of the company which carries on long term insurance business;
such part of the loss as attributable to the general insurance business, from the total statutory income of the company which carries on general insurance business.”; and
by the substitution in paragraph (a) of subsection (6) of that section, for the words and figures “from income tax under section 16, section 17, section 18,”, of the words and figures “from income tax under section 16, section 16A, section 16B, section 16C, section 16D, section 17, section 17A, section 18,”.
s 15Amendment of section 33 of the principal enactment
Section 33 of the principal enactment as last amended by Act, No. 22 of 2011 is hereby further amended in item (ii) of the further proviso to subsection (1) of that section, by the substitution for the words and figures “any part of any allowance under section 34 from any employment income”, of the words and figures “any part of any allowance under section 34, other than the allowance referred to in paragraphs (u) and (v) of subsection (2) of section 34, from any employment income”.
s 16Amendment of section 34 of the principal enactment
Section 34 of the principal enactment as last amended by Act, No.18 of 2013 is hereby further amended as follows:-
in subsection (2) of that section –
by the substitution for paragraph (s) of that subsection, of the following paragraph:-
“(s)
investment of not less than fifty million rupees in the acquisition of fixed assets made by any person on or after
April 1, 2011 but before April 1, 2014
in the expansion of any undertaking which would have been qualified for exemption under section 16C or section 17A had such undertaking commenced to carry on business on or after April 1,
2011:
Provided however, where such investment is made in any high tech plant, machinery or equipment which is acquired for energy efficiency purposes or for technology upgrading purposes or introducing any new technology or for power generation using renewable energy resources in the expansion of such undertaking on or after April 1, 2011, but prior to April 1,
2015 such investment shall comprise a qualifying payment.”;
by the substitution in paragraph (u) of that subsection, for the words “whichever is lower;”, of the words “whichever is lower;”;
by the substitution in paragraph (v) of that subsection, for the words “not resident in Sri
Lanka.”, of the words “not resident in Sri
Lanka;”; and
by the addition immediately after paragraph (v) of that subsection, of the following new paragraphs:-
“(w) any expenditure incurred not exceeding six hundred thousand rupees for any year of assessment commencing on or after April 1, 2014 on the repayment of the capital of a loan obtained from any bank licensed under the Banking Act, No. 30 of 1988 or any finance company licensed under the
Finance Business Act, No. 42 of 2011, of which the proceeds are utilized to construct a house or to purchase a house or a unit of a residential apartment complex, by an individual who is a professional and who furnishes a return under section 106, whether such individual obtained such loan alone or together with any other individual:
Provided that, if such loan is obtained together with another individual or obtained for a co-owned property, such deduction shall not exceed the amount of expenditure attributable to such individual who obtained such loan.
For the purpose of this paragraph,
“professional” shall have the same meaning as given for that expression in section 40C;
any expenditure incurred by any bank or any finance company licensed under the Finance Business Act, No.42 of 2011, by way of cost of acquisition or merger of any other bank or any other finance company, where such cost is ascertained by considering all the facts on case by case basis in accordance with the guidelines issued by the Central
Bank of Sri Lanka for that purpose, and such expenditure is not deductible under section 25.”;
in subsection (4) of that section –
by the substitution in sub-paragraph (i) of paragraph (a) of that subsection, for the words and figures “ (t), (u) and (v) of subsection (2)”, of the words and figures “(t), (u), (v) and (w)
of subsection (2)”; and
by the substitution in sub-paragraph (i) of paragraph (b) of that subsection, for the words and figures “(r), (s) and (t) of subsection (2)”, of the words and figures “(r), (s), (t) and (x) of subsection (2)”.
s 17Amendment of section 40A of the principal enactment
Section 40A of the principal enactment as last amended by Act, No. 18 of 2013 is hereby further amended by the substitution for the words and figures “commencing on or after April 1, 2008,”, of the words and figures
“commencing on or after April 1, 2008, but prior to April 1,
2014,”.
s 18Insertion of new section 40C in the principal enactment
The following new section is hereby inserted immediately after section 40B of the principal enactment and shall have effect as section 40C of that enactment :-
40C. (1) Where the taxable income of any individual, being a citizen of Sri Lanka, for any year of assessment commencing on or after
April 1, 2014, includes any profits from employment (hereinafter in this section referred to as “relevant profits”) in the exercise of his duties as a professional, and the rate of income tax payable on a part of such taxable income
(hereinafter in this section referred to as the
“Rates of income tax on the profits from employment of professionals.
“relevant part of the taxable income”) exceeds sixteen per centum, then in regard to the relevant part of the taxable income, the tax payable shall be computed as follows:-
where such relevant part of the taxable income exceeds the amount of the relevant profits:-
the tax payable on such portion of the relevant part of the taxable income as is equal to the amount of such relevant profits, shall be computed at the rate of sixteen per centum; and
the tax payable on the balance of the relevant part of the taxable income, shall be computed according to such of the rates above sixteen per centum, as are applicable thereto, under the First
Schedule to this Act; or
where such relevant part of the taxable income does not exceed the amount of the relevant profits, the tax payable on the entirety of the relevant part of the taxable income, shall be computed at the rate of sixteen per centum.
For the purpose of this section
“professional” means a doctor registered under the Medical Ordinance (Chapter 105), a chartered engineer, a chartered architect, a member of the Institute of Chartered
Accountants of Sri Lanka, a member of the
Association of
Chartered
Certified
Accountants, a member of the Chartered
Institute of Management Accountants (U.K.)
and an attorney-at-law, and includes a software engineer, a pilot licensed under the Air
Navigation Act (Chapter 365), a navigation officer and a researcher or senior academic, recognized as an accredited professional.”.
s 19Amendment of section 50 of the principal enactment
Section 50 of the principal enactment is hereby amended by the substitution for the words and figures
“taxable income of that person for any year of assessment commencing prior to April 1, 2014 includes”, of the words
“taxable income of that person for any year of assessment includes”.
s 20Amendment of section 51 of the principal enactment
Section 51 of the principal enactment is hereby amended by the substitution for the words and figures
“taxable income of that company for any year of assessment commencing prior to April 1, 2014 includes”, of the words
“taxable income of that company for any year of assessment includes”.
s 21Amendment of section 52 of the principal enactment
Section 52 of the principal enactment is hereby amended by the substitution for the words and figures
“taxable income of that company for any year of assessment commencing prior to April 1, 2015 includes”, of the words
“taxable income of that company for any year of assessment includes”.
s 22Amendment of section 56C of the principal enactment
Section 56C of the principal enactment is hereby amended by the substitution for the words “from the sale of any product manufactured in Sri Lanka”, of the words and figures “from the sale of any product manufactured in Sri
Lanka, other than such part of the profits and income exempt under section 13,”.
s 23Replacement of section 58 of the principal enactment
Section 58 of the principal enactment is hereby repealed and the following section is substituted therefor:-
58. Such part of the profits and income within the meaning of paragraph (a) of section 3, of any person as consists of profits and income from the supply of any services, to any exporter of goods or services or to any foreign principal of such exporter directly, being services which could be treated as essentially related to the manufacture of such goods or provision of such services exported by such exporter either directly or through any export
“Rate of tax on profits and income from the supply of any services to any exporter.
trading house, including any service provided by an agent of a ship operator to such agent's foreign principal, and the payment for such services are made by such exporter or foreign principal to such person in Sri Lanka in foreign currency, shall, notwithstanding anything to the contrary in any other provision of this Act, be chargeable with income tax at the appropriate rate specified in the Fifth Schedule to this Act, if -
such supply is covered by an international letter of credit or a letter of credit opened in a bank in Sri Lanka on a back to back basis against an international letter of credit for the remittance to Sri Lanka of the foreign exchange value of the exports related to such supply; or
(i) the payment of the consideration for such supply is made in foreign currency by means of a draft or telegraphic transfer made in favour of such person by such exporter or foreign principal; and
such other documentary evidence as is required by the Commissioner-General to satisfy himself that the goods or services relating to such supply have in fact been exported, is adduced.”.
s 24Amendment of section 59B of the principal enactment
Section 59B of the principal enactment as last amended by Act, No.18 of 2013 is hereby further amended in subsection (1) of that section, by the substitution for the words “any other provisions of this Act”, of the words “any other provisions of this Act, but subject to provisions of section 59F ”.
s 25Amendment of section 59D of the principal enactment
Section 59D of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “holding of its shares by the general public.”, of the following words and figures:-
“holding of its shares by the general public:
Provided however, where any company lists its shares in the aforesaid manner, on or before April 1,
2017 and which is liable to pay income tax at the rate specified in item 3 of PART-B of Second Schedule to this Act, such rate shall be reduced by fifty per centum for the year of assessment in which such shares are listed and for another two years of assessment immediately succeeding that year of assessment subject such company after listing continues to maintain not less than twenty per centum of holding of its shares by the general public.”.
s 26Insertion of new sections 59F, 59G and 59H in the principal enactment
The following new sections are hereby inserted immediately after section 59E of the principal enactment and shall have effect as sections 59F, 59G and 59H respectively, of that enactment:-
59F. (1) Where the taxable income of any individual being a citizen of Sri Lanka, for any year of assessment commencing on or after
April 1, 2014, includes any profits and income from providing professional services as a professional, such part of the taxable income shall, notwithstanding anything to the contrary in any other provisions of this Act, be chargeable with income tax at the appropriate rate specified in the Fifth Schedule to this Act.
For the purpose of this section,
“professional” shall have the same meaning as given for that expression in section 40C.
“Rate of income tax on the profits and income from the provision of professional services.
59G. (1) The tax rate applicable on the profits and income earned by a bank for any year of assessment commencing on or after
April 1, 2014, on any loan granted to any individual, who is a professional, for the purpose of constructing a house or purchasing a house or a unit of a residential apartment complex, by such individual alone or together with any other individual, shall be reduced by fifty per centum.
For the purpose of this section,
“professional” shall have the same meaning as given for that expression in section 40C.
59H. Such part of the tax computed in accordance with this Act, as being payable by any ship operator, ship builder or any agent of a foreign ship shall, notwithstanding anything to the contrary in any other provision of this
Act, be reduced by ten per centum, if such ship operator, ship builder or agent provides training on skill development in the shipping industry to trainees.”.
s 27Amendment of section 63 of the principal enactment
Section 63 of the principal enactment as last amended by Act, No. 10 of 2007 is hereby further amended by the substitution for the words “such dividend shall,”, of the words “profits and income from such dividend shall,”.
s 28Amendment of section 76 of the principal enactment
Section 76 of the principal enactment is hereby amended in subsection (2) of that section, by the substitution for the words “the amount of any interest, annuity, ground rent or royalty”, of the words “the amount of any interest or annuity”.
s 29Amendment of section 79 of the principal enactment
Section 79 of the principal enactment as last amended by Act, No.18 of 2013 is hereby further amended by the repeal of subsection (3) of that section, and the substitution therefor, of the following subsection:-
Income tax payable by ship operators, ship builders or any agent of a foreign ship.
Rate of income tax applicable to the profits and income earned by any bank on loans granted to professionals for construction purposes.
“(3) For any year of assessment commencing prior to April 1, 2013, an individual who has been deemed resident for two or more consecutive years of assessment shall be deemed to be resident until such time as he is continuously absent from Sri
Lanka for an unbroken period of three hundred and sixty five days. When such person is so absent, he shall notwithstanding the provisions of subsection (2), be deemed to be non-resident from the commencement of the year of assessment in which such absence commences.”.
s 30Amendment of section 105 of the principal enactment
Section 105 of the principal enactment is hereby amended in subsection (3) of that section, by the substitution for the words “provisions of this Act,”, of the words
“provisions of this Act, and shall notwithstanding anything to the contrary in any other provision of this Act, be chargeable with income tax at the appropriate rate specified in the Fifth Schedule to this Act,”.
s 31Amendment of section 106 of the principal enactment
Section 106 of the principal enactment as last amended by Act, No. 22 of 2011 is hereby further amended by the addition immediately after subsection (19) of that section, of the following new subsection:-
“(20) For the purposes of this Act, the
Commissioner-General may give notice in writing to any person requiring him to furnish within the period specified in such notice, any information in relation to any transaction between such person and any other person or class of persons.”.
s 32Amendment of section 107 of the principal enactment
Section 107 of the principal enactment as last amended by Act, No.8 of 2012 is hereby further amended in subsection (3) of that section as follows:-
by the substitution in paragraph (a) of that subsection, for the words “ “approved accountant”
means –”, of the words “ “approved accountant”
for any year of assessment commencing prior to
April 1, 2014 means -”;
by the insertion immediately after paragraph (a) of that subsection, of the following new paragraph:-
“(aa)
“approved accountant” for any year of assessment commencing on or after April 1, 2014 means an accountant who is a member of the Institute of Chartered
Accountant of Sri Lanka;”; and
by the substitution in paragraph (b) of that subsection, for the words “commercial practices and accounting standards;”, of the words “commercial practices and accounting standards and the operational profits calculated in accordance with the Sri Lanka Financial Reporting Standards;”.
s 33Amendment of section 117 of the principal enactment
Section 117 of the principal enactment as last amended by Act, No. 22 of 2011 is hereby further amended in subsection (1) of that section, by the substitution for the words “provides a benefit in cash or in kind to any other person who”, of the words “to any other person and where such director, chairperson or other person”.