KEY CHANGES IN THE INLAND REVENUE ACT, NO 24 OF 2017

The provisions of the Inland Revenue Act, No .24 of 2017 shall effect from today onwards (1/4/2018).You may make sure whether you are aware following key changes.

  • Deductions of WHT
Income Rate 
Payment of interest to a person other than to a senior citizen5%
Payment of interest to a senior citizen exceeds Rs.1,500,000 per annum

(Refer guideline issued by IRD)

5%
Dividend14%  
Rent10%

Payment of royalty, premium , winning from lottery and other payments referred to in section 84(1)(a)(i)               

14%

Services fee referred in section 85(1)(a) which amount exceeding Rs.50,000 per month paid to a resident individual

5%

Payment of service fee or an insurance premium to a non resident person which referred to in section 85(1)(b)

14%
 Allocation of partnership share of a partnership to partners 8%

Payment of salaries and other payments to employees in respect of the employment

  • Employees who have given primary employment declaration 
  • Employees who have not given primary employment declaration 

 

Special Note

  • The person who are required to withhold the tax need to be registered as a withholding agent.
  • Employers are required to get primary employment declaration from employees.
  • Bank and Financial Institutes are required to get declaration from senior citizens to check whether there is a requirement to deduct WHT(please refer guideline issued )
  • If the payment on which the deduction of tax is required has not been remitted to the Commissioner General, such expenses shall not be allowed in arriving at the person’s income.
  • The gain on realization of investment assets (capital gain) shall be taxed at the rate of 10%.
  • Now we have three income tax rates I. e 14%,28% and 40%. Make sure you are aware about the tax rate applicable to your business or business of your employing organization.Please refer First schedule to the Inland Revenue Act 
  • In the case of bank and financial institution, the leasing transaction shall be considered as loan and accordingly, no capital allowance shall be allowed and no capital repayment shall be taxed (i.e only the interest income shall be taxed).
  • Taxation of insurance industry has been drastically changed. Please refer section 67
  • Make sure the amounts borrowed through financial instruments are within the limit given in section 18. If it has exceeded, the interest attributed to such amount exceeded shall not be allowed to deduct in arriving at the person’s income but allow to carry forward for next 6 years period. This restriction shall not apply for the bank and financial institutes.
  • In case where the person has incurred loss, such loss could be carried forward only for the next 6 years period. Make sure whether you are aware the restriction of claim of unrelieved loss referred in section 19.
  • In the case of long term contracts, the Commissioner General may allow to carry back the unrelieved losses.
  • Most of the income tax exemptions granted have been removed whereas investment incentives have been granted under second and sixth schedules.
  • In the case of December ending companies, the tax payment days, return furnishing dates will differ.
  • Tax payment dates will be as follows.
1st Installment  on or before April 15th of the year of assessment
2nd Installmenton or before July 15th of the year of assessment
3rd Installmenton or before October 15th of the year of assessment
4th Installment  on or before January 15th of succeeding year.
  • The  Return  of income of the person required to be furnished not later than 8 months after the end of the year of assessment. i.e in the case of December ending companies, the return furnishing date will be on or before August 30th of the next succeeding year.
  • In the case of March ending companies, the ax payments dates will be fifteen days of August, November and February in the year of assessment and fifteen day of May of the next succeeding year of assessment. The return should be furnished on or before November 30th of the next succeeding year.
  • Capital gain tax return needs to be furnished not later than one month after the realization.
  • Individual Tax
  1. In the case of employees , the tax free allowance will be Rs.500,000 and additional relief shall be granted up to the total of the individual’s income from employment of Rs.700,000
  2. For Individual other than employee, only Rs.500,000 tax relief shall be allowed.
  3. Income earned in foreign currencies from any service rendered in or outside Sri Lanka to any person to be utilized outside Sri Lanka up to Rs.15,000,000 shall be exempted.


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