Salient features of Surcharge Tax
This article is based on the Bill issued on Surcharge Tax on 07.02.2022
Liability
(a) any individual, partnership or company, whose taxable income calculated in accordance with the provisions of the Inland Revenue Act, No. 24 of 2017, exceeds Rs. 2,000 million, for the Y/A 2020/21, at the rate of 25% on the taxable income of such individual, partnership or company, for such year of assessment:
Provided however, the income of a partner derived from a partnership shall not be taken into account when calculating the taxable income of such partner as an individual, if the tax has been paid by the partnership on such taxable income;
(b) each company of a group of companies, of which the aggregate of the taxable income of all subsidiaries and the holding company in that group of companies, calculated in accordance with the provisions of the Inland Revenue Act, No. 24 of 2017, exceeds Rs. 2,000 million, for the Y/A 2020/21, at the rate of 25%, on the taxable income of each such company after deducting the gains and profits from dividends received from a subsidiary which is part of such taxable income of each such company, for such year of assessment, notwithstanding that the taxable income of any one of such companies does not exceed Rs. 2,000 million.
In calculating the aggregate of the taxable income under paragraph (b), any subsidiary or any holding company of such group of companies which has a nil amount due to losses or unrelieved losses, shall not be taken into account.
If have different period for tax
Where the Commissioner-General has approved an alternative period of twelve months under the provisions of the Inland Revenue Act, No. 24 of 2017, for the purpose of maintaining accounts of any company liable to pay the tax under this Act, such approved period shall be deemed to be the year of assessment commenced on April 1, 2020, for the purposes of this Act.
Payment
in two equal installments, to the Commissioner- General.
- 1st installment - on or before, 31.03.2022
- 2nd installment - on or before 30.06.2022
Accounting and deductibity for tax purpose
- Surcharge tax shall be deemed to be an expenditure in the financial statement relating to the year of assessment 2020/21
- no deduction shall be granted in calculating the taxable income under the Inland Revenue Act, for any year of assessment, for the payment of the tax
- no deduction shall be granted in calculating the Value Added Tax on the supply of financial services for the payment of the tax
Important Definitions
- “taxable income”–
(a) in relation to a company which has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978 and has become liable to income tax determined in accordance with such agreement, after the expiration of its period of tax exemption set out in such agreement means the profit before income tax and the tax levied under this Act of such company as per the audited financial statement;
(b) in relation to an individual, a partnership, a company and the subsidiaries and the holding company of a group of companies other than the companies referred to in paragraph (a), shall have the same meaning assigned to such expression under section 3 of the Inland Revenue Act, No. 24 of 2017.
- “group of companies” means a holding company and its subsidiaries;
- “holding company” means a company which owns more than fifty per centum of the shares with voting rights of another company, directly or indirectly, other than a holding company incorporated outside Sri Lanka and not registered under Chapter XVIII of the Companies Act, No.7 of 2007
- “subsidiary” means a company in which more than fifty per centum of its shares with voting rights are owned by another company, directly or indirectly other than a subsidiary incorporated outside Sri Lanka and not registered under Chapter XVIII of the Companies Act, No.7 of 2007 of a holding company incorporated outside Sri Lanka and not registered under Chapter XVIII of the Companies Act;
Submission of return
On or prior to March 31, 2022
Administrative provisions
Provisions of Inland Revenue Act, No.24 of 2017 shall, mutatis mutandis, be applicable to the administration, record keeping and information collection, tax returns, assessments, objections and appeals, liability for and payment of tax, interest, recovery of tax, penalties and criminal proceedings
Time Bar - 31.12.2024
