ACT, No. 18 OF 2013

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PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
INLAND REVENUE (AMENDMENT)
ACT, No. 18 OF 2013
[Certified on 24th April, 2013]
Printed on the Order of Government
Published as a Supplement to Part II of the Gazette of the Democratic
Socialist Republic of Sri Lanka of April 26, 2013
PRINTEDATTHE DEPARTMENTOFGOVERNMENTPRINTING,SRILANKA
TO BEPURCHASED AT THE GOVERNMENT PUBLICATIONS BUREAU, COLOMBO 5
Price : Rs. 20.00 Postage : Rs. 20.00

Inland Revenue (Amendment) Act, No. 18 of 2013 1
[Certified on 24th April, 2013]
L.D.—O. 13/2013
AN ACT TO AMEND THE INLAND REVENUE ACT, NO. 10 OF 2006
BE it enacted by the Parliament of the Democratic Socialist
Republic of Sri Lanka as follows :-
1. (1) This Act may be cited as the Inland Revenue Short title and
(Amendment) Act, No. 18 of 2013. the date of
operation.
(2) The provisions of this Act, shall come into operation
on April 1, 2013:
Provided however that–
(a) the amendments made to section 16C of the Inland
Revenue Act, No.10 of 2006 (hereinafter referred
to as the “principal enactment”) by section 7(2) of
this Act;
(b) the amendments made to section 16D of the
principal enactment by section 8 of this Act; and
(c) the amendments made to section 17A of the
principal enactment by section 10(4) of this Act,
shall be deemed for all purposes to have come into
operation on April 1, 2012.
2. Section 7 of the principal enactment as last Amendment of
amended by Act, No. 8 of 2012 is hereby further amended as section 7 of the
principal
follows :- enactment.
(1) in paragraph (b) of that section –
(a) by the substitution in sub-paragraph (lxii),
for the words and figures “Certified
Management Accountants of Sri Lanka Act,
2—PL 007057—4090 (03/2013)
2 Inland Revenue (Amendment) Act, No. 18 of 2013
No. 23 of 2009; and”, of the words and figures
“Certified Management Accountants of Sri
Lanka Act, No. 23 of 2009;”;
(b) by the substitution in sub-paragraph (lxiii),
for the words and figures “the National Child
Protection Authority Act, No. 50 of 1998.”,
of the words and figures “the National Child
Protection Authority Act, No. 50 of 1998;”;
and
(c) by the addition, immediately after sub-
paragraph (lxiii), of the following new sub-
paragraphs :-
“(lxiv) College of General Practitioners of
Sri Lanka established by the College
of General Practitioners of Sri Lanka
Act, No. 26 of 1974;
(lxv) Sri Lanka Social Security Board
established by the Sri Lanka Social
Security Board Act, No. 17 of 1996;
(lxvi) any Public Corporation to the extent
of provision of services on behalf of
the Government of Sri Lanka, free of
charge out of the funds voted by
Parliament from the Consolidated
Fund or out of any loan arranged
through the Government;
(lxvii) Sri Lanka Savings Bank Limited
incorporated under the Companies
Act, No. 7 of 2007, which is merged
with the National Development
Trust Fund (NDTF);
(lxviii) Lanka Puthra Development Bank
Limited incorporated under the
Companies Act, No. 17 of 1982; and
(lxix) any Government assisted private
school other than that incorporated
under the Companies Act, No.7 of
Inland Revenue (Amendment) Act, No. 18 of 2013 3
2007 which is registered with the
Ministry of Education and mandated
to follow the Government curricula
set by the Ministry of Education and
the circulars issued by such
Ministry.”.
(2) by the substitution in paragraph (k) of that section,
for the words “dividend to the Government.”, of
the words “dividend to the Government;”; and
(3) by the addition immediately after paragraph (k) of
that section, of the following new paragraph:—
“(l) the profits and income for any year of
assessment commencing on or after April 1,
2013, of Sri Lanka Deposit Insurance Scheme
established by regulation made under the
Monetary Law Act (Chapter 422).”.
3. Section 8 of the principal enactment as last amended Amendment of
by Act, No. 22 of 2011 is hereby further amended in section 8 of the
principal
subsection (1) as follows :-
enactment.
(1) by the insertion immediately after paragraph
(dd) of that subsection, of the following new
paragraph :-
“(ddd) the emoluments arising in Sri Lanka of any
individual who is an expert and who is not a
citizen and is brought to and employed in
Sri Lanka by any undertaking for the
purposes of that undertaking, being an
undertaking with which an agreement has
been entered into by the Board of Investment
of Sri Lanka and invested more than US $ 50
Million as direct foreign investment made
on or after April 1, 2013, during the period of
its tax holiday under section 17A or section
16D as the case may be, and if it is confirmed
by the Board of Investment of Sri Lanka that
the service rendered by him in carrying out
4 Inland Revenue (Amendment) Act, No. 18 of 2013
activities of such undertaking in Sri Lanka is
essential and such service is not obtainable
from Sri Lanka:
Provided that the number of experts in an
undertaking to whom this provision is
applicable shall not exceed five.
For the purpose of this paragraph “expert”
means an individual who has expertise
in such field as may be determined by
the Commissioner – General on the
recommendation made by the Board of
Investment of Sri Lanka, as being a field in
which sufficient expertise is not available
among the citizens of Sri Lanka;” ;
(2) by the substitution in paragraph (t) of that
subsection for the words “exceeds five hundred
thousand rupees, then-” of the words and figures
“exceeds five hundred thousand rupees, for any year
of assessment commencing prior to April 1, 2013,
then-”; and
(3) by the substitution in paragraph (w) of that
subsection for the words “one hundred thousand
rupees,”, of the words and figures “one hundred
thousand rupees, for any year of assessment
commencing prior to April 1, 2013,”.
Amendment of 4. Section 9 of the principal enactment as last amended
section 9 of the by Act, No. 8 of 2012 is hereby further amended as follows:-
principal
enactment.
(1) by the insertion immediately after paragraph (a) of
that section, of the following new paragraph :-
“(aa) the interest accruing to any person or
partnership or other body of persons outside
Sri Lanka from investment made out of
foreign currency brought in to Sri Lanka on
or after April 1, 2012, in any security or bond
issued by any person in Sri Lanka;”; and
Inland Revenue (Amendment) Act, No. 18 of 2013 5
(2) by the addition immediately after paragraph (n) of
that section, of the following new paragraph:-
“(o) the interest or discount accruing or arising to
any person from any investment made on or
after January 1, 2013-
(i) in any Corporate Debt Security, quoted
in any Stock Exchange licensed by the
Securities and Exchange Commission;
and
(ii) in any Municipal Bond issued by any
Municipal Council with the approval
of the Secretary of the Ministry of
Finance.”.
5. Section 13 of the principal enactment as last amended Amendment of
by Act, No. 8 of 2012 is hereby further amended as section 13 of the
principal
follows :-
enactment.
(1) by the insertion immediately after paragraph (bb)
of that section, of the following new paragraph:-
“(bbb) the profits and income earned in foreign
currency by any person for any year of
assessment commencing on or after April
1, 2012, in respect of any business of
procuring goods from one country or
manufacturing goods in one country and
exporting to another country, other than
Sri Lanka;” ;
(2) by the insertion immediately after paragraph (dddd)
of that section, of the following new paragraph :-
“(ddddd) any profits and income earned in foreign
currency from outside Sri Lanka, by any
resident individual who is a citizen of
Sri Lanka, if such profits and income (less
6 Inland Revenue (Amendment) Act, No. 18 of 2013
such amount, if any, expended outside Sri
Lanka as is considered by the
Commissioner-General to be reasonable
expenses) are remitted to Sri Lanka
through a bank;”;
(3) by the insertion immediately after paragraph
(xxxxxx) of that section, of the following new
paragraphs:-
“(xxxxxxx) any profits and income from any
investment made on or after January
1, 2013 –
(i) in any Corporate Debt Security,
quoted in any Stock Exchange
licensed by the Securities and
Exchange Commission;
(ii) in any Municipal Bond issued by
any Municipal Council with the
approval of the Secretary of the
Ministry of Finance;
(xxxxxxxx) the interest earned by the DFCC Bank
established by the Development Finance
Corporation of Ceylon Act, No. 35 of 1955
and National Development Bank PLC
incorporated under the Compaines Act,
No. 7 of 2007, from moneys lent out of
funds raised from outside Sri Lanka to
Small and Medium enterprises,
plantaions, construction industry or other
manufacturing industries.”;
(4) by the insertion immediately after paragraph
(yyyyyy) of that section, of the following new
paragraph :-
“(yyyyyyy) any royalty, franchising fee or any
payment for designing received by any
foreign collaborator from a company
Inland Revenue (Amendment) Act, No. 18 of 2013 7
registered with the Board of
Investment, during the period of tax
holiday under section 17A or section
16D as the case may be, where the
investment made in Sri Lanka from
foreign direct investment raised
outside Sri Lanka exceeds US $ 50
Million and if such services are
considered by the Director General
of the Board of Investment to be
essential in carrying out activities in
Sri Lanka and is not obtainable in
Sri Lanka;”;and
(5) by the insertion immediately after paragraph (zzzzzz)
of that section, of the following new paragraph :-
“(zzzzzzz) where an individual who is a citizen
of Sri Lanka, employed abroad returns
to the country on or after January 1,
2013 and invests his earnings from
employment abroad to commence any
business of manufacture of any article,
other than liquor or tobacco products,
or provision of any service, the profits
and income of such person from such
business for a period of five years
commencing from the beginning of the
year of assessment in which the
commercial operations of such
business commenced.”.
6. Section 15 of the principal enactment is hereby Amendment of
amended by the substitution for all the words from “exempt section 15 of the
principal
from income tax,” to the end of that section, of the following
enactment.
words and figures:-
“exempt from income tax-
(i) for any year of assessment commencing prior
to April 1, 2013, if such individual is a citizen
of both Sri Lanka and any other country;
8 Inland Revenue (Amendment) Act, No. 18 of 2013
(ii) for any year of assessment commencing on or
after April 1, 2013, if such individual is a
citizen of Sri Lanka and—
(a) citizen of any other country; or
(b) has obtained permanent resident status
or similar status in any other country
under which such individual may
obtain citizenship in such country,
at the time of such arrival and during the
whole of such stay.”.
Amendment of 7. Section 16C of the principal enactment as last
section 16c of amended by Act, No. 8 of 2012 is hereby further amended as
the principal
follows:-
enactment.
(1) in Column 1 of the Schedule of subsection (1) of
that section by the substitution for the words and
figures “Any activity referred to in paragraph (a) of
subsection (2), but not including services relating
to agriculture (products shall be with a minimum of
35% value addition, if more than 50% of the
production is to be sold in the domestic market)”,
of the words and figures “Any activity referred to in
paragraph (a) of subsection (2).
In case of manufacture of any article, such article
shall be with a minimum of 35% value addition, if
more than 50% of the production is to be sold in
the domestic market.”; and
(2) in subsection (2) of that section –
(i) by the substitution in paragraph (b) of that
subsection for the words and figure “Schedule
to subsection (1); and” of the words and figure
“Schedule to subsection (1);”;
(ii) by the substitution in paragraph (c) of that
subsection, for the words and figures “after
April 1, 2011.” of the words and figures “after
April 1, 2011; and”;
Inland Revenue (Amendment) Act, No. 18 of 2013 9
(iii) by the insertion immediately after paragraph
(c) of that subsection, of the following new
paragraph;-
“(d) which is not formed by the splitting up
or reconstruction or acquisition of any
business which was previously in
existence.”.
8. Section 16D of the principal enactment as last Amendment of
section 16D of
amended by Act, No. 8 of 2012 is hereby further amended
the principal
by the substitution for the words “whichever occurs earlier.”, enactment.
of the words “whichever occurs earlier where such
undertaking is not formed by the splitting up or
reconstruction or acquisition of any business which was
previously in existence.
For the purposes of this section “the investment” means
the cost of any land, plant, machinery, equipment and other
fixed assets.”.
9. The following new section is hereby inserted Insertion of new
section 16E in
immediately after section 16D of the principal enactment
the principal
and shall have effect as section 16E of that enactment :- enactment.
“Exemption of 16E. The profits and income within the
profits and meaning of paragraph (a) of section 3 (other
income from
than any profits and income from the disposal
cultivation of
any renewable of any capital asset) of any person or
energy crops partnership-
and
transactions
(i) from any undertaking of cultivating
connected with
manufacturing, any renewable energy crop in Sri
distribution Lanka, for a period of ten years;
and marketing
of organic
(ii) from all transactions connected with
fertilizer.
manufacturing, distribution and
marketing of organic fertilizers,
commencing on or after April 1, 2013, shall
be exempt from income tax.”.
10 Inland Revenue (Amendment) Act, No. 18 of 2013
Amendment of 10. Section 17A of the principal enactment, as last
section 17A of amended by Act, No. 8 of 2012 is hereby further amended in
the principal
subsection (2) of that section as follows :-
enactment.
(1) by the substitution in sub-paragraph (ii) of
paragraph (a) of that subsection, for the words
“apparels,”, of the words “apparels and textile,”;
(2) by the substitution in sub-paragraph (xxvii) of
paragraph (a) of that subsection, for the words
“national economy; and” , of the words “national
economy;”;
(3) by the substitution in paragraph (b) of that
subsection, for the words and figures “on or after
April 1, 2011.”, of the words and figures “on or after
April 1, 2011; and”; and
(4) by the insertion immediately after paragraph (b) of
that subsection, of the following new paragraph:-
“(c) 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.”.
Amendment of 11. Section 25 of the principal enactment as last
section 25 of the amended by Act, No. 8 of 2012 is hereby further amended in
principal
subsection (1) of that section as follows :-
enactment.
(1) by the substitution in paragraph (d) of the proviso
to paragraph (a) of that subsection for the words
“the rate shall be fifty per centum of the cost of
acquisition;”, of the words “the rate shall be fifty
per centum of the cost of acquisition”:
Provided that where such high tech plant,
machinery or equipment acquired on or after April
Inland Revenue (Amendment) Act, No. 18 of 2013 11
1, 2013 and used in any trade or business meets
more than thirty per centum of the total requirement
of the power generation of that trade or business
out of alternative energy sources, the rate shall be
one hundred per centum on the cost of acquisition;
For the purpose of this proviso “alternative
energy source” means any source other than the
National Grid, that generates power.”;
(2) by the addition immediately after paragraph (d) of
the proviso to paragraph (a) of that subsection, of
the following new paragraphs:-
“(e) where any plant or machinery or equipment
is acquired and used in any business on or
after April 1, 2013 for technology upgrading
purposes or introducing any new technology,
the rate shall be fifty per centum of the cost
of acquisition;
(f) where any plant, machinery or equipment is
acquired and used on or after April 1, 2013 in
any Stock Broker Company for the
upgrading of information technology
infrastructure to be in compliance with the
requirements of the Colombo Stock
Exchange licensed by the Securities and
Exchange Commission, in relation to the
Risk Management System,the rate shall be
one hundred per centum of the cost of
acquisition;
(g) where any plant, machinery or equipment
acquired and used on or after April 1, 2013,
in any trade or business and where at least
sixty per centum of the turnover of such trade
or business is from export, the rate shall be
fifty per centum of the cost of acquisition;”;
12 Inland Revenue (Amendment) Act, No. 18 of 2013
(3) by the substitution in paragraph (i) of that
subsection, for all the words from “upgrading of
any trade or business carried on” to the words
“carried out through any Government institution;”,
of the following words and figures:-
“upgrading of any trade or business carried on
by such person:
Provided that-
(A) where such expenditure is incurred on or
after April 1, 2012 but prior to April 1,
2013 and such research is carried out
through any Government institution;
(B) where such expenditure is incurred on or
after April 1, 2013 and such research is
carried out through any institution in
Sri Lanka,
the deduction shall be an amount equal to three
hundred per centum of such expenditure incurred
by such person”; and
(4) by the addition immediately after paragraph (t) of
that subsection, of the following new paragraph :-
“(u) any sum paid by a Public Corporation or
Government Owned Business Undertaking
as a special levy, to the Government.”.
Amendment of 12. Section 26 of the principal enactment as last amended
section 26 of the by Act, No. 8 of 2012 is hereby further amended in paragraph
principal
enactment. (v) of subsection (1) of that section, by the substitution for
the words “carried on or exercised by him other than”, of
the words and figures “carried on or exercised by him other
than the cost of advertisement incurred on or after August 1,
2012, on sponsorship of international sport events approved
by the Minister to whom the subject of Sports has been
assigned; or”.
Inland Revenue (Amendment) Act, No. 18 of 2013 13
13. Section 34 of the principal enactment as last Amendment of
section 34 of
amended by Act, No.8 of 2012 is hereby further amended as
the principal
follows:- enactment.
(1) in subsection (2) of that section, by the insertion
immediately after paragraph (t) of that subsection,
of the following new paragraphs:-
“(u) where the profits from employment of any
individual who is a citizen of Sri Lanka or
resident in Sri Lanka other than profits
referred to in paragraph (c) of subsection (1)
of section 4, exceeds five hundred thousand
rupees, for any year of assessment
commencing on or after April 1, 2013, then-
(i) such part of such profits in excess of
five hundred thousand rupees; or
(ii) one hundred thousand rupees,
whichever is lower;
(v) such part of official emoluments as does not
exceed one hundred thousand rupees for any
year of assessment commencing on or after
April 1, 2013, arising in Sri Lanka to any
individual who is not a citizen of Sri Lanka
and not resident in Sri Lanka.”; and
(2) in subsection (4) of that section, by the substitution
in sub-paragraph (i) of paragraph (a) of that
subsection for the words and figures “other than
those referred to in paragraphs (a), (b), (c), (e), (g),
(gg), (h), (i), (j), (k), (n), (o), (q),(r), (s) and (t) of
subsection (2)”, of the words and figures “other
than those referred to in paragraphs (a), (b), (c), (e),
(g), (gg), (h), (i), (j), (k), (n), (o), (q),(r), (s), (t),(u) and
(v) of subsection (2)”.
14 Inland Revenue (Amendment) Act, No. 18 of 2013
Amendment of 14. Section 40A of the principal enactment as last
section 40A of amended by Act, No.19 of 2009 is hereby further amended
the principal
by the substitution for the words “twenty per centum”
enactment.
wherever such words occur in that section, of the words
“sixteen per centum”.
Amendment of 15. Section 40B of the principal enactment as last
section 40B of amended by Act, No.19 of 2009 is hereby further amended
the principal
by the substitution for the words “twenty per centum”
enactment.
wherever such words occur in that section, of the words
“sixteen per centum”.
Insertion of new 16. The following new section is hereby inserted
section 46A in immediately after section 46 of the principal enactment and
the principal
shall have effect as section 46A of that enactment:-
enactment.
“Rates of 46A. Where the taxable income of any
income tax person for any year of assessment includes any
on profits
profits and income within the meaning of
from poultry
farming. paragraph (a) of section 3 (other than any profits
and income from the disposal of any capital
asset) from poultry farming, such part of such
taxable income as consists of such profits and
income shall, notwithstanding anything to the
contrary in other provisions, be chargeable
with income tax at the appropriate rate specified
in the Fifth Schedule to this Act.
For the purposes of this section “profits and
income from poultry farming” means such
profits and income from the sale of produce by
such person without subjecting such produce
to any process of production or manufacture.”.
Insertion of new 17. The following new section is hereby inserted
section 48C in immediately after section 48B of the principal enactment
the principal
enactment. and shall have effect as section 48C of that enactment:-
“Rate of 48C.Where any undertaking which has
income tax
applicable to entered into an agreement with the Board of
BOI Investment of Sri Lanka under section 17 of
registered
undertakings the Board of Investment of Sri Lanka Law,
after the No. 4 of 1978, which provides for tax
expiry of the
period of tax concessions, and the taxation under such
exemption. agreement after the expiry of the tax exemption
Inland Revenue (Amendment) Act, No. 18 of 2013 15
period provided thereunder is more
burdensome than the texation under the Inland
Revenue Act, the profits and income of such
undertaking after the expiry of such tax
exemption period shall be chargeable with
income tax in accordance with the provisions
of the Inland Revenue Act, provided such
undertaking shall not seek any further tax
concession in respect of such agreement
through any supplementary agreement.”.
18. Section 56 of the principal enactment is hereby Amendment of
amended as follows:- section 56 of the
principal
enactment.
(1) in subsection (2) of that section, by the substitution
for the words “fifteen per centum”, of the words
“twelve per centum”; and
(2) in subsection (3) of that section, by the substitution
for the words “fifteen per centum” wherever such
words occur in that subsection, of the words “twelve
per centum”.
19. The following new sections are inserted immediately Insertion of new
after section 56 of the principal enactment and shall have sections 56A,
56B, 56C, and
effect as sections 56A, 56B, 56C and 56D respectively, of that
56D in the
enactment:- principal
enactment.
“Rate of 56A. Such part of the profits and income of
income tax an export oriented company which has entered
on the profits into an agreement with the Board of Investment
and income
from the sale of Sri Lanka under section 17 of the Board of
of goods by Investment of Sri Lanka Law, No. 4 of 1978,
an export for any year of assessment commencing on or
oriented after April 1, 2013, from the sale of goods
company. manufactured in Sri Lanka, up to the quantity
approved by the Board of Investment as import
replacement, to-
(a) any company which has entered into
an agreement with the Board of
Investment of Sri Lanka under section
16 Inland Revenue (Amendment) Act, No. 18 of 2013
17 of the Board of Investment of Sri
Lanka Law, No. 4 of 1978, enjoying tax
holiday under section 16C, 16D or 17A
of this Act or under the Strategic
Development Projects Act, No.14 of
2008 and which is permitted to import
project related goods or raw materials
on duty free basis under the provisions
of such agreement, during the project
implementation period; or
(b) any person eligible to import specific
goods on duty free basis under any
Government Authority,
shall notwithstanding anything to the
contrary in any other provisions of this Act,
be deemed to be profits and income from
exports and be chargeable with income tax
at the appropriate rate specified in the Fifth
Schedule to this Act.
Rate of 56B. Such part of the profits and income of
income tax any person for any year of assessment
on the profits
commencing on or after April 1, 2013 from the
and income
from the supply of any goods manufactured in Sri Lanka
supply of or the provision of services, to foreign ships
goods or for payments in foreign currency, shall
services to notwithstanding anything to the contrary in
foreign
any other provisions of this Act, be deemed to
ships.
be profits and income from exports and be
chargeable with income tax at the appropriate
rate specified in the Fifth Schedule to this Act.
Rate of 56C. Such part of the profits and income of
income tax
on the any person for any year of assessment
profits and commencing on or after April 1, 2013 from the
income from sale of any product manufactured in Sri Lanka
the sale of
products for payment in foreign currency through
manufactured foreign exchange earning account authorized
in Sri Lanka by the Central Bank of Sri Lanka, shall
for payment
in foreign notwithstanding anything to the contrary in
currency. any other provisions of this Act, be deemed to
Inland Revenue (Amendment) Act, No. 18 of 2013 17
be profits and income from exports and be
chargeable with income tax at the appropriate
rate specified in the Fifth Schedule to this Act.
Rate of 56D. For any year of assessment
income tax commencing on or after April 1, 2013 such
on the profits
and income part of the profits and income from the sale in
from the sale the local market, of locally manufactured
of locally
manufactured gaments, bags made out of fabric, linen,
goods in curtains or any othe goods, of any export
local market
by export oriented company which exports not less than
oriented sixty per centum of its products shall be
companies. chargeble with income tax at the rate of twelve
per centum:
Provided however, where the local value
addition of such garments, bags, linen, curtains
or other goods, as the case may be, is greater
than sixty five per centum with Sri Lankan
brand name, such part of the profits and income
of such export oriented company from the sale
in the local market, of such garments, bags,
linen, curtains, or other goods shall be
chargeable with income tax at the rate of ten
per centum.”.
20. Section 59B of the principal enactment as last Amendment of
section 59B of
amended by Act, No. 8 of 2012 is hereby further amended as
the principal
follows:- enactment.
(1) in subsection (2) of that section, by the substitution
for paragraph (b) of that subsection, of the following
new paragraph:-
“(b) the turnover of such undertaking (other than
from the sale of any capital asset) for that
year of assessment-
(i) being any year of assessment
commencing on or after April 1, 2011
but prior to April 1, 2013, does not
exceed three hundred million rupees;
18 Inland Revenue (Amendment) Act, No. 18 of 2013
(ii) being any year of assessment
commencing on or after April 1, 2013,
does not exceed five hundred million
rupees.”;and
(2) by the substitution for the marginal note to that section,
of the following marginal note:-
“Rate of income tax applicable to the profits and
income of any person from any undertaking with
annual turnover not exceeding certain amount. ”.
Insertion of new 21. The following new sections are hereby inserted
sections 59D and
59E in the immediately after section 59C of the principal enactment
principal and shall have effect as sections 59D and 59E respectively, of
enactment. that enactment:-
“Rate of 59D. (1) The tax rate applicable on the
income tax
applicable to profits and income within the meaning of
companies paragraph (a) of section 3 (other than any profits
listing its
shares in the and income from the sale of any capital asset),
Colombo of any company which lists its shares on or
Stock
Exchange after April 1, 2013 but prior to April 1, 2014, in
and issuing the Colombo Stock Exchange licensed by the
its shares to
the general Securities and Exchange Commission of Sri
public. Lanka and issues by way of Initial Public
Offering not less than twenty per centum of its
shares to the general public, 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
where such company after listing continues to
maintain not less than twenty per centum of
holding of its shares by the general public.
(2) Where the company referred to in
subsection (1) fails to maintain in any
subsequent year of assessment after listing its
shares, not less than twenty per centum of
Inland Revenue (Amendment) Act, No. 18 of 2013 19
holding of shares by the general public in the
opinion of an Assessor, the tax reduced under
subsection (1) shall notwithstanding to the
contrary in any other provisions of this Act, be
re-assessable, payable and recoverable.
For the purposes of this section “shares held
by the general public” in relation to a listed
company means shares of such company held
by any person other than those directly or
indirectly held by :-
(a) its parent, subsidiary or associate
companies or any subsidiaries or
associates of its parent company;
(b) its directors who are holding office as
directors of such company, their
spouses and children under 18 years of
age;
(c) its Chief Executive Officer, his spouse
and children under 18 years of age; and
(d) any single shareholder who holds ten
per centum or more of the shares of such
company.
Rate of 59E. Such part of the profits and income of
income tax any person or partnership from operating any
on the profits
and income project for producing any alternative energy
from including operating any mini hydro power
operating project shall notwithstanding anything to the
any contrary in any other provisions of this Act, be
alternative
power taxable at the appropriate rate specified in the
generation Fifth Schedule to this Act.
project.
For the purposes of this section “mini hydro
power project” means any hydro power project
which generates less than ten Mega Watts
electricity.”.
20 Inland Revenue (Amendment) Act, No. 18 of 2013
Amendment of 22. Section 60 of the principal enactment as last
section 60 of the amended by Act, No.19 of 2009 is hereby further amended
principal
as follows:-
enactment.
(1) in sub-paragraph (ii) of paragraph (a) of that section,
by the substitution for the words “black tea in bulk,
crepe rubber,”, of the words “black tea not in packet
or package form and each packet or package
weighing not more than one kilogram, crepe
rubber,”; and
(2) by the substitution for the words and figures “any
other produce referred to in section 16.”, of the
words and figures “any other produce referred to in
section 16, but include organic tea in bulk.”.
Amendment of 23. Section 78 of the principal enactment as last
section 78 of amended by Act, No.22 of 2011 is hereby further amended
principal
in subsection (1) as follows:-
enactment.
(1) by the substitution in paragraph (a) of that
subsection for the words “and other income; and” ,
of the words “and other income;”; and
(2) by the substitution for paragraph (b) of that
subsection, of the following paragraphs:-
“(b) for any year of assessment commencing on
or after April 1, 2007, but prior to April 1,
2013, on the excess, if any, of the aggregate
of the divisible profits referred to in section
76 and other income over six hundred
thousand rupees”; and
(c) for any year of assessment commencing on
or after April 1, 2013, on the excess, if any,
of the aggregate of the divisible profits
referred to in section 76 and other income
over one million rupees,”.
Amendment of 24. Section 79 of the principal enactment as last amended
section 79 of by Act, No. 9 of 2008 is hereby further amended as follows:-
the principal
enactment. (1) in subsection (3) of that section, by the substitution
for the words “be deemed to be non-resident from
Inland Revenue (Amendment) Act, No. 18 of 2013 21
the commencement of the year of assessment in
which such absence commences.”, of the words and
figures “be deemed to be non-resident from the
commencement of the year of assessment in which
such absence commences being a year of assessment
prior to April 1, 2013.”; and
(2) in subsection (4) of that section, by the substitution
for the words “the aggregate of thirty days shall”,
of the words and figures “the aggregate of thirty
days for any year of assessment prior to April 1,
2013, shall”.
25. Section 104 of the principal enactment as last amended Amendment of
by Act, No. 9 of 2008 is hereby further amended as section 104 of
the principal
follows :- enactment.
(1) in subsection (1) of that section, by the substitution
for the words “any transaction entered into
between”, of the words “any international
transaction entered into between”;
(2) by the repeal of subsection (2) of that section, and
the substitution therefor, of the following
subsection:—
“(2) Where it appears to an Assessor that the
profits and income or the loss referred to in
subsection (1), has not been as ascertained having
regard to the arm’s length price, he may refer the
computation of the arm’s length price in relation to
such international transaction to a Transfer Pricing
Officer. The Transfer Pricing Officer may, in writng
addressed to the person who carries on either the
one or the other or both of the two associated
undertakings referred to in subsection (1), require
him to prove to the satisfaction of the Transfer
pricing Officer, that such profits and income or such
loss, as the case may be, has in fact been ascertained
having regard to the arm’s length price. Where such
person fails to so prove, the Transfer Pricing Officer
may determin the arm’s length price and inform it
to the Assessor. Thereupon the Assessor may
estimate the amount of the profit and income or the
22 Inland Revenue (Amendment) Act, No. 18 of 2013
loss, as the case may be, referred to in subsection
(1), and make an assessment accordingly.”;
(3) by the insertion immediately after subsection (3) of
that section, of the following new subsection:-
“(3A) An advance pricing agreement may be
entered into between any person and the
Commissioner-General in respect of arm’s length
price for the purposes of this section on the basis of
a prescribed manner.”;
(4) in subsection (4) of that section-
(a) by the substitution in paragraph (b) of that
subsection for the words “other than
associated undertakings.”, of the words “other
than associated undertakings;”; and
(b) by the addition immediately after paragraph
(b) of that subsection, of the following:-
“international transaction” means a
transaction between two or more associated
undertakings, either one or both of whom are
non-residents, in the nature of purchase, sale
or lease of tangible or intangible property, or
provision of services, or lending or borrowing
money or any other transaction having a
bearing on the profits, income, losses or assets
of such undertakings, and includes any
allocation or apportionment of, or any
contribution to any cost or expense incurred
or to be incurred in connection with a benefit,
service or facility provided or to be provided
to any one or more of such undertakings under
any mutual agreement or arrangement
between two or more such associated
undertakings. Any transaction entered into
by an undertaking with a person, either one
is non-resident, other than an associated
undertaking shall, for the purposes of
subsection (1) be deemed to be an
Inland Revenue (Amendment) Act, No. 18 of 2013 23
international transaction entered into
between two associated undertakings, if there
exists a prior agreement between such
undertaking and other person and, by which
the terms of such transaction are determined
in substance between such undertaking and
other person which results in the reduction
of or would have the effect of reducing the
amount of tax payable.
Without prejudice to the generality of the
provision of this subsection, the allowance
for any expense or interest arising from an
international transaction shall also be
determined having regard to the arm’s length
price;
“Transfer Pricing Officer” means any
officer of Inland Revenue prescribed by the
Commissioner – General as a Transfer Pricing
Officer.”; and
(5) in the marginal note to that section, by the
substitution for the words “from transactions
between”, of the words “from international
transactions between”.
26. The following new section is hereby inserted Insertion of new
immediately after section 104 of the principal enactment section 104A in
the principal
and shall have effect as section 104A of that enactment:-
enactment.
“Profits and 104A. (1) Any profits and income arising,
income or derived or accruing from, or any loss incurred
loss from
transactions in any transaction, other than transactions
between referred to in subsection (1) of section 104,
associated entered into between two associated
undertakings undertakings shall be ascertained having
to be
determined regard to the arm’s length price.
having
regard to the (2) Where it appears to an Assessor that the
arm’s length profits and income or the loss referred to in
price.
subsection (1), has not been ascertained having
24 Inland Revenue (Amendment) Act, No. 18 of 2013
regard to the arm’s length price, he may,
in writing addressed to the person who carries
on either the one or the other or both of the
two associated undertakings referred to in
subsection (1), require him to prove to the
satisfaction of the Assessor, that such
profits and income or such loss, as the case
may be, has in fact been ascertained having
regard to the arm’s length price. Where such
person fails to so prove, the Assessor may
estimate the amount of the profit and income
or the loss, as the case may be, referred to in
subsection (1), and make an assessment
accordingly.
(3) The arm’s length price referred to in
subsection (1) shall be determined on the basis
of any one or more of the methods, prescribed
for that purpose.
(4) For the purposes of this section-
(a) an undertaking shall be deemed to
be an associated undertaking of
another undertaking, if the
first-mentioned undertaking
participates directly or indirectly
or through one or more
intermediaries, in the control of the
second-mentioned undertaking in
such manner or to such extent as
may be prescribed;
(b) “arm’s length price” means a price
which is applied in uncontrolled
conditions in a transaction between
persons other than associated
undertakings.”.
Inland Revenue (Amendment) Act, No. 18 of 2013 25
27. Section 113 of the principal enactment as last Amendment of
amended by Act, No.8 of 2012 is hereby further amended by section 113 of
the principal
the addition immediately after subsection (5) of that section,
enactment.
of the following new subsection:-
“(6) Where any bank or financial institution which is
required to invest in the investment fund referred to in
subsection (5), has not utilized in accordance with the
guidelines issued by the Central Bank of Sri Lanka, any part
of the funds lying to the credit of the fund as at July 1, 2013,
such balance shall be deemed to be a debt due to the
Government by such bank or financial institution as the
case may be, and transferred to the Consolidated Fund.”.
28. Section 121 of the principal enactment is hereby Amendment of
amended by the addition immediately after subsection (2) section 121 of
the principal
of that section, of the following new subsection:-
enactment.
“(3) Where during any year of assessment an employer
has deducted income tax from the remuneration of any
employee for any pay period any sum in excess of the amount
deductible in respect of such remuneration for such pay
period, such employer may reduce such excess from the
amount of income tax deductible in respect of the
remuneration of such employee for any pay period in such
year of assessment or in the immediately succeeding year of
assessment and notify the Commissioner-General
accordingly within two weeks from the date of such
adjustment.”.
29. Section 135 of the principal enactment as last Amendment of
amended by Act, No.22 of 2011 is hereby further amended section 135 of
the principal
in subsection (1), by the substitution for the words and figures
enactment.
“at the time of the issue of such corporate debt security.”, of
the words and figures “at the time of the issue of such
corporate debt security:
Provided that-
(a) where such corporate debt security is issued with
floating rate of interest payable for reviewing
periods, such deduction shall be made at the time
of beginning of each such reviewing period of
interest rate;
26 Inland Revenue (Amendment) Act, No. 18 of 2013
(b) where any corporate debt security issued prior to
April 1, 2011 and to which interest is payable on or
after April 1, 2011 and in respect of which no
deduction of income tax on interest has been made,
such deduction shall be made at the time such
interest is paid or credited;
(c) no deduction of income tax under this section shall
be made from any interest or discount referred to in
paragraph (o) of section 9.”.
Amendment of 30. Section 140 of the principal enactment is hereby
section 140 of amended as follows:-
the principal
enactment.
(1) by the substitution for all the words from “Every
bank” to the words “such payment,” , of the words
“Every bank or financial institution or company
issuing corporate debt security, which is required
to deduct income tax from the interest paid or
credited or discount allowed, as the case may be,
by it in any year of assessment to any person
chargeable with income tax under this Act, shall
deduct such income tax at the time when such
interest is paid or when such security is issued or
where such corporate debt security is issued with
floating rate of interest, at the beginning of each
reviewing period, as the case may be, to such person
in accordance with any agreement entered into
between such bank or financial institution or
company and such person with respect to such
payment,”; and
(2) in the marginal note to that section, by the
substitution for the words “Duties of bank and
financial institution”, of the words “Duties of banks,
financial institutions and companies”.
Amendment of 31. Section 141 of the principal enactment is hereby
section 141 of
amended by the substitution for all the words and figures
the principal
enactment. from “any bank or financial institution” to the words “a
penalty of a sum”, of the words and figures “any bank or
financial institution which pays interest or issues any debt
Inland Revenue (Amendment) Act, No. 18 of 2013 27
security , or a company which issues corporate debt security,
not deducting tax in accordance with the provisions of
section 133 or section 135, as the case may be, he shall after
affording such bank, financial institution or any such
company, which pays interest or issues debt security or
corporate debt security, as the case may be, an opportunity
to show cause and where he is satisfied that there has been a
contravention of the provisions of section 133 or section
135, impose on such bank or financial institution or the
company, which pays interest or issues such debt security
or corporate debt security, as the case may be, a penalty of
a sum”.
32. Section 142 of the principal enactment is hereby Amendment of
section 142 of
amended by the substitution for the words “bank or financial
the principal
institution” wherever such words occur in subsections (1), enactment.
(2) and (3) of that section, of the words “bank or financial
institution or company”, respectively.
33. Section 163 of the principal enactment, as last Amendment of
section 163 of
amended by Act, No.22 of 2011 is hereby further amended
the principal
as follows:- enactment.
(1) in subsection (1) of that section:-
(a) by the substitution in the proviso to that
subsection, for the word “September”, of the
word “November”;
(b) by the substitution in the further proviso to
that subsection for the words and figures
“paragraph (b) of subsection (1) of section
65 or paragraph (c) of subsection (2) of section
62”, of the words and figures “sub-paragraph
(i) of paragraph (b) of subsection (1) of section
61 or paragraph (c) of subsection (1) of
section 61 or paragraph (b) of subsection (1)
of section 62 ”;
(2) in paragraph (b) of subsection (3), of that section
by the substitution for the word “assemble
income”, of the words “assessable income”;
28 Inland Revenue (Amendment) Act, No. 18 of 2013
(3) by the substitution for paragraph (a) of subsection
(5) of that section, of the following paragraph:-
“(a) who or which has made a return of his or its
income on or before the thirtieth day of
November of the year of assessment
immediately succeeding that year of
assessment,
(i) where such year of assessment is any year
of assessment commencing prior to April
1, 2013, shall be made after the expiry of
a period of two years from the thirtieth
day of November of the immediately
succeeding year of assessment; and
(ii) where such year of assessment is any year
of assessment commencing on or after
April 1, 2013, shall be made after the
expiry of a period of eighteen months
from the thirtieth day of November of
the immediately succeeding year of
assessment:”; and
(4) by the addition immediately after subsection (9) of
that section, of the following new subsection:-
“(10) Notwithstanding anything to the contrary
in any other provisions of this Act, where the annual
total turnover of any person other than a company
for any year of assessment commencing prior to
April 1, 2011 from every trade or business did not
exceed rupees three hundred million and such
person has not complied with the provisions of any
tax law administered by the Commissioner –
General, invests earnings so made by such person
prior to April 1, 2011, in any trade or business, on
or before March 31, 2014, and furnishes the return
of income for any year of assessment commencing
prior to April 1, 2014 together with an undertaking
Inland Revenue (Amendment) Act, No. 18 of 2013 29
in writing that he shall comply with the requirements
of this Act for any subsequent period, such return
shall be accepted and no assessment or additional
assessment shall be made on such person in respect
of such year of assessment for which a return of
income is so furnished and for five years of
assessment immediately succeeding that year of
assessment.”.
34. Section 172 of the principal enactment is hereby Amendment of
section 172 of
amended as follows:-
the principal
enactment.
(1) in subsection (2) of that section, by the substitution
for the words “to the Board of Review.”, of the words
and figures “to the Board of Review prior to April
1, 2011 or on or after April 1, 2011, to the Tax
Appeals Commission.”; and
(2) in subsection (3) of that section, by the substitution
for the words “apply to the hearing and disposal of
any appeal under the preceding provisions of this
section. The Board of Review may”, of the words
and figures “apply prior to April 1, 2011, to the
hearing and disposal of any appeal under the
preceding provisions of this section. The Board of
Review prior to April 1, 2011 or after April 1, 2011,
the Tax Appeals Commission, as the case may be,
may”.
35. Section 204A of the principal enactment as last Amendment of
amended by Act No.22 of 2011 is hereby further amended as section 204A of
the principal
follows:- enactment.
(1) by the substitution for the words “provision of this
Act or regulation, rule or order made thereunder”,
of the words “provisions of this Act or any other
Act administered by the Commissioner- General,
or regulation, rule or order made thereunder”; and
(2) in the marginal note to that section, by the
substitution for the words “the Act”, of the words
“this Act or any other Act administered by the
Commissioner-General”.
30 Inland Revenue (Amendment) Act, No. 18 of 2013
Amendment of 36. Section 208A of the principal enactment is hereby
section 208A of amended by the addition at the end of that section, of the
the principal
following words:-
enactment.
“The committee shall determine any request made to it
for interpretation within six months from the date of receipt
of such request.”.
Amendment of 37. Section 217 of the principal enactment as last
section 217 of amended by Act No. 8 of 2012 is hereby further amended
the principal
enactment. in the definition of the expression “dividend” by the
substitution in sub-paragraph (iv) of paragraph (a) for the
words “dividend in specie; and”, of the following words:-
“dividend in species; or
(v) where a company buys back shares from its
shareholders, the excess, if any, paid to any
shareholder over the market price of such share
quoted in the Colombo Stock Exchange or the
market value of such share as the case may be, as at
the date on which the shareholders of such company
at a meeting approved such share buyback; and”.
Amendment of 38. The First Schedule to the principal enactment, as
the First last amended by Act, No. 8 of 2012, is hereby further amended
Schedule to the
principal by the substitution for PART V of that Schedule, of the
enactment. following Part:-
“PART V
The rate of income tax applicable to any sum referred to
in the proviso to subsection (2) of section 35-
(a) for any year of assessment as per PART I,
commencing prior to April 1, 2013 PART 1A or PART
IB, but subject to a
maximum of 20 per
centum
(b) for any year of assessment as per PART IB, but
commencing on or after April 1, subject to a
maximum of 16 per
2013
centum.”.
Inland Revenue (Amendment) Act, No. 18 of 2013 31
39. The Second Schedule to the principal enactment, Amendment of
as last amended by Act, No. 8 of 2012, is hereby further the Second
Schedule to the
amended by the addition, immediately after item 2 in principal
PART A of that Schedule, of the following new item:- enactment.
“3. Any unit trust management company on the taxable
income-
(a) for any year of assessment
commencing prior to April
1, 2013 as per PART B
(b) for any year of assessment
commencing on or after
April 1, 2013 10 per centum”;
40. The Fifth Schedule to the principal enactment, as Amendment of
last amended by Act, No. 8 of 2012, is hereby further amended the Fifth
Schedule to the
as follows :-
principal
enactment.
(1) by the substitution for item 22 of that Schedule, of
the following item :-
“22. The rate of income tax on profits and income referred
to in section 58-
(a) for any year
of assessment
commencing prior
to April 1, 2011 15 per centum
(b) for any year
of assessment
commencing on or
after April 1, 2011 12 per centum”;
(2) by the substitution for item 23 of that Schedule, of
the following item :-
“23. The rate of income tax on profits and income
from transshipment agency fees referred to in
section 59-
(a) for any year of assessment
commencing prior to April
1, 2011 15 per centum
32 Inland Revenue (Amendment) Act, No. 18 of 2013
(b) for any year of assessment
commencing on or after
April 1, 2011 12 per centum”.
(3) by the addition immediately after item 40 of that
Schedule, of the following new items:-
“41. The rate of income tax applicable As per the First
to such part of the profits and Schedule, but
income of any person engaged in subject to a
an undertaking for poultry farming maximum of 10
referred to in section 46A – per centum for an
individual, and 10
per centum for a
company.
42. The rate of income tax applicable As per the First
to such part of the profits and Schedule, but
income of any person from any subject to a
undertaking referred to in section maximum of 12
56A- per centum for an
individual, and 12
per centum for a
company.
43. The rate of income tax applicable As per the First
to such part of the profits and Schedule, but
income of any person from any subject to a
undertaking referred to in section maximum of 12
56B- per centum for an
individual, and 12
per centum for a
company.
44. The rate of income tax applicable As per the First
to such part of the profits and Schedule, but
income of any person from any subject to a
undertaking referred to in section maximum of 12
56C – per centum for an
individual, and 12
per centum for a
company.
45. The rate of income tax applicable As per the First
to such part of the profits and Schedule, but
income of any person or subject to a
partenership from any undertaking maximum of 12
referred to in section 59E- per centum for an
individual, and 12
per centum for a
company.”.
Inland Revenue (Amendment) Act, No. 18 of 2013 33
41. The amount of tax charged or collected from any Validation.
person by or on behalf of the Commissioner – General, by
virtue of the application of any provision of this Act, during
the period commencing on April 1, 2013 and ending on the
date on which the certificate of the Speaker is endorsed in
respect of this Act, shall be deemed to have been validly and
lawfully charged or collected under this Act by the
Commissioner – General or by such person who charged or
collected such tax on behalf of the Commissioner – General:
Provided that the aforesaid provisions shall not affect
any decision or order made by any Court or any proceedings
pending in any Court in respect of any tax charged or
collected during such period.
42. In the event of any inconsistency between the Sinhala text to
Sinhala and Tamil texts of this Act, the Sinhala text shall prevail in case
of an
prevail.
inconsistency.

34 Inland Revenue (Amendment) Act, No. 18 of 2013
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(Foreign), Payable to the SUPERINTENDENT, GOVERNMENT PUBLICATIONS BUREAU, DEPARTMENT OF
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