Inland Revenue (Amendment)

Link to law: http://www.lawnet.lk/process.php?st=1995Y0V0C27A&hword=%27%27&path=2
Published: 1995

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Inland Revenue (Amendment)
Inland Revenue (Amendment)




AN ACT TO AMEND THE INLAND REVENUE ACT, NO. 28 OF 1979








BE it enacted by the Parliament of the Democratic Socialist Republic of Sri Lanka as follows:-



[22nd November

, 1995 ]













Short title



1. This Act may be cited as the inland Revenue (Amendment) Act, No. 27 of 1995.



Amendment of section 9 of act, No. 28 of 1979



2. Section 9 of Inland Revenue Act, No. 28 of 1979 (hereinafter referred to as the "principal enactment") is hereby amended in paragraph (bb) of subsection (1) of that section as follows-: -





(1) by the substitution, for the words and figures "the official emoluments, of any person,, or any profits " from employment referred to in paragraph of section 4 (1), paid to", of the words and figures " the official emoluments or any profits from employment referred to in paragraph (C)subsection (I) of section 4, paid to-";



(2) by the repeal of Sub-paragraph (i) of that paragraph and the substitution, therefor of the following sub-paragraph :-





" (i) any individual who holds any paid under the Republic, out of the Consolidated fund ."



(3) by the addition immediately after sub- paragraph (ix) of that paragraph of the following sub-paragraph :-





" (x) a member or employee of any board or commission of inquiry established by or under any law being a board or commission all the members of which are appointed by the President or by a Minister.".



Amendment of section 11 of the principal enactment.



3. Section 11 of the principal enactment is hereby amended as follows :--





(1) by the insertion immediately after paragraph (a)of that section, of the following paragraph: -





"(aa) any dividend paid by a flagship e (with which an agreement has been entered info by the board of Investment of Sri Lanka to any shareholder during the period for which the profits and income of that company are exempt from income tax under the terms of that agreement or within one year thereafter out of the profits and income of such company which are except from income tax.



In this paragraph, " flagship company " means any 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 1973 and which has, in accordance with such agreement, invested in Sri Lanka, within the period specified in such agreement, not less than fifty million United State of America Dollars or its equivalent in any other foreign currency-





(a) in the purchase or construction of any building or in the purchase of any land, plants machinery or furniture ; and



(b) in the acquisition of any asset not included in paragraph (a),



for the use of the undertaking carried on by the company;' ;



(2) in paragraph (b) of that section by the substitution. for the figures "17D, 18", of the figures " 17 D, 17J, 18 ".



Insertion of new section 17J in the principal enactment.



4. The following new section is hereby inserted immediately after section 17H, and shall have section 17J of the principal enactment:-







Exemption from income tax of the profit and income of an industrial undertaking carried on by a company utilizing advanced technology.



17J.





(1) The profit and income with in the meaning of paragraph (a) of section 3 (other than any profits and income from the sale of capital assets referred to in subsection (2) shall be exempt from income tax for a period of five years from the commencement of the year of assessment in which such company commenced to carry on business



(2) The provisions of subsection (1) shall apply to any company which-





(a) is incorporated on or after April 1, 1995;



(b) is approved by the Minister to be company to which this section applies by Order published in the Gazette on or before March 31, 1997, on am application in writing in that behalf made on or before September 38, 1996;



(c) is engaged only in carrying on any industrial undertaking -





(i) for the production or manufacture of any goods or commodities ; or



(ii) for the provision of any service, utilizing advanced technology;



(d) has before the expiry of a period of two years from the date of it's incorporation, invested not less than ten million rupees, in the purchase, for the use of the undertaking carried on by the company, of any plant, machinery, fixtures or equipment;



(e) employs as at a date not later than a period of six months from the date on which it commences to carry on business and continues to employ until the expiry of the period of five years referred to in subsection (1) not less " fifty employees other the directors of such company ; and



(f) is not formed by the splitting up reconstruction or acquisition of any business which was previously in



For the purposes of paragraph (e) of ,this subsection the word " employee" has the same meaning assigned to it in subsection (2) of section 16D. '.



Amendment of section 22E of the principal enactment .



5. section 22 E of the principal enactment is hereby amended as follows: -





(1) in paragraph (a) of that section, by the substitution for the words and figures " section 17D or section 20 or section 22c"', of the words and figures " section 17D or section 17J or section 20 or section 17J, 20".



(2) in the marginal note to that section by the substitution for the figures " 17D, 20 '", of the figures " 17D, 17J, 20 "



Amendment of section 29 of the principal enactment



6. Section 29 of the principal enactment is hereby amended in paragraph (a) of subsection (3) of that section by the substitution for the words and figures "section 17E or section 17H or section 22A, " of the words and figures " section 17G, or section 17H, or section 17J, or section 22A.



Amendment of the section 30 of the principal enactment.



7. Section 30 of the principal enactment is hereby amended as follows:-





(1) in subsection (1) of that section-





(a) by the substitution, in paragraph (aaaaa) of that section for the words and figures any year of assessment commencing on or after April 1 1992 and of the words and figures any year of assessment commencing on or after April 1 1992 but prior to April 1, 1995:"



(b) by the insertion, immediately after paragraph (aaaaa) of that subsection, of the following paragraph: -





" (aaaaaa) an allowance of sixty thousand rupees in respect of any year of assessment commencing on or after April 1, 1995, and": and



(c) by the substitution, in the proviso to that subsection for the words "or paragraph (aaaa) or paragraph (aaaaa) in ascertaining", of the words or paragraph (aaaa) or paragraph (aaaaa) or paragraph (aaaaaa) in ascertaining".



(2) in subsection (2) of that section-





(a) In the first proviso to the subsection-





(i) by the substitution in paragraph (f) of he words and figures "any year of assessment commencing on or after April 1, 1992: ", of the words and figures "any year of assessment commencing on or after April 1992 but prior to April 1, 1995;";



(ii) by the insertion, immediately after paragraph (f) of that proviso, of the following paragraph :-





" (g) an allowance of sixty thousand rupees in respect of any year of assessment commencing on or after April 1, 1995 : " ;



(b) in the second proviso to that subsection-





(i) by the substitution, in sub-paragraph (1) of that proviso, for the words and figures " an year of assessment commencing on or after April 1, 1987, but prior to April 1, 1992 ; and ", of the words and figures ''an year of assessment commencing on or after April 1, 1987, but prior to April 1, 1992 ;



(ii) by the substitution in sub-paragraph (ii) of that proviso, for the words and figures " an year of assessment commencing on or after April 1, 1992 , of the words and year of assessment commencing on or after April 1, 1992, but prior to April 1, 1995 and ". and



(iii) by the addition immediately after sub-paragraph(ii) of that proviso of the following sub-paragraph:-





"(iii) sixty thousand rupees, where such year of assessment is an year of assessment commencing on or after April 1, 1995:".



Amendment of 32 of the principal enactment.



8. Section 32 of the principal enactment is hereby amended as follows:-





(1) in the proviso to subsection (1) of that section-





(a) by the substitution, in subparagraph (iv) of that proviso, for the words and figures ' for any year of assessment commencing on or after April 1, 1986, but prior to April 1, 1992; and ", of the words and figures " for any year of assessment commencing on or after April 1, 1986' but prior to April 1, 1992;"



(b) by the substitution, in sub-paragraph (v) of that proviso for the words and figures " for any year of assessment commencing on or after April 1, 1992,", of the words and figures " for any year of assessment commencing on or after April 1, 1992, but prior to April 1, 1995 ; and " ; and



(c) by the addition, immediately after sub-paragraph (v) of that proviso, of the following sub-paragraph;-





(vi) sixty thousand rupees, for any year of assessment commencing on or after April 1, 1995";



(2) in subsection (2) of that section-





(a) by the substitution, in paragraph (vi) of that subsection, for the words and figures " any year of assessment commencing on or after April 1,1988 ; ", of the words and figures " any year of assessment commencing on or after April 1, 1988, but prior to April 1, 1992 ; or ";



(b) by the addition, immediately after paragraph (vi) of that subsection, of the following paragraph:-





" (vii) Part 11E of the First Schedule to the Act in respect of any year of assessment commencing on or after April 1, 1992, but prior to April 1, 1994; or



(viii) Part 11F of the First Schedule to this Act in respect of any year of assessment commencing on or after April 1,1994: ".



Amendment of section 32CC of the principal enactment.



9. Section 32CC of the principal enactment is hereby amended by the substitution for the words " be chargeable with income tax at the rate of fifteen per centum. of the following:-



" be chargeable with income tax at the rate of fifteen per centum :



Provided that where such person to Sri Lanka is a flagship company within the meaning of paragraph (aa) of section 11 such royalty shall be chargeable with income tax at the rate of ten per centum.",



Amendment of section 32EE of the principal enactment.



10. Section 32EE of the principal enactment is hereby amended in paragraph (a) of that section as follows :-





(1) by the substitution, in sub-paragraph (ii) of that paragraph, for the words and figures " any year of assessment commencing on or after April J, 1992 but prior to April 1, 19,94, and ", of the words and figures " any year of assessment commencing OH or after April 1, 1992 but prior to April 1, 1933,"; and



(2) by the repeal of sub-paragraph (iii) of that paragraph



Insertion at new section 32EEE in the principal enactment.



11. The following new section is hereby inserted, immediately after section 32EE of the principal enactment, and shall have effect as section 32EEE of the principal enactment :-







'Tax credit against tax on profits from employment for any year of assessment commencing on or after April 1. 1993.



32EEE.





(1) There shall be deducted from the income tax payable for any year of assessment commencing on or after April 1, 1993, by any individual not being an individual to whom the provisions of l subsection (7) of section 67 apply, whose assessable income for that year of assessment includes profits from employment, an amount ascertained in accordance with the succeeding provisions of this section-





(a) where such year of assessment is the year of assessment commencing on April 1, 1993, and where for that year of assessment the amount of the relevant profits form employment of such individual-





(i) does not exceed one hundred and forty-four thousand rupees, an amount equal to-



twenty-five thousand six hundred and fifty rupees, or



the amount of income tax which is attributable to the relevant profits from employment of tuck individual for that year of assessment.



whichever is less;



(ii) exceeds one hundred and forty- four thousand rupees as amount equal to-



one thousand eight hundred rupees, or



the amount of income tax which is attributable to the relevant profits from employment of such individual for that year of assessment,



whichever is less;



(b) where such year of assessment is the year of assessment commencing ok April 1, 1994, and where for that year of assessment the amount of the relevant profits from employment of such employee-





(i) does not exceed one hundred and forty four thousand rupees, an amount equal to-



twenty-one thousand nine hundred and fifty rupees, or



the amount of income tax which is attributable to-the relevant profits from employment of such individual for that year of assessment,



whichever is less ;



(ii) exceeds one hundred and forty-four thousand rupees but does not exceed one hundred and eighty thousand rupees as amount equal to-



seventeen thousand nine hundred and eighteen rupees reduced by thirty-two and four-fifth per-centum of the excess of the relevant profits from employment of such individual for that year of assessment over one hundred and forty-four thousand rupees; or



the amount of income tax which is attributable to the relevant profit from employment of that individual for that year of assessment,



whichever is less ;



(iii) exceeds one hundred and eighty thousand rupees, an amount equal to-



six thousand rupees ; or



the amount of income tax which is attributable to the relevant profit* from employment of that individual for that year of assessment,



whichever is less ;



(c) where such year of assessment is any year of assessment commencing on or after April 1, 1995, and where for that year of assessment the amount of the relevant profits from employment of such individual





(i) does not exceed one hundred and forty-four thousand rupees, an amount equal to-



fifteen thousand seven hundred rupees, or



the amount of income tax which is attributable to the relevant profits from employment of that individual for that year of assessment,



whichever is less ;



(ii) exceeds one hundred and forty-four thousand rupees but does not exceed one hundred and seventy thousand four hundred rupees, an amount equal to-



twelve thousand two hundred and forty-four rupees reduced by thirty-five per centum of the excess of the relevant profits from employment of such individual for that year of assessment over one hundred and forty-four thousand rupees, or



the amount of income tax which is attributable to the relevant profits from employment of that individual for that year assessment,



whichever is less ;



(iii) exceeds one hundred and seventy-thousand four hundred rupees, an amount equal to-



three thousand rupees, or the amount of income tax which is attributable to the relevant profits from employment of that individual for that year of assessment,



whichever is less,



(2) For the purposes of this section-





(a) " the relevant profits from employment " in relation to any individual And to any year of assessment means the profits from employment of such individual for such year of assessment after deducting there from the aggregate of-





(i) such part, if any, of sack profits as is chargeable with income tax at the rates specified m Part IV of the First Schedule to this Act; and



(ii) such part, if any, of such profits as is chargeable with income tax in accordance with the provisions of subsection (3) of section 32 as provided for tinker the proviso to subsection (2) of section 32;



(b) "the amount of income tax which it attributable to the Relevant profit from employment" in relation to any individual and to any year of assessment means the sum which bears to the relevant income tax payable by that individual for that year assessment, the same proportion as the proportion which the relevant profits from employment of that individual for that year of assessment bears to the relevant assessable income of that individual for that year of assessment;



(c) " relevant income tax ' in relation to any individual and to any year of assessment, means the income tax year of assessment before granting any relief, whether under this section or any other section, of this Act and after deducting therefrom the 'income tax, in respect of the profits from employment referred to in sub-paragraphs ( i) and (ii) of paragraph (a) of this section ;



(d) relevant assessable income " in relation to any individual and to any year of assessment, means-









the assessable income of that individual for that year of assessment after deducting there-from the aggregate amount of profits referred to in sub-paragraphs (i) and (ii) of paragraph (a) of this subsection, or



an amount equal to the relevant profits from employment of such individual for that year of assessment,



whichever is more-'.



Amendment of section 32M of the principal enactment.



12. Section 32M of the principal enactment is hereby amended as follows:-





(1) in paragraph (b) of subsection (1) of that section, by the substitution for the words "the production or manufacture by such specified undertaking", of the words "the production, manufacture or packaging by such specified undertaking ";



(2) by the repeal of paragraph (a) of subsection (4) of that section, and the substitution therefor, of the following paragraph :-





" (a) is made during the period for which-





(i) the taxable income of the person who, or of any partner of a partnership which, carried on the specified undertaking referred to in subsection (1) is chargeable with income tax in accordance with the provisions of this Chapter ; or



(ii) the export profits and income of the specified undertaking referred to in subsection (1) are exempt from income tax, under paragraph (b) of subsection (1) of section 20 or in terms of an agreement entered into by such specified undertaking with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 197C, and, ".



Amendment of section 33A of the principal enactment.



13. Section 33A of the principal enactment is hereby amended in paragraph (i) of subsection (2) of that section the substitution for the words and figures "section 33(1) and" of the words and figures " section 33(1) (a), and"



Amendment of section 67 of the principal enactment.



14. Section 67 Of the principal enactment is hereby amended in subsection (7) of that section by the substitution for the words " date on which he commences employment in Sri Lanka, of the following : -



"date on which he commences employment in Sri Lanka:



Provided that where such individual is an individual employed in a flagship company within the meaning of paragraph (aa) of section 11, such individual shall be deemed to be non-resident for a period of five years calculated from the date on which he commences employment in Sri Lanka.".



Amendment of section 73 of the principal enactment.



15. Section 73 of the principal enactment is hereby amended in subsection (1A) of that section as follows:-





(1) in paragraph (v) of that subsection, by the substitution for the words and figures "commencing on after April 1, 1992,", of the words and figures " commencing on or after April 1, 1992, but prior to April 1, 1995 ; and " ; and



(2) by the addition, immediately after paragraph (v) of that subsection, of the following paragraph :-





" (vi) sixty thousand rupees, for any year of commencing assessment commencing on after April 1, 1995,".



Amendment of section 99 of the principal enactment.



16. Section 99 of the principal enactment is hereby amended by the repeal of subsection (1) of that section, and " the substitution therefor, of the following subsection:-





(1) Every employer work employs-





(a) an individual who receives remuneration in excess of five thousand rupees per centum or sixty thousand rupees per annum ; or



(b) any non-resident individual receiving remuneration for services rendered in Sri Lanka in excess of eighty five rupees per men sum or one thousand rupees per annum ; and



who has not given notice to the Commissioner-General under subsection (1) of section 107c of the Inland Revenue Act, No. 4 of 1963 or under this Chapter of this Act, shall give notice to the Commissioner-General not later than December 31, 1995, that he has in his employ such individual (hereinafter in this Chapter referred to at a " specified employee ").'.



Insertion of new section 112A of the principal enactment.



17. The following new section is hereby inserted immediately after section 112 of the principal enactment and shall have effect as section 112A of that enactment : -







"Special provisions for refund by the employer, of taxes deducted from the remuneration of certain employees for the year of assessment commencing on April 1, 1993.



112A.





(1) Where the aggregate amount of such part of remuneration being the relevant profits from employment (within the meaning of subsection (2) of section 32EEE) of any specified employee for the year of assessment commencing on April 1,1993 does not exceed one hundred and forty-four thousands rupees it shall be lawful the employer of such employee to refund to such employee the income tax deducted by such employer in accordance with the provision of this chapter for that year assessment from such part of such remuneration of such employee and remitted to the Commissioner-General.



(2) Where an employer has refunded income tax to any employee under the provisions of subsection (1), such employer shall be entitled to-





(a) set off the amount so refunded or any part thereof, against any subsequent remittance required to be made by him in respect of any pay period ; and



(b) a refund of the excess, if any, of the amount so refunded over the total of the sums set off under the provisions of paragraph (a). if a claim is made in writing in that behalf to the Commissioner-General, not late* than March 31. 1997.



(3)The Commissioner-General may, for She purpose of permitting the set off or granting the refund under subsection (2), require such employer to produce proof of the refund of the income tax referred to in subsection (1).



(4) Where an employer has set off, under the provisions of paragraph (a) of subsection (2). any income tax referred to in subsection (1) against any subsequent remittance required to be made by him, the provisions of subsection (1) of section 107 and subsection (1) of section 108 shall not be applicable to such employer in respect of the tax so set-off,



(5) Where a specified employee has received a refund under subsection (1), such employee shall not be entitled-





(a) to a set-off under section 111, of the amount of income tax deducted under this Chapter and refunded to him under subsection (1) ; or



(b) to a refund under section 149, of such amount,".



Amendment of section 113M of the principal enactment.



18. Section 113M of the principal enactment is hereby amended as follows :-





(1) In subsection (1) of that section by the substitution for the words " any income tax otherwise payable by such employer." of the following:-



"any income tax otherwise payable by such employer:



Provided, however, that for any year of assessment commencing on or after April 1, 1994, if the aggregate of the official emoluments of such employee for that year of assessment does not exceed one hundred and forty- four thousand rupees no income tax in respect of such emoluments of such employee shall be payable by such employer for that year of assessment. " : and



(2) in subsection (2) of that section, by the substitution for the words and figures "section 99, section 102 " of the words and figures "section 99, section 100, section 102 ".



Amendment of section 113R of the principal enactment.



19. section 113R of the principal enactment is hereby amended as follows:-





(1) in paragraph (b) of that section-





(a) by the substitution, for the words and figures" for any year of assessment commencing on or after April 1, 1994 , the excess of -", of the words and figures " for the year of assessment commencing on April 1, 1994, the excess of-"; and



(b) in sub-paragraph (ii) of that paragraph, by the substitution for the words " six thousand rupees.", of the words " six thousand rupees;" ;



(2) by the addition, immediately after paragraph (b) of that section, of the following paragraph : -





"(c) for any year of assessment commencing on or after April 1, 1995, the excess of-





(i) the income tax computed at the rates specified in Part UP of the First Schedule to this Act on such emoluments of such employee alter deducting there from a sum of sixty thousand rupees, over



(ii) three thousand rupees.",



Amendment of section 163 of the principal enactment.



20. Section 163 of the principal enactment is hereby amended in paragraph (B) of the definition of "qualifying distribution" as follows: -





(1) by the substitution, for sub-paragraph (i) of that paragraph, of the following paragraph ; -





" (i) if taxable for that year of assessment, would be taxed at the appropriate rate specified in-





(a) the Second Schedule to this Act, as the rate applicable to companies of that



(b) any regulation made by the Board of Investment of Sri Lanka under the Board of Investment of Sri Lanka Law, No. 4 of 1978, and published in the Gazette as being applicable to any company which has entered into an agreement with such Board under section 17 of such Law, or ";



(2) in sub-paragraph (ii) of that paragraph, by the substitution for the words and figures " section 32H or of section 32K. ", of the words and figures " section 32H, or of section 32K or of section 32M, ".



(3) in sub-paragraph (a) of that paragraph-





(i) in item (iii) of that sub-paragraph by the substitution for the words " dividend received by such company ; or", of the words " dividend received by such company ; " ;



(ii) by the insertion, immediately after item (iii) of that sub-paragraph, of the following item :-





" (iv) profits and income on which tax payable under paragraph (a) of subsection (1) of section 33 does not exceed the amount of any tax credit referred to in section 82 for any tax paid outside Sri Lanka on such profits and income or"..



Replacement of seventh schedule to the principal enactment.



21. The Seventh Schedule to the principal enactments hereby repealed and the following Schedule substituted therefor :-



Retrospective effect.



22. (1) The amendments to section 32EE, section 32M, section 33A and the replacement of the seventh Schedule to the principal enactment made by sections 10, 12, 13 and 21 respectively of this Act shall be deemed for all purposes to have come into force on October 31, 1994.



Validation of refund or set off.



23. Where an employer has, during the period commencing on May 18, 1994, and ending on the date of commencement of this Act, refunded under subsection (1) of section 112A or set off under subsection(2) of section 112A any income tax, such employer shall be deemed-





(a) to have validly refunded or set off as the case may be such tax so refunded or set off; and



(b) not to be a defaulter in respect of such tax so setoff, notwithstanding the provisions of subsection (1) of section 107.



Sinhala text to prevail in case of inconsistency.



24. In the event of any inconsistency between the Sinhala and Tamil texts of this Act, the Sinhala text shall text prevail.
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