PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI …

PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA

INLAND REVENUE ACT, No. 24 OF 2017

[Certified on 24th of October, 2017] 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 October 27, 2017

PRINTED AT THE DEPARTMENT OF GOVERNMENT PRINTING, SRI LANKA TO BE PURCHASED AT THE GOVERNMENT PUBLICATIONS BUREAU, COLOMBO 5

Price : Rs. 250.00

Postage : Rs. 85.00

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This Act can be downloaded from .lk

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ARRANGEMENT OF SECTIONS

Section

Title

1. Short title and the effective date of the Act.

PART I

CHAPTER I IMPOSITION OF INCOME TAX

2. Charging provision.

CHAPTER II INCOME TAX BASE

Division I: Taxable Income 3. Taxable income.

Division II: Assessable Income

4. Assessable income. 5. Employment income. 6. Business income. 7. Investment income. 8. Other income.

Division III: Exempt Amounts

9. Exempt amounts.

Division IV: Deductions

10. General Deduction. 11. Main deduction. 12. Interest expense. 13. Allowance for trading stock. 14. Repairs and improvements. 15. Research and development expenses and agricultural

start up expenses. 16. Capital allowances and balancing allowances. 17. Losses on realisation of business assets and liabilities.

(i)

Page 1

1

2

2 3 5 6 7

7

8 9 9 10 11 11 12 13

Section

Title

18. Deductible amount of financial cost. 19. Business or investment losses.

CHAPTER III CALCULATION OF THE INCOME TAX

Division I: Method of Accounting

20. Change in the year of assessment. 21. Method of accounting. 22. Cash basis accounting. 23. Accrual basis accounting. 24. Reverse of amounts including bad debts.

Division II: Long Term Contracts

25. Long-term contracts. 26. Foreign currency and financial instruments. 27. Quantifying a payment or amount. 28. Indirect payments. 29. Jointly owned investments. 30. Compensation and recovery payments. 31. Annuities, instalment sales and finance leases. 32. Islamic financial transactions. 33. Arm's length standard and arrangements between

associates. 34. Income splitting. 35. Tax avoidance schemes.

CHAPTER IV ASSETS AND LIABILITIES

Division I: Calculation of Gains and Losses

36. Calculating gains and losses. 37. Cost of an asset. 38. Consideration received. 39. Realisation. 40. Liabilities. 41. Reversal, quantification and compensation of amounts.

(ii)

Page

14 15

16 17 18 18 20

21 22 24 24 25 25 25 27

27 28 29

31 31 32 33 34 35

Section

Title

Division II: Realization of assets

42. Cost of trading stock and other fungible assets. 43. Realisation with retention of asset. 44. Transfer of asset to spouse or former spouse. 45. Transfer of asset on death. 46. Transfer of asset to an associate or for no consideration. 47. Involuntary realisation of asset with replacement. 48. Realisation by separation. 49. Transfer by way of security, finance lease or instalment

sale. 50. Payment of Tax on gains from realisation of an Asset. 51. Apportionment of costs and consideration received.

CHAPTER V TYPES OF PERSONS

Division I: Individuals and Entities 52. Qualifying payments and reliefs.

Division II: Partnerships

53. Partnerships. 54. Partnership income or loss. 55. Taxation of partners. 56. Cost of and consideration received for partnership

interest.

Division III: Trusts and Unit Trusts

57. Taxation of trusts. 58. Taxation of beneficiaries. 59. Taxation of unit trusts.

Division IV: Companies

60. Taxation of companies. 61. Taxation of shareholders. 62. Remittance tax.

(iii)

Page

36 37 37 38 38 40 41 41 42 42

43

43 45 45 46

47 49 49

50 51 51

Section

Title

Page

Division V: Entities

63. Asset dealings between entities and members.

52

64. Change in control.

52

CHAPTER VI SPECIAL INDUSTRIES

Division I: Petroleum Operations

65. Petroleum operations.

53

Division II: Financial Institutions and Insurance Entities

66. Banking business.

54

67. Insurance business.

55

Division III: Non-Governmental Organizations and Charitable Institutions

68. Non-Governmental organizations and charitable

institutions.

56

CHAPTER VII INTERNATIONAL

Division I: Residence and Sources

69. Resident persons.

57

70. Change of residence.

59

71. Source of income and quarantining of foreign losses.

59

72. Source directly to be included and amounts to be

deducted.

61

73. Source of payments.

61

74. Foreign Source.

65

Division II: Double Taxation Agreements and Mutual Administrative Assistance Agreements

75. Double taxation agreements and mutual administrative

assistance agreements.

65

(iv)

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