Inland Revenue (Amendment) Bill
The Sri Lankan Parliament passed the Value Added Tax and Inland Revenue bills with amendments, on the 9th of December, 2022. Passed with a majority vote, these amendments are yet to be certified by the speaker of the Parliament, Mahinda Yapa Abeywardena. However, it is highly expected that these amendments will be adopted as tax increases are a crucial element of the long-anticipated IMF support package.
Changes to the personal income tax, corporate income tax, Value Added Tax (VAT), Advanced Income Tax (AIT), and other specific tax rates, were included in the amendments that were passed. With regard to personal income tax, amendments to personal relief thresholds, income tax rates for different periods of the year commencing 01/01/23, as well as, terminal benefits related to retirement, were included. Amendments to corporate income tax included changes to the standard income tax rates. Concessionary tax rates affecting SMEs and sectors such as manufacturing, export, tourism, healthcare, education, construction, and renewable energy, were removed. Tax reductions were also included for multinational companies (MNCs) who record increased exports in the Ys/A 2021/22, 2022/23, and 2023/24. The amendments also included the removal of the 25% reduction on the tax payable which corresponds to the proportion of the farming produce produced by any person to the total farming produce utilized in agro-processing or manufacturing by that person. This tax reduction will end in Y/A 2022/23.
A new VAT threshold of LKR 20 mn per quarter (LKR 80mn per annum) was also passed to be made applicable from the 1st of October, 2022. Changes to taxes related to trusts, unit trusts, charitable institutions, and NGOs as well as changes to the Capital Gains Tax payable by companies were included in the amendments. Additionally, the bill also included the Advanced Income Tax (AIT) and Withholding Tax (WHT). The Advanced Income Tax was applicable to rent payments made to a resident person where the aggregate payment ≥ LKR 100k per month, interest or discount paid, dividends paid by a resident company, and other specified payments under section 84A (Natural resource payment, royalty, or premium). WHT was applicable to service fee payments to a non-resident person, service fee payments exceeding LKR 100k per month to a resident individual who is not an employee of the payer, and insurance premium payments to a non-resident person. A few previously existing tax exemptions were also removed through the bill.
A few key highlights of the Inland Revenue (Amendment) Bill have been included in the linked report. Please go through it for a more detailed overlook of the tax amendments and send any questions or concerns our way.
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