1. Income Tax (Amendments to the Inland Revenue Act, No. 24 of 2017
1.1 Tax Payable by Withholding
(a) A special tax return requirement will be introduced for the deduction of 2.5% withholding tax levied on the sale price of any gem sold at an auction conducted by the National Gems and Jewellery Authority. Exemption under Inland Revenue Act will be allowed subject to such return information.
(b) The withholding tax certificate issued by the withholding agent pursuant to section 87 shall be issued without charge or payment from the withholdee.
1.2 Income tax on Unit Trusts and Unit Holders
The current tax treatment of Unit Trusts shall continue to apply subject to the mandatory requirements of furnishing information specified by the Commissioner General such as details of income, exempt amounts and withholding tax details to every unit holder before 30th August following the year of assessment. Any Unit Trust who has not complied prior to that date will be deemed as a Unit Trust that does not conduct an eligible business.
1.3 Prosecution actions against failures to file tax returns
A special penal provision will be introduced to prosecute persons who have not submitted tax returns and information required by the tax officials.
1.4 Clarity of certain provisions will be improved
Section 18, 67, 163 will be amended to improve the clarity of the application of such sections.
1.5 Submission of Documentary Evidence
The documentary evidence called by tax officials during tax audits or administrative reviews but not submitted within a reasonable period of time (6 months from the original date of call for evidence available in Sri Lanka and 9 months for others), will not be allowed to submit during the hearing at Tax Appeals Commission. Relevant provisions in the Tax Appeals Commission Act, No. 23 of 2011, will be amended as well.
1.6 Tax Identification Number
Submission of a copy of the Certificate of the Taxpayer Identification Number (TIN) will be made a mandatory requirement to:-
(a) Open bank current account at any bank;
(b) Obtain approval for a building plan, by the applicant
(c) Register a motor vehicle or renew license, by the owner
(d) Register a land or title to a land, by the buyer
The required guidelines will be issued by the Commissioner General.
1.7 Income Tax Treatment on Salary Arrears
Present tax treatment on salary arrears will be changed to remove the excessive tax liabilities of the employees, with effect from January 1, 2024.
2. Value Added Tax
2.1 Amendment will be introduced enabling the Commissioner General to specify the format of the tax invoice.
2.2 the expression “taxable Period” in section 83 of the VAT Act, will be defined to have same return filing frequency for all taxpayers
2.3 A gazette notification will be issued to implement the increase of VAT rate with effect from January 1, 2024.
2.4 The registered persons will be encouraged to use Point of Sale (POS) machines which automates invoicing and sales recording, to support VAT collection in supplying goods or services
3. Technical Rectifications and clarification of administrative provisions
Necessary amendments will be made to the respective provisions of the, Inland Revenue Act, No.24 of 2017, Value Added Tax Act No.14 of 2002, Finance Acts and Finance (Amendment) Acts, Social Security Contribution Levy Act, No.25 of 2022, Telecommunication Levy Act No 21 of 2011, Tax Appeals Commission Act No 23 of 2011, in order to streamline the revenue administration and to rectify certain ambiguities and unintended effects (including differences in translations) and for the avoidance of doubts.
