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PARLIAMENT OF THE DEMOCRATICSOCIALIST REPUBLIC OF

SRI LANKA

INLAND REVENUE (AMENDMENT)ACT, No. 18 OF 2013

Printed on the Order of Government

[Certified on 24th April, 2013]

PRINTED AT THE DEPARTMENT OF GOVERNMENT PRINTING, SRI LANKA

TO BE PURCHASED AT THE GOVERNMENT PUBLICATIONS BUREAU, COLOMBO 5

Price : Rs. 20.00 Postage : Rs. 20.00

Published as a Supplement to Part II of the Gazette of the DemocraticSocialist Republic of Sri Lanka of April 26, 2013

1Inland Revenue (Amendment) Act, No. 18 of 2013

Short title andthe date ofoperation.

Amendment ofsection 7 of theprincipalenactment.

[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 SocialistRepublic of Sri Lanka as follows :-

1. (1) This Act may be cited as the Inland Revenue(Amendment) Act, No. 18 of 2013.

(2) The provisions of this Act, shall come into operationon April 1, 2013:

Provided however that–

(a) the amendments made to section 16C of the InlandRevenue Act, No.10 of 2006 (hereinafter referredto as the “principal enactment”) by section 7(2) ofthis Act;

(b) the amendments made to section 16D of theprincipal enactment by section 8 of this Act; and

(c) the amendments made to section 17A of theprincipal enactment by section 10(4) of this Act,

shall be deemed for all purposes to have come intooperation on April 1, 2012.

2. Section 7 of the principal enactment as lastamended by Act, No. 8 of 2012 is hereby further amended asfollows :-

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

(a) by the substitution in sub-paragraph (lxii),for the words and figures “CertifiedManagement 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 SriLanka Act, No. 23 of 2009;”;

(b) by the substitution in sub-paragraph (lxiii),for the words and figures “the National ChildProtection Authority Act, No. 50 of 1998.”,of the words and figures “the National ChildProtection 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 ofSri Lanka established by the Collegeof General Practitioners of Sri LankaAct, No. 26 of 1974;

(lxv) Sri Lanka Social Security Boardestablished by the Sri Lanka SocialSecurity Board Act, No. 17 of 1996;

(lxvi) any Public Corporation to the extentof provision of services on behalf ofthe Government of Sri Lanka, free ofcharge out of the funds voted byParliament from the ConsolidatedFund or out of any loan arrangedthrough the Government;

(lxvii) Sri Lanka Savings Bank Limitedincorporated under the CompaniesAct, No. 7 of 2007, which is mergedwith the National DevelopmentTrust Fund (NDTF);

(lxviii) Lanka Puthra Development BankLimited incorporated under theCompanies Act, No. 17 of 1982; and

(lxix) any Government assisted privateschool other than that incorporatedunder the Companies Act, No.7 of



2007 which is registered with theMinistry of Education and mandatedto follow the Government curriculaset by the Ministry of Education andthe circulars issued by suchMinistry.”.

(2) by the substitution in paragraph (k) of that section,for the words “dividend to the Government.”, ofthe words “dividend to the Government;”; and

(3) by the addition immediately after paragraph (k) ofthat section, of the following new paragraph:—

“(l) the profits and income for any year ofassessment commencing on or after April 1,2013, of Sri Lanka Deposit Insurance Schemeestablished by regulation made under theMonetary Law Act (Chapter 422).”.

3. Section 8 of the principal enactment as last amendedby Act, No. 22 of 2011 is hereby further amended insubsection (1) as follows :-

(1) by the insertion immediately after paragraph(dd) of that subsection, of the following newparagraph :-

“(ddd) the emoluments arising in Sri Lanka of anyindividual who is an expert and who is not acitizen and is brought to and employed inSri Lanka by any undertaking for thepurposes of that undertaking, being anundertaking with which an agreement hasbeen entered into by the Board of Investmentof Sri Lanka and invested more than US $ 50Million as direct foreign investment madeon or after April 1, 2013, during the period ofits tax holiday under section 17A or section16D as the case may be, and if it is confirmedby the Board of Investment of Sri Lanka thatthe service rendered by him in carrying out



activities of such undertaking in Sri Lanka isessential and such service is not obtainablefrom Sri Lanka:

Provided that the number of experts in anundertaking to whom this provision isapplicable shall not exceed five.

For the purpose of this paragraph “expert”means an individual who has expertisein such field as may be determined bythe Commissioner - General on therecommendation made by the Board ofInvestment of Sri Lanka, as being a field inwhich sufficient expertise is not availableamong the citizens of Sri Lanka;” ;

(2) by the substitution in paragraph (t) of thatsubsection for the words “exceeds five hundredthousand rupees, then-” of the words and figures“exceeds five hundred thousand rupees, for any yearof assessment commencing prior to April 1, 2013,then-”; and

(3) by the substitution in paragraph (w) of thatsubsection for the words “one hundred thousandrupees,”, of the words and figures “one hundredthousand rupees, for any year of assessmentcommencing prior to April 1, 2013,”.

4. Section 9 of the principal enactment as last amendedby Act, No. 8 of 2012 is hereby further amended as follows:-

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

“(aa) the interest accruing to any person orpartnership or other body of persons outsideSri Lanka from investment made out offoreign currency brought in to Sri Lanka onor after April 1, 2012, in any security or bondissued by any person in Sri Lanka;”; and


(2) by the addition immediately after paragraph (n) ofthat section, of the following new paragraph:-

“(o) the interest or discount accruing or arising toany person from any investment made on orafter January 1, 2013-

(i) in any Corporate Debt Security, quotedin any Stock Exchange licensed by theSecurities and Exchange Commission;and

(ii) in any Municipal Bond issued by anyMunicipal Council with the approvalof the Secretary of the Ministry ofFinance.”.

5. Section 13 of the principal enactment as last amendedby Act, No. 8 of 2012 is hereby further amended asfollows :-

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

“(bbb) the profits and income earned in foreigncurrency by any person for any year ofassessment commencing on or after April1, 2012, in respect of any business ofprocuring goods from one country ormanufacturing goods in one country andexporting to another country, other thanSri Lanka;” ;

(2) by the insertion immediately after paragraph (dddd)of that section, of the following new paragraph :-

“(ddddd) any profits and income earned in foreigncurrency from outside Sri Lanka, by anyresident individual who is a citizen ofSri Lanka, if such profits and income (less



such amount, if any, expended outside SriLanka as is considered by theCommissioner-General to be reasonableexpenses) are remitted to Sri Lankathrough a bank;”;

(3) by the insertion immediately after paragraph(xxxxxx) of that section, of the following newparagraphs:-

“(xxxxxxx) any profits and income from anyinvestment made on or after January1, 2013 -

(i) in any Corporate Debt Security,quoted in any Stock Exchangelicensed by the Securities andExchange Commission;

(ii) in any Municipal Bond issued byany Municipal Council with theapproval of the Secretary of theMinistry of Finance;

(xxxxxxxx) the interest earned by the DFCC Bankestablished by the Development FinanceCorporation of Ceylon Act, No. 35 of 1955and National Development Bank PLCincorporated under the Compaines Act,No. 7 of 2007, from moneys lent out offunds raised from outside Sri Lanka toSmall and Medium enterprises,plantaions, construction industry or othermanufacturing industries.”;

(4) by the insertion immediately after paragraph(yyyyyy) of that section, of the following newparagraph :-

“(yyyyyyy) any royalty, franchising fee or anypayment for designing received by anyforeign collaborator from a company


registered with the Board ofInvestment, during the period of taxholiday under section 17A or section16D as the case may be, where theinvestment made in Sri Lanka fromforeign direct investment raisedoutside Sri Lanka exceeds US $ 50Million and if such services areconsidered by the Director Generalof the Board of Investment to beessential in carrying out activities inSri Lanka and is not obtainable inSri 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 citizenof Sri Lanka, employed abroad returnsto the country on or after January 1,2013 and invests his earnings fromemployment abroad to commence anybusiness of manufacture of any article,other than liquor or tobacco products,or provision of any service, the profitsand income of such person from suchbusiness for a period of five yearscommencing from the beginning of theyear of assessment in which thecommercial operations of suchbusiness commenced.”.

6. Section 15 of the principal enactment is herebyamended by the substitution for all the words from “exemptfrom income tax,” to the end of that section, of the followingwords and figures:-

“exempt from income tax-

(i) for any year of assessment commencing priorto April 1, 2013, if such individual is a citizenof both Sri Lanka and any other country;



(ii) for any year of assessment commencing on orafter April 1, 2013, if such individual is acitizen of Sri Lanka and—

(a) citizen of any other country; or

(b) has obtained permanent resident statusor similar status in any other countryunder which such individual mayobtain citizenship in such country,

at the time of such arrival and during thewhole of such stay.”.

7. Section 16C of the principal enactment as lastamended by Act, No. 8 of 2012 is hereby further amended asfollows:-

(1) in Column 1 of the Schedule of subsection (1) ofthat section by the substitution for the words andfigures “Any activity referred to in paragraph (a) ofsubsection (2), but not including services relatingto agriculture (products shall be with a minimum of35% value addition, if more than 50% of theproduction is to be sold in the domestic market)”,of the words and figures “Any activity referred to inparagraph (a) of subsection (2).

In case of manufacture of any article, such articleshall be with a minimum of 35% value addition, ifmore than 50% of the production is to be sold inthe domestic market.”; and

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

(i) by the substitution in paragraph (b) of thatsubsection for the words and figure “Scheduleto subsection (1); and” of the words and figure“Schedule to subsection (1);”;

(ii) by the substitution in paragraph (c) of thatsubsection, for the words and figures “afterApril 1, 2011.” of the words and figures “afterApril 1, 2011; and”;

Amendment ofsection 16c ofthe principalenactment.


(iii) by the insertion immediately after paragraph(c) of that subsection, of the following newparagraph;-

“(d) which is not formed by the splitting upor reconstruction or acquisition of anybusiness which was previously inexistence.”.

8. Section 16D of the principal enactment as lastamended by Act, No. 8 of 2012 is hereby further amendedby the substitution for the words “whichever occurs earlier.”,of the words “whichever occurs earlier where suchundertaking is not formed by the splitting up orreconstruction or acquisition of any business which waspreviously in existence.

For the purposes of this section “the investment” meansthe cost of any land, plant, machinery, equipment and otherfixed assets.”.

9. The following new section is hereby insertedimmediately after section 16D of the principal enactmentand shall have effect as section 16E of that enactment :-

16E. The profits and income within themeaning of paragraph (a) of section 3 (otherthan any profits and income from the disposalof any capital asset) of any person orpartnership-

(i) from any undertaking of cultivatingany renewable energy crop in SriLanka, for a period of ten years;

(ii) from all transactions connected withmanufacturing, distribution andmarketing of organic fertilizers,

commencing on or after April 1, 2013, shallbe exempt from income tax.”.

“Exemption ofprofits andincome fromcultivation ofany renewableenergy cropsandtransactionsconnected withmanufacturing,distributionand marketingof organicfertilizer.

Amendment ofsection 16D ofthe principalenactment.

Insertion of newsection 16E inthe principalenactment.


10. Section 17A of the principal enactment, as lastamended by Act, No. 8 of 2012 is hereby further amended insubsection (2) of that section as follows :-

(1) by the substitution in sub-paragraph (ii) ofparagraph (a) of that subsection, for the words“apparels,”, of the words “apparels and textile,”;

(2) by the substitution in sub-paragraph (xxvii) ofparagraph (a) of that subsection, for the words“national economy; and” , of the words “nationaleconomy;”;

(3) by the substitution in paragraph (b) of thatsubsection, for the words and figures “on or afterApril 1, 2011.”, of the words and figures “on or afterApril 1, 2011; and”; and

(4) by the insertion immediately after paragraph (b) ofthat subsection, of the following new paragraph:-

“(c) which is not formed by the splitting up orreconstruction or acquisition of any businesswhich was previously in existence.

For the purpose of this section “theinvestment” means the cost of any land, plant,machinery, equipment and other fixedassets.”.

11. Section 25 of the principal enactment as lastamended by Act, No. 8 of 2012 is hereby further amended insubsection (1) of that section as follows :-

(1) by the substitution in paragraph (d) of the provisoto paragraph (a) of that subsection for the words“the rate shall be fifty per centum of the cost ofacquisition;”, of the words “the rate shall be fiftyper centum of the cost of acquisition”:

Provided that where such high tech plant,machinery or equipment acquired on or after April

Amendment ofsection 17A ofthe principalenactment.



1, 2013 and used in any trade or business meetsmore than thirty per centum of the total requirementof the power generation of that trade or businessout of alternative energy sources, the rate shall beone hundred per centum on the cost of acquisition;

For the purpose of this proviso “alternativeenergy source” means any source other than theNational Grid, that generates power.”;

(2) by the addition immediately after paragraph (d) ofthe proviso to paragraph (a) of that subsection, ofthe following new paragraphs:-

“(e) where any plant or machinery or equipmentis acquired and used in any business on orafter April 1, 2013 for technology upgradingpurposes or introducing any new technology,the rate shall be fifty per centum of the costof acquisition;

(f) where any plant, machinery or equipment isacquired and used on or after April 1, 2013 inany Stock Broker Company for theupgrading of information technologyinfrastructure to be in compliance with therequirements of the Colombo StockExchange licensed by the Securities andExchange Commission, in relation to theRisk Management System,the rate shall beone hundred per centum of the cost ofacquisition;

(g) where any plant, machinery or equipmentacquired and used on or after April 1, 2013,in any trade or business and where at leastsixty per centum of the turnover of such tradeor business is from export, the rate shall befifty per centum of the cost of acquisition;”;


(3) by the substitution in paragraph (i) of thatsubsection, for all the words from “upgrading ofany 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 onby such person:

Provided that-

(A) where such expenditure is incurred on orafter April 1, 2012 but prior to April 1,2013 and such research is carried outthrough any Government institution;

(B) where such expenditure is incurred on orafter April 1, 2013 and such research iscarried out through any institution inSri Lanka,

the deduction shall be an amount equal to threehundred per centum of such expenditure incurredby such person”; and

(4) by the addition immediately after paragraph (t) ofthat subsection, of the following new paragraph :-

“(u) any sum paid by a Public Corporation orGovernment Owned Business Undertakingas a special levy, to the Government.”.

12. Section 26 of the principal enactment as last amendedby Act, No. 8 of 2012 is hereby further amended in paragraph(v) of subsection (1) of that section, by the substitution forthe words “carried on or exercised by him other than”, ofthe words and figures “carried on or exercised by him otherthan the cost of advertisement incurred on or after August 1,2012, on sponsorship of international sport events approvedby the Minister to whom the subject of Sports has beenassigned; or”.



13. Section 34 of the principal enactment as lastamended by Act, No.8 of 2012 is hereby further amended asfollows:-

(1) in subsection (2) of that section, by the insertionimmediately after paragraph (t) of that subsection,of the following new paragraphs:-

“(u) where the profits from employment of anyindividual who is a citizen of Sri Lanka orresident in Sri Lanka other than profitsreferred to in paragraph (c) of subsection (1)of section 4, exceeds five hundred thousandrupees, for any year of assessmentcommencing on or after April 1, 2013, then-

(i) such part of such profits in excess offive hundred thousand rupees; or

(ii) one hundred thousand rupees,

whichever is lower;

(v) such part of official emoluments as does notexceed one hundred thousand rupees for anyyear of assessment commencing on or afterApril 1, 2013, arising in Sri Lanka to anyindividual who is not a citizen of Sri Lankaand not resident in Sri Lanka.”; and

(2) in subsection (4) of that section, by the substitutionin sub-paragraph (i) of paragraph (a) of thatsubsection for the words and figures “other thanthose referred to in paragraphs (a), (b), (c), (e), (g),(gg), (h), (i), (j), (k), (n), (o), (q),(r), (s) and (t) ofsubsection (2)”, of the words and figures “otherthan 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)”.

Amendment ofsection 34 ofthe principalenactment.


14. Section 40A of the principal enactment as lastamended by Act, No.19 of 2009 is hereby further amendedby the substitution for the words “twenty per centum”wherever such words occur in that section, of the words“sixteen per centum”.

15. Section 40B of the principal enactment as lastamended by Act, No.19 of 2009 is hereby further amendedby the substitution for the words “twenty per centum”wherever such words occur in that section, of the words“sixteen per centum”.

16. The following new section is hereby insertedimmediately after section 46 of the principal enactment andshall have effect as section 46A of that enactment:-

46A. Where the taxable income of anyperson for any year of assessment includes anyprofits and income within the meaning ofparagraph (a) of section 3 (other than any profitsand income from the disposal of any capitalasset) from poultry farming, such part of suchtaxable income as consists of such profits andincome shall, notwithstanding anything to thecontrary in other provisions, be chargeablewith income tax at the appropriate rate specifiedin the Fifth Schedule to this Act.

For the purposes of this section “profits andincome from poultry farming” means suchprofits and income from the sale of produce bysuch person without subjecting such produceto any process of production or manufacture.”.

17. The following new section is hereby insertedimmediately after section 48B of the principal enactmentand shall have effect as section 48C of that enactment:-

48C.Where any undertaking which hasentered into an agreement with the Board ofInvestment of Sri Lanka under section 17 ofthe Board of Investment of Sri Lanka Law,No. 4 of 1978, which provides for taxconcessions, and the taxation under suchagreement after the expiry of the tax exemption

“Rate ofincome taxapplicable toBOIregisteredundertakingsafter theexpiry of theperiod of taxexemption.


Amendment ofsection 40B ofthe principalenactment.

Insertion of newsection 46A inthe principalenactment.

Insertion of newsection 48C inthe principalenactment.

“Rates ofincome taxon profitsfrom poultryfarming.



“Rate ofincome taxon the profitsand incomefrom the saleof goods byan exportorientedcompany.

Insertion of newsections 56A,56B, 56C, and56D in theprincipalenactment.

period provided thereunder is moreburdensome than the texation under the InlandRevenue Act, the profits and income of suchundertaking after the expiry of such taxexemption period shall be chargeable withincome tax in accordance with the provisionsof the Inland Revenue Act, provided suchundertaking shall not seek any further taxconcession in respect of such agreementthrough any supplementary agreement.”.

18. Section 56 of the principal enactment is herebyamended as follows:-

(1) in subsection (2) of that section, by the substitutionfor the words “fifteen per centum”, of the words“twelve per centum”; and

(2) in subsection (3) of that section, by the substitutionfor the words “fifteen per centum” wherever suchwords occur in that subsection, of the words “twelveper centum”.

19. The following new sections are inserted immediatelyafter section 56 of the principal enactment and shall haveeffect as sections 56A, 56B, 56C and 56D respectively, of thatenactment:-

56A. Such part of the profits and income ofan export oriented company which has enteredinto an agreement with the Board of Investmentof Sri Lanka under section 17 of the Board ofInvestment of Sri Lanka Law, No. 4 of 1978,for any year of assessment commencing on orafter April 1, 2013, from the sale of goodsmanufactured in Sri Lanka, up to the quantityapproved by the Board of Investment as importreplacement, to-

(a) any company which has entered intoan agreement with the Board ofInvestment of Sri Lanka under section


17 of the Board of Investment of SriLanka Law, No. 4 of 1978, enjoying taxholiday under section 16C, 16D or 17A

of this Act or under the StrategicDevelopment Projects Act, No.14 of2008 and which is permitted to importproject related goods or raw materialson duty free basis under the provisionsof such agreement, during the projectimplementation period; or

(b) any person eligible to import specificgoods on duty free basis under anyGovernment Authority,

shall notwithstanding anything to thecontrary in any other provisions of this Act,be deemed to be profits and income fromexports and be chargeable with income taxat the appropriate rate specified in the FifthSchedule to this Act.

56B. Such part of the profits and income ofany person for any year of assessmentcommencing on or after April 1, 2013 from thesupply of any goods manufactured in Sri Lankaor the provision of services, to foreign shipsfor payments in foreign currency, shallnotwithstanding anything to the contrary inany other provisions of this Act, be deemed tobe profits and income from exports and bechargeable with income tax at the appropriaterate specified in the Fifth Schedule to this Act.

56C. Such part of the profits and income ofany person for any year of assessmentcommencing on or after April 1, 2013 from thesale of any product manufactured in Sri Lankafor payment in foreign currency throughforeign exchange earning account authorizedby the Central Bank of Sri Lanka, shallnotwithstanding anything to the contrary inany other provisions of this Act, be deemed to

Rate ofincome taxon the profitsand incomefrom thesupply ofgoods orservices toforeignships.

Rate ofincome taxon theprofits andincome fromthe sale ofproductsmanufacturedin Sri Lankafor paymentin foreigncurrency.


be profits and income from exports and bechargeable with income tax at the appropriaterate specified in the Fifth Schedule to this Act.

56D. For any year of assessmentcommencing on or after April 1, 2013 suchpart of the profits and income from the sale inthe local market, of locally manufacturedgaments, bags made out of fabric, linen,curtains or any othe goods, of any exportoriented company which exports not less thansixty per centum of its products shall bechargeble with income tax at the rate of twelveper centum:

Provided however, where the local valueaddition of such garments, bags, linen, curtainsor other goods, as the case may be, is greaterthan sixty five per centum with Sri Lankanbrand name, such part of the profits and incomeof such export oriented company from the salein the local market, of such garments, bags,linen, curtains, or other goods shall bechargeable with income tax at the rate of tenper centum.”.

20. Section 59B of the principal enactment as lastamended by Act, No. 8 of 2012 is hereby further amended asfollows:-

(1) in subsection (2) of that section, by the substitutionfor paragraph (b) of that subsection, of the followingnew paragraph:-

“(b) the turnover of such undertaking (other thanfrom the sale of any capital asset) for thatyear of assessment-

(i) being any year of assessmentcommencing on or after April 1, 2011but prior to April 1, 2013, does notexceed three hundred million rupees;

Rate ofincome taxon the profitsand incomefrom the saleof locallymanufacturedgoods inlocal marketby exportorientedcompanies.

Amendment ofsection 59B ofthe principalenactment.


(ii) being any year of assessmentcommencing on or after April 1, 2013,does not exceed five hundred millionrupees.”;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 andincome of any person from any undertaking withannual turnover not exceeding certain amount. ”.

21. The following new sections are hereby insertedimmediately after section 59C of the principal enactmentand shall have effect as sections 59D and 59E respectively, ofthat enactment:-

59D. (1) The tax rate applicable on theprofits and income within the meaning ofparagraph (a) of section 3 (other than any profitsand income from the sale of any capital asset),of any company which lists its shares on orafter April 1, 2013 but prior to April 1, 2014, inthe Colombo Stock Exchange licensed by theSecurities and Exchange Commission of SriLanka and issues by way of Initial PublicOffering not less than twenty per centum of itsshares to the general public, shall be reducedby fifty per centum for the year of assessmentin which such shares are listed and for anothertwo years of assessment immediatelysucceeding that year of assessment subjectwhere such company after listing continues tomaintain not less than twenty per centum ofholding of its shares by the general public.

(2) Where the company referred to insubsection (1) fails to maintain in anysubsequent year of assessment after listing itsshares, not less than twenty per centum of

Insertion of newsections 59D and59E in theprincipalenactment.

“Rate ofincome taxapplicable tocompanieslisting itsshares in theColomboStockExchangeand issuingits shares tothe generalpublic.


holding of shares by the general public in theopinion of an Assessor, the tax reduced undersubsection (1) shall notwithstanding to thecontrary in any other provisions of this Act, bere-assessable, payable and recoverable.

For the purposes of this section “shares heldby the general public” in relation to a listedcompany means shares of such company heldby any person other than those directly orindirectly held by :-

(a) its parent, subsidiary or associatecompanies or any subsidiaries orassociates of its parent company;

(b) its directors who are holding office asdirectors of such company, theirspouses and children under 18 years ofage;

(c) its Chief Executive Officer, his spouseand children under 18 years of age; and

(d) any single shareholder who holds tenper centum or more of the shares of suchcompany.

59E. Such part of the profits and income ofany person or partnership from operating anyproject for producing any alternative energyincluding operating any mini hydro powerproject shall notwithstanding anything to thecontrary in any other provisions of this Act, betaxable at the appropriate rate specified in theFifth Schedule to this Act.

For the purposes of this section “mini hydropower project” means any hydro power projectwhich generates less than ten Mega Wattselectricity.”.

Rate ofincome taxon the profitsand incomefromoperatinganyalternativepowergenerationproject.


22. Section 60 of the principal enactment as lastamended by Act, No.19 of 2009 is hereby further amendedas follows:-

(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 packetor package form and each packet or packageweighing not more than one kilogram, creperubber,”; and

(2) by the substitution for the words and figures “anyother produce referred to in section 16.”, of thewords and figures “any other produce referred to insection 16, but include organic tea in bulk.”.

23. Section 78 of the principal enactment as lastamended by Act, No.22 of 2011 is hereby further amendedin subsection (1) as follows:-

(1) by the substitution in paragraph (a) of thatsubsection for the words “and other income; and” ,of the words “and other income;”; and

(2) by the substitution for paragraph (b) of thatsubsection, of the following paragraphs:-

“(b) for any year of assessment commencing onor after April 1, 2007, but prior to April 1,2013, on the excess, if any, of the aggregateof the divisible profits referred to in section76 and other income over six hundredthousand rupees”; and

(c) for any year of assessment commencing onor after April 1, 2013, on the excess, if any,of the aggregate of the divisible profitsreferred to in section 76 and other incomeover one million rupees,”.

24. Section 79 of the principal enactment as last amendedby Act, No. 9 of 2008 is hereby further amended as follows:-

(1) in subsection (3) of that section, by the substitutionfor the words “be deemed to be non-resident from



Amendment ofsection 78 ofprincipalenactment.


the commencement of the year of assessment inwhich such absence commences.”, of the words andfigures “be deemed to be non-resident from thecommencement of the year of assessment in whichsuch absence commences being a year of assessmentprior to April 1, 2013.”; and

(2) in subsection (4) of that section, by the substitutionfor the words “the aggregate of thirty days shall”,of the words and figures “the aggregate of thirtydays for any year of assessment prior to April 1,2013, shall”.

25. Section 104 of the principal enactment as last amendedby Act, No. 9 of 2008 is hereby further amended asfollows :-

(1) in subsection (1) of that section, by the substitutionfor the words “any transaction entered intobetween”, of the words “any internationaltransaction entered into between”;

(2) by the repeal of subsection (2) of that section, andthe substitution therefor, of the followingsubsection:—

“(2) Where it appears to an Assessor that theprofits and income or the loss referred to insubsection (1), has not been as ascertained havingregard to the arm’s length price, he may refer thecomputation of the arm’s length price in relation tosuch international transaction to a Transfer PricingOfficer. The Transfer Pricing Officer may, in writngaddressed to the person who carries on either theone or the other or both of the two associatedundertakings referred to in subsection (1), requirehim to prove to the satisfaction of the Transferpricing Officer, that such profits and income or suchloss, as the case may be, has in fact been ascertainedhaving regard to the arm’s length price. Where suchperson fails to so prove, the Transfer Pricing Officermay determin the arm’s length price and inform itto the Assessor. Thereupon the Assessor mayestimate 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) by the insertion immediately after subsection (3) ofthat section, of the following new subsection:-

“(3A) An advance pricing agreement may beentered into between any person and theCommissioner-General in respect of arm’s lengthprice for the purposes of this section on the basis ofa prescribed manner.”;

(4) in subsection (4) of that section-

(a) by the substitution in paragraph (b) of thatsubsection for the words “other thanassociated undertakings.”, of the words “otherthan associated undertakings;”; and

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

“international transaction” means atransaction between two or more associatedundertakings, either one or both of whom arenon-residents, in the nature of purchase, saleor lease of tangible or intangible property, orprovision of services, or lending or borrowingmoney or any other transaction having abearing on the profits, income, losses or assetsof such undertakings, and includes anyallocation or apportionment of, or anycontribution to any cost or expense incurredor to be incurred in connection with a benefit,service or facility provided or to be providedto any one or more of such undertakings underany mutual agreement or arrangementbetween two or more such associatedundertakings. Any transaction entered intoby an undertaking with a person, either oneis non-resident, other than an associatedundertaking shall, for the purposes ofsubsection (1) be deemed to be an


international transaction entered intobetween two associated undertakings, if thereexists a prior agreement between suchundertaking and other person and, by whichthe terms of such transaction are determinedin substance between such undertaking andother person which results in the reductionof or would have the effect of reducing theamount of tax payable.

Without prejudice to the generality of theprovision of this subsection, the allowancefor any expense or interest arising from aninternational transaction shall also bedetermined having regard to the arm’s lengthprice;

“Transfer Pricing Officer” means anyofficer of Inland Revenue prescribed by theCommissioner - General as a Transfer PricingOfficer.”; and

(5) in the marginal note to that section, by thesubstitution for the words “from transactionsbetween”, of the words “from internationaltransactions between”.

26. The following new section is hereby insertedimmediately after section 104 of the principal enactmentand shall have effect as section 104A of that enactment:-

104A. (1) Any profits and income arising,derived or accruing from, or any loss incurredin any transaction, other than transactionsreferred to in subsection (1) of section 104,entered into between two associatedundertakings shall be ascertained havingregard to the arm’s length price.

(2) Where it appears to an Assessor that theprofits and income or the loss referred to insubsection (1), has not been ascertained having

Insertion of newsection 104A inthe principalenactment.

“Profits andincome orloss fromtransactionsbetweenassociatedundertakingsto bedeterminedhavingregard to thearm’s lengthprice.


regard to the arm’s length price, he may,in writing addressed to the person who carrieson either the one or the other or both of thetwo associated undertakings referred to insubsection (1), require him to prove to thesatisfaction of the Assessor, that suchprofits and income or such loss, as the casemay be, has in fact been ascertained havingregard to the arm’s length price. Where suchperson fails to so prove, the Assessor mayestimate the amount of the profit and incomeor the loss, as the case may be, referred to insubsection (1), and make an assessmentaccordingly.

(3) The arm’s length price referred to insubsection (1) shall be determined on the basisof any one or more of the methods, prescribedfor that purpose.

(4) For the purposes of this section-

(a) an undertaking shall be deemed tobe an associated undertaking ofanother undertaking, if thefirst-mentioned undertakingparticipates directly or indirectlyor through one or moreintermediaries, in the control of thesecond-mentioned undertaking insuch manner or to such extent asmay be prescribed;

(b) “arm’s length price” means a pricewhich is applied in uncontrolledconditions in a transaction betweenpersons other than associatedundertakings.”.


27. Section 113 of the principal enactment as lastamended by Act, No.8 of 2012 is hereby further amended bythe addition immediately after subsection (5) of that section,of the following new subsection:-

“(6) Where any bank or financial institution which isrequired to invest in the investment fund referred to insubsection (5), has not utilized in accordance with theguidelines issued by the Central Bank of Sri Lanka, any partof 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 theGovernment by such bank or financial institution as thecase may be, and transferred to the Consolidated Fund.”.

28. Section 121 of the principal enactment is herebyamended by the addition immediately after subsection (2)of that section, of the following new subsection:-

“(3) Where during any year of assessment an employerhas deducted income tax from the remuneration of anyemployee for any pay period any sum in excess of the amountdeductible in respect of such remuneration for such payperiod, such employer may reduce such excess from theamount of income tax deductible in respect of theremuneration of such employee for any pay period in suchyear of assessment or in the immediately succeeding year ofassessment and notify the Commissioner-Generalaccordingly within two weeks from the date of suchadjustment.”.

29. Section 135 of the principal enactment as lastamended by Act, No.22 of 2011 is hereby further amendedin subsection (1), by the substitution for the words and figures“at the time of the issue of such corporate debt security.”, ofthe words and figures “at the time of the issue of suchcorporate debt security:

Provided that-

(a) where such corporate debt security is issued withfloating rate of interest payable for reviewingperiods, such deduction shall be made at the timeof beginning of each such reviewing period ofinterest rate;





(b) where any corporate debt security issued prior toApril 1, 2011 and to which interest is payable on orafter April 1, 2011 and in respect of which nodeduction of income tax on interest has been made,such deduction shall be made at the time suchinterest is paid or credited;

(c) no deduction of income tax under this section shallbe made from any interest or discount referred to inparagraph (o) of section 9.”.


(1) by the substitution for all the words from “Everybank” to the words “such payment,” , of the words“Every bank or financial institution or companyissuing corporate debt security, which is requiredto deduct income tax from the interest paid orcredited or discount allowed, as the case may be,by it in any year of assessment to any personchargeable with income tax under this Act, shalldeduct such income tax at the time when suchinterest is paid or when such security is issued orwhere such corporate debt security is issued withfloating rate of interest, at the beginning of eachreviewing period, as the case may be, to such personin accordance with any agreement entered intobetween such bank or financial institution orcompany and such person with respect to suchpayment,”; and

(2) in the marginal note to that section, by thesubstitution for the words “Duties of bank andfinancial institution”, of the words “Duties of banks,financial institutions and companies”.

31. Section 141 of the principal enactment is herebyamended by the substitution for all the words and figuresfrom “any bank or financial institution” to the words “apenalty of a sum”, of the words and figures “any bank orfinancial institution which pays interest or issues any debt




security , or a company which issues corporate debt security,not deducting tax in accordance with the provisions ofsection 133 or section 135, as the case may be, he shall afteraffording such bank, financial institution or any suchcompany, which pays interest or issues debt security orcorporate debt security, as the case may be, an opportunityto show cause and where he is satisfied that there has been acontravention of the provisions of section 133 or section135, impose on such bank or financial institution or thecompany, which pays interest or issues such debt securityor corporate debt security, as the case may be, a penalty ofa sum”.

32. Section 142 of the principal enactment is herebyamended by the substitution for the words “bank or financialinstitution” wherever such words occur in subsections (1),(2) and (3) of that section, of the words “bank or financialinstitution or company”, respectively.

33. Section 163 of the principal enactment, as lastamended by Act, No.22 of 2011 is hereby further amendedas follows:-

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

(a) by the substitution in the proviso to thatsubsection, for the word “September”, of theword “November”;

(b) by the substitution in the further proviso tothat subsection for the words and figures“paragraph (b) of subsection (1) of section65 or paragraph (c) of subsection (2) of section62”, of the words and figures “sub-paragraph(i) of paragraph (b) of subsection (1) of section61 or paragraph (c) of subsection (1) ofsection 61 or paragraph (b) of subsection (1)of section 62 ”;

(2) in paragraph (b) of subsection (3), of that sectionby the substitution for the word “assembleincome”, of the words “assessable income”;




(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 itsincome on or before the thirtieth day ofNovember of the year of assessmentimmediately succeeding that year ofassessment,

(i) where such year of assessment is any yearof assessment commencing prior to April1, 2013, shall be made after the expiry ofa period of two years from the thirtiethday of November of the immediatelysucceeding year of assessment; and

(ii) where such year of assessment is any yearof assessment commencing on or afterApril 1, 2013, shall be made after theexpiry of a period of eighteen monthsfrom the thirtieth day of November ofthe immediately succeeding year ofassessment:”; and

(4) by the addition immediately after subsection (9) ofthat section, of the following new subsection:-

“(10) Notwithstanding anything to the contraryin any other provisions of this Act, where the annualtotal turnover of any person other than a companyfor any year of assessment commencing prior toApril 1, 2011 from every trade or business did notexceed rupees three hundred million and suchperson has not complied with the provisions of anytax law administered by the Commissioner -General, invests earnings so made by such personprior to April 1, 2011, in any trade or business, onor before March 31, 2014, and furnishes the returnof income for any year of assessment commencingprior to April 1, 2014 together with an undertaking


in writing that he shall comply with the requirementsof this Act for any subsequent period, such returnshall be accepted and no assessment or additionalassessment shall be made on such person in respectof such year of assessment for which a return ofincome is so furnished and for five years ofassessment immediately succeeding that year ofassessment.”.


(1) in subsection (2) of that section, by the substitutionfor the words “to the Board of Review.”, of the wordsand figures “to the Board of Review prior to April1, 2011 or on or after April 1, 2011, to the TaxAppeals Commission.”; and

(2) in subsection (3) of that section, by the substitutionfor the words “apply to the hearing and disposal ofany appeal under the preceding provisions of thissection. The Board of Review may”, of the wordsand figures “apply prior to April 1, 2011, to thehearing and disposal of any appeal under thepreceding provisions of this section. The Board ofReview 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 lastamended by Act No.22 of 2011 is hereby further amended asfollows:-

(1) by the substitution for the words “provision of thisAct or regulation, rule or order made thereunder”,of the words “provisions of this Act or any otherAct administered by the Commissioner- General,or regulation, rule or order made thereunder”; and

(2) in the marginal note to that section, by thesubstitution for the words “the Act”, of the words“this Act or any other Act administered by theCommissioner-General”.




36. Section 208A of the principal enactment is herebyamended by the addition at the end of that section, of thefollowing words:-

“The committee shall determine any request made to itfor interpretation within six months from the date of receiptof such request.”.

37. Section 217 of the principal enactment as lastamended by Act No. 8 of 2012 is hereby further amendedin the definition of the expression “dividend” by thesubstitution in sub-paragraph (iv) of paragraph (a) for thewords “dividend in specie; and”, of the following words:-

“dividend in species; or

(v) where a company buys back shares from itsshareholders, the excess, if any, paid to anyshareholder over the market price of such sharequoted in the Colombo Stock Exchange or themarket value of such share as the case may be, as atthe date on which the shareholders of such companyat a meeting approved such share buyback; and”.

38. The First Schedule to the principal enactment, aslast amended by Act, No. 8 of 2012, is hereby further amendedby the substitution for PART V of that Schedule, of thefollowing Part:-

“PART V

The rate of income tax applicable to any sum referred toin the proviso to subsection (2) of section 35-

(a) for any year of assessment

commencing prior to April 1, 2013

(b) for any year of assessment

commencing on or after April 1,

2013



Amendment ofthe FirstSchedule to theprincipalenactment.

as per PART I,PART 1A or PARTIB, but subject to amaximum of 20 percentumas per PART IB, butsubject to amaximum of 16 percentum.”.


39. The Second Schedule to the principal enactment,as last amended by Act, No. 8 of 2012, is hereby furtheramended by the addition, immediately after item 2 inPART A of that Schedule, of the following new item:-

“3. Any unit trust management company on the taxableincome-

(a) for any year of assessmentcommencing prior to April1, 2013

(b) for any year of assessmentcommencing on or afterApril 1, 2013

40. The Fifth Schedule to the principal enactment, aslast amended by Act, No. 8 of 2012, is hereby further amendedas follows :-

(1) by the substitution for item 22 of that Schedule, ofthe following item :-

“22. The rate of income tax on profits and income referredto in section 58-

(a) for any yearof assessmentcommencing priorto April 1, 2011

(b) for any yearof assessmentcommencing on orafter April 1, 2011

(2) by the substitution for item 23 of that Schedule, ofthe following item :-

“23. The rate of income tax on profits and incomefrom transshipment agency fees referred to insection 59-

(a) for any year of assessmentcommencing prior to April1, 2011

15 per centum

as per PART B

10 per centum”;

Amendment ofthe FifthSchedule to theprincipalenactment.

12 per centum”;

Amendment ofthe SecondSchedule to theprincipalenactment.

15 per centum


(b) for any year of assessmentcommencing on or afterApril 1, 2011

(3) by the addition immediately after item 40 of thatSchedule, of the following new items:-

“41. The rate of income tax applicableto such part of the profits andincome of any person engaged inan undertaking for poultry farmingreferred to in section 46A –

42. The rate of income tax applicableto such part of the profits andincome of any person from anyundertaking referred to in section56A-

43. The rate of income tax applicableto such part of the profits andincome of any person from anyundertaking referred to in section56B-

44. The rate of income tax applicableto such part of the profits andincome of any person from anyundertaking referred to in section56C –

45. The rate of income tax applicableto such part of the profits andincome of any person orpartenership from any undertakingreferred to in section 59E-

12 per centum”.

As per the FirstSchedule, butsubject to amaximum of 10per centum for anindividual, and 10per centum for acompany.




As per the FirstSchedule, butsubject to amaximum of 12per centum for anindividual, and 12per centum for acompany.”.


Sinhala text toprevail in caseof aninconsistency.

41. The amount of tax charged or collected from anyperson by or on behalf of the Commissioner - General, byvirtue of the application of any provision of this Act, duringthe period commencing on April 1, 2013 and ending on thedate on which the certificate of the Speaker is endorsed inrespect of this Act, shall be deemed to have been validly andlawfully charged or collected under this Act by theCommissioner - General or by such person who charged orcollected such tax on behalf of the Commissioner - General:

Provided that the aforesaid provisions shall not affectany decision or order made by any Court or any proceedingspending in any Court in respect of any tax charged orcollected during such period.

42. In the event of any inconsistency between theSinhala and Tamil texts of this Act, the Sinhala text shallprevail.

Validation.


Annual subscription of English Bills and Acts of the Parliament Rs. 885 (Local), Rs. 1,180(Foreign), Payable to the SUPERINTENDENT, GOVERNMENT PUBLICATIONS BUREAU, DEPARTMENT OF

GOVERNMENT INFORMATION, NO. 163, KIRULAPONA MAWATHA, POLHENGODA, COLOMBO 05 before 15thDecember each year in respect of the year following.

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