UHY Centra Management Associates tax professionals’ help clients minimize their tax liability through careful planning and ensure that they comply with the Sri Lankan tax laws. We keep clients updated with any changes in the Sri Lankan tax rules and regulations that would have an impact on the tax strategies of their businesses. We take a holistic view on tax, combining industry insight with the technical skills of our financial and tax professionals to develop comprehensive integrated solutions.
Managing a company’s tax strategy and statutory obligations in the light of today’s intricate rules and regulations can be expensive in terms of time, money and resources. Our services include;
- Tax compliance and reporting
Provision of tax compliance reporting, tax process improvement solutions and qualitative data analysis.
- Tax advisory
Representing tax payers before tax authorities in appeal hearings at a appeal commission and liaising with tax consultants at all levels including appeal court and supreme court.
- Tax management advisory
Assisting clients the importance of tax functions by aligning their organisational goals and providing strategic, technical and transactional business solutions using core competencies.
- Tax review and appeals hearing
Carrying out an in-depth tax review of companies to identify overall tax position including income tax and other taxes payable, refunds claimable, assessments issued and appeals made.
- Filing periodic returns
Filing monthly and quarterly VAT, SVAT, NBT, ESC, EPF, ETF and PAYE as needed.
Value Added Tax (VAT)
Value Added Tax (VAT) was initiated by the Act No.14 of 2002 of Sri Lanka. It is a tax on domestic consumption of goods and services. The goods imported into Sri Lanka, and the goods and services supplied within the territorial limits of Sri Lanka are subject to this tax.
Below stated are some supplies of goods and services that are exempted from VAT
Our statutory compliance services under VAT scheme include;
- Any exporter or provider of zero rated service (more than 50%) under section 7 of the VAT acts,
- Registered person engaged in any strategic development project (SDP)
- Persons registered under Section 22(7), and who are entitled to claim input tax under the act.,
- Manufacturers who supply goods produced in Sri Lanka, (liable to VAT) to an exporter
- Provide more than 50% of his sales or services to any manufacturer of exports
- Registration for VAT scheme or cancellation of VAT registration,
- Changes of company address or status from registered identified supplier (RIS) to registered identified purchaser (RIP) or wise versa.
- Filing of quarterly VAT returns with Inland Revenue Department (IRD) in Sri Lanka
- Process for SVAT “credit vouchers” with Inland Revenue Department (IRD) in Sri Lanka
- Cancellation of “differed VAT” facility in coordination with IRD, customs and BOI
- Process of “VAT refunds” in coordination with Inland Revenue Department (IRD) and other relevant authorities
- Representing your company on any matters pertaining to government authorities
- Handling VAT audits with the Inland Revenue Department (IRD)
Private client tax service
Personal tax planning and wealth management are increasingly complex areas where experts’ advice can deliver significant long-term benefits for you and your family. According to the new Inland Revenue Act No. 24 of 2017, taxpayers are categorized as residents and non-residents. The assessable income of a resident for the year of assessment is based on employment, business and investment.
An individual’s income from employment for year of assessment shall be same as the individual's gain and profit of the employment for the given year of assessment. The following are the source of employment income:
- Payment of salary, wages, leave pay, overtime pay, pension, commission, gratuities and bonus
- Payment of personal allowance, cost of living, subsistence, rent and travelling allowance
- Payment for redundancy, loss or termination of employment
- Gift received in respect of employment
Business income is a person's gains and profits from conducting business for duration of a year. The following are the sources of
- Trading stocks
- Service fee
- Gains from realisation of capital assets
- Gift received in respect of business
Investment income is a person's income from an investment derived or received during a year of assessment which includes:
- Dividends, interest, discounts, charges, annuities, rent, premiums and royalties
- Gain from realisation of investment assets
- Gifts received in respect of investment
- Winning from lotteries, betting, or gambling
Capital gain tax
Capital gain tax is a tax on gains, realized on the transfer of ownership. This includes sale, exchange, transfer, distribute, cancel, redeem, destroy, loss, expire, expropriate or surrender of investment asset. The only gain that should be subject to capital gain tax with effective from 1st April 2018, are:
- Land or building
- A membership interest in a company, trust or partnership
- A security or other financial asset
New Inland Revenue Act
The new Inland Revenue Act No. 24 of 2017 is being implemented now and it will change the tax policies of several sectors. The main objective of this new act will be:
- Simplify the tax system in order to create investor friendly environment to attract foreign investors.
- Ease the burden on low-income people and effectively implement the revenue law on high income groups.
- Reduce the indirect taxes levied from the people from 80% to 60% and increase direct taxes from 20% to 40% within three years.
- The new act will make it obligatory to eligible taxpayers to pay their taxes.
- The value added tax (VAT) on various goods pushed by foreigners while arriving to the country will be returned to them
Resident and non-resident
With effect from 1 April 2008, expatriate employees are taxed, based on the tax rates applicable to residents in SriLanka. Nevertheless, the expats will be taxed only on their Sri Lankan-sourced income.
A resident is an individual who is present in Sri Lanka for period in aggregate of 183 days or more in any twelve months period that commences or ends during that year. In general, all remuneration and benefits received by an employee who is a resident in Sri Lanka or, for services rendered in, Sri Lanka is taxable.
The new act has listed down two types of deductions; general deductions and main deductions. Main deductions will be allowed in a situation where expenses are incurred in relation to business or investment income of a person during a year of assessment. The following specific tax credits may be claimed against the taxpayer’s regular tax liability:
- Pay-As-You-Earn (PAYE)
- Withholding tax (WHT) on specified fees
- Income tax paid on a self-assessment basis
- Relief under double tax treaties (DTA)
- General deductions cannot be taken into consideration in calculating a person’s income
A foreign resident is entitled to claim foreign tax credits (FTC) on tax paid during that year in computing his/her assessable income.