M.S.M. Riyas ATII (Sri Lanka) , MAAT (Sri Lanka)

Phone :  (94) (11) - 2643 - 958  

                      072 - 346 - 6297  

E. mail :  msmriyas@yahoo.com

Sri Lanka - Income Tax and Value Added Tax.

In Sri Lanka we have both direct and indirect tax in operation. They are income tax and value added tax.

Income Tax is payable on income.  Value added tax is payable on the value of supply.

Income Tax

Income Tax is imposed by the Inland Revenue Act No 38 of 2000.

Income tax is charged on the basis of income arising in or derived from sources.  Persons whose income  exceed the income of Rs. 300 000 for any year of assessment  are liable to income tax.

The Inland Revenue Act places the responsibility for maintenance of records, furnish returns and pay tax on the taxpayer. 

If returns are not furnished an assessor has the authority to issue assessment/s. The tax so assessed may be excessive. In case the taxpayer is dissatisfied with the assessment he may appeal against the assessment. 

In case of any excess payment a taxpayer may claim refund.

Value Added Tax

Value added tax is imposed by Value Added Tax Act No 14 of 2002.

The liability is determined on the basis of supply. The supply may be goods ,services  or both.

Value Added Tax is a tax collected by the businesses from customers on behalf of the government.

Liability.

Liability is reckoned on two bases. They are,

(1).Value Added Tax will be charged  , at the time of supply on every taxable supply of goods or services , made in a taxable period, by a registered person in the course of carrying on , or carrying out a taxable activity by such person in Sri Lanka.

(2) on importation of goods into Sri Lanka by any person.

As in the case of income tax payer should maintain records, furnish returns and pay tax. Unlike in the income tax there are schedules that should be maintained. The format of the schedules was published by the Revenue.

The assessor may issue assessment as in the case of income tax. The taxpayer may appeal against an assessment. The appeal provisions are similar to that of Inland Revenue Act. However the penalty may go up to 100% of the tax payable.

N.B.

This web page gives basic information on tax and not meant to be exhaustive. Law may change with the introduction of annual budget and /or other legislation.