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Income Tax

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Inland Revenue Acts

Inland Revenue Act No. 10 of 2006

Inland Revenue (Amendment) Act No. 10 of 2007

Inland Revenue (Amendment) Act No. 9 of 2008

Inland Revenue (Amendment) Act No. 19 of 2009

Inland Revenue (Amendment) Act No. 22 of 2011

Inland Revenue (Amendment) Act No. 8 of 2012

Inland Revenue (Amendment) Act No. 18 of 2013

Inland Revenue (Amendment) Act No. 8 of 2014

Inland Revenue (Amendment) Act No. 9 of 2015


LIMITED LIABILITY COMPANY

Requirement

Any person who carries on any trade, business, profession or vocation, including any company which has been entered in to any agreement with the Board of Investment, shall obtain a registration number within one year of such Registration or incorporation or commencement of the activity as the case may be, from the CGIR and furnish Return of income before 30th November following the end of each year of assessment. Further Tax Registration certificate (TN) shall be attached to your Annual Return which furnishes to the Registrar of Companies in every year.


Registration
A duly completed and signed application form be submitted with the following documents to the Department of Inland Revenue.

  • Articles of Association
  • Form 1 (Particulars of Directors & Secretaries, Address), 20, 13
  • Business Incorporation certificate (Form 2A)
  • Request Letter

 

Directors Liability on Taxation
Penalties and Offences
The secretary, manager, director or other principal officer of any company shall be liable to do all such acts, matters, or things as required to be done under the tax laws and if they fail to do so, such persons shall be deemed to be guilty of that offence unless he proves that the offence was committed without his knowledge and that he exercised all such diligence to prevent the commission of that offence as he ought to have exercised having regard to the nature of his function in such capacity and to do all other circumstances. If any person committed for offence shall be liable for maximum of rupees fifty thousand or to imprisonment of either description for a term not exceeding six months.


Taxes in Default
Income Tax
Where the entirety of the tax or part of such tax payable by a company has not been paid such company shall be deemed to be a defaulter under the Inland Revenue Act no. 10 of 2006. Therefore, defaulter is the company but not directors. Hence directors are not personally liable for income tax. However, in liquidation of Private Companies directors are jointly and severally liable for payment of income tax and first charge will be income tax under the income tax Act.


Punishment for income tax in default – section 174
Where any person, including director, principal officer or an office bearer, has defaulted in the payment of income tax and where such default commences on or after April 1, 2004, and continue for a period more than more than three years, Commissioner General shall submit to the Magistrate a certificate and such person liable on conviction after summary trial before a magistrate, to a period of imprisonment of either description not exceeding three months. However, director has right to show cause.


RESIDENT INDIVIDUAL /SOLE PROPRIETOR

Registration

Duly completed and signed application form be submitted to the Department of Inland Revenue with the following documents
  • Certificate of Business Registration (Sole Proprietorship)
  • Financial Statements
  • Copy of National Identity Card
From the Year of Assessment 2016/2017 Tax Free Allowance will be Rs 2.4 Million and rate of 15% applicable on balance Tax Liabilities.

Liability on Taxation
Individuals are personally liable to pay income tax and The Department of Inland Revenue takes recovery actions under the income tax Act for non – payment of income tax and non – furnishing of Income Tax Return.

Requirement
Where Trade, business, profession or vocation carried on by two or more persons in partnership, income tax file shall be opened with The Department of Inland Revenue under the partnership name.

Registration
Duly completed and signed application form be submitted to the Department of Inland Revenue with the following documents
Business Registration Certificate of partnership business

  • Financial Statements
  • Photo copy of Identity Cards of Partners


Income Tax Rates - Corporate Sector
With effect from the year of assessment 2011/2012 income Tax rates of  10%,  12%,  28% and 40% applicable for different sectors on taxable income and from the year of assessment 2016/2017 Income Tax Rates will be 15% and 30%.

 

Income Tax Rates for Individual other than Employee - Year of Assessment 2015/2016


Tax Fee Allowance  Rs 500,000

Tax Liability of Taxable Income
First Rs. 500,000  4%
Next Rs. 500,000 8%
Next Rs 500,000  12%
Next Rs 500,000 16%
Net Rs. 1,000,000  20%
Balance  24%


From the Year of Assessment 2016/2017 Tax Free Allowance is  Rs 2.4 Million and Rate for balance Taxable income is 15%


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