Finance ACT – 2004

Arrangement of Sections

1. Short title.

PART I

Imposition of an Economic Service Charge

2. Imposition of an Economic Service Charge.

3. Service Charge to be deducted from the relevant income tax.

4. Remaining part of the service Charge not to be refunded.

5. Notice of chargeability.

6. Service Charge to be paid in four quarterly installments.

7. Furnishing return of liable turnover.

8. Maintenance of records.

9. Assessor to make assessments.

10. Service Charge not paid deemed to be in default.

11. Certain provisions of the Inland Revenue Act, No. 38 of 2000 to apply.

11A. Regulations.

12. Interpretation.

13. Date of Coming into operation of this part.

PART II

Imposition of Cellular telephone Subscribers' Levy

14. Imposition of Cellular telephone Subscriber Levy.

15. Mode of collection of Levy.

16. Commission to collect levy on behalf of the government.

17. Secretary Treasury to issue guidelines.

18. Action in cases of failure to pay levy.

19. Operation of the provisions of this Part.

20. Indemnity.

PART III

Imposition of International Telecommunications Operators Levy

21. Imposition of International Telecommunications Operators Levy.

22. Amount of operator's levy.

23. Commission to issue guidelines.

24. Action in cases of default in payment.

25. Offences and penalties.

26. Regulations.

27. Date of operation of this part.

28. Avoidance of doubts.

PART IIIA

REPEALED

28A. Repealed.

28B. Repealed.

28C. Repealed.

28D. Repealed.

PART IV

Amendments to the Finance Act, No 25 Of 2003

29. Amendment of section 11 of Part II of the Finance Act No. 25 of 2003.

30. Date of operation of this Part of the Act.

31. Sinhala text to prevail in case of inconsistency.

SCHEDULE

11 of 2004,

7 of 2005,

11 of 2006,

13 of 2006,

37 of 2007,

7 of 2008,

13 of 2009,

12 of 2012.

AN ACT to make provision for the imposition of certain charges and levies consequential to the 2004 budget proposals; and to provide for matters connected therewith and incidental thereto.

[Date of Commencement: 28th October, 2004]

1. Short title.

This Act may be cited as the Finance Act.

PART I

Imposition of an Economic Service Charge

2. Imposition of an Economic Service Charge.

(1) An Economic Service Charge (hereinafter referred to as "the Service Charge”) shall, subject to the provisions of this Act, be chargeable from every person and every partnership for each year of assessment commencing on or after April 1, 2004 (hereinafter in this Act referred to as "the relevant year of assessment”) and ending on March 31, 2006, in respect of every part of the liable turnover of such person or partnership for that relevant year of assessment, at the rate specified in the Schedule to this Act:

Provided that no Service Charge shall be charged from any person or partnership being a BOI enterprise, for the relevant year of assessment commencing on April 1, 2004.

[S 2(1) am by s 14(1) of Act 13 of 2006.]

(2) Notwithstanding the provisions of subsection (1), the Service Charge chargeable from any person or partnership for any relevant year of assessment shall be charged if and only if the liable turnover of such person or partnership for that relevant year of assessment exceeds rupees fifty million:

Provided that the Service Charge chargeable from any person or partnership for any relevant year of assessment shall in no case exceed rupees fifty million.

(3) In this subsection—

"liable turnover” in relation to any person or partnership and to any relevant year of assessment means, the aggregate turnover of every trade, business, profession or vocation other than any trade, business (not being any trade or business which deals in the wholesale or retail of such goods, not manufactured or produced by such person or partnership), or profession or vocation the commercial operations of which commenced, whether by such person or partnership or by any other person or partnership, on a date which falls within the period of thirty-six months immediately preceding the first day of that relevant year of assessment, carried on or exercised by such person or partnership as the case may be, in Sri Lanka whether directly or through an agent or more than one agent, being the turnover for the year of assessment immediately preceding that relevant year of assessment; and

[Am by s 2(1) of Act 7 of 2005.]

"turnover” in relation to any trade, business, profession or vocation and to any year of assessment means the total amount receivable, whether actually received or not, from every transaction entered into in that year of assessment in the course of such trade, business, profession or vocation carried on or exercised by such person or partnership, after deducting therefrom—

(i) any sum included in such total amount being a sum which represents the value added tax in respect of that transaction, provided that the person or partnership who or which carries on or exercises such trade, business, profession or vocation is at the time of such transaction registered under section 10 of the Value Added Tax Act, No. 14 of 2002;

(ii) the total proceeds from the disposal of any capital assets; and

[Subs by s 2(2) of Act 7 of 2005.]

(iii) the amount of any bad debt incurred by that trade, business, profession or vocation during that year of assessment, being an amount which had been included in the liable turnover of such trade, business, profession or vocation of any previous year of assessment,

increased by the amount of any sum received during that year of assessment on account of any bad debt written off or allowed in any previous year of assessment.

Provided that:

(a) in the case of a bank, the receipts of such bank by way of, or on account of, interest, discounts, dividends, exchange, service charges, commissions, brokerage and any other income derived by the bank in the course of its business shall be deemed to be included in the turnover of such bank; and

(b) in the case of a person carrying on insurance business, insurance premia received, or receivable in respect of—

(i) life insurance; and

(ii) insurance against damages or destruction by strike, not, civil commotion, or acts of terrorism and paid into the Consolidated Fund,

shall be deemed not to be included in the turnover of such insurance business.

3. Service Charge to be deducted from the relevant income tax.

(1) The amount of any Service Charge paid by any person for any relevant year of assessment, shall be deducted from the relevant income tax if any, payable by that person for that relevant year or partnership for that relevant year of assessment (hereinafter referred to as the "first mentioned relevant year of assessment”).

[S 3(1) am by s 3(1) of Act 7 of 2005.]

(1A) The amount of any service charge paid by any partnership for any relevant year of assessment shall be apportioned among the partners of such partnership in the ratio in which such partners share the profits or losses of such partnership for that relevant year of assessment: the amount of the service charge so apportioned to any partner, shall be deducted from the relevant income tax payable by such partner for such relevant year of assessment (hereinafter referred to as the "first-mentioned relevant year of assessment”).

[S 3(1A) ins by s 3(2) of Act 7 of 2005.]

(2) The balance, if any, of such service charge paid by any person after its deduction in accordance with subsection (1) shall be deducted from the relevant income tax payable by such person for that relevant year of assessment immediately succeeding the first mentioned relevant year of assessment (hereinafter referred to as the "first succeeding relevant year of assessment”).

[S 3(2) am by s 3(3) of Act 7 of 2005.]

(2A) The balance, if any, of any service charge apportioned to any partner in accordance with subsection (1A), after its deduction in accordance with subsection (1A) shall be deducted from the relevant income tax payable by such partner for the relevant year of assessment immediately succeeding the first-mentioned relevant year of assessment (hereinafter referred to as the "first succeeding relevant year of assessment”).

[S 3(2A) ins by s 3(4) of Act 7 of 2005.]

(3) The residue, if any, of the balance of such service charge or of the portion of such service charge, as the case may be, after its deduction in accordance with the provisions of either subsection (2) or subsection (2A), shall be deducted from the relevant income tax payable by such person or such partner of such partnership as the case may be, for the relevant year of assessment immediately succeeding the first succeeding relevant year of assessment (hereinafter referred to as the "second succeeding relevant year of assessment”).

[S 3(3) am by s 3(5) of Act 7 of 2005.]

(4) In no circumstances shall:

(a) the aggregate deduction exceed the amount of such Service Charge; and

(b) the remaining portion, if any of the residue referred to in subsection (3) after its deduction in accordance with subsection (3); be deducted from any income tax payable for any relevant year of assessment succeeding the second succeeding relevant year of assessment.

(5) For the purposes of this section and in relation to any relevant year of assessment, the expression—

"attributable to the liable turnover” in relation to any part of the share of the divisible profits of any partner of any partnership means the sum which bears to the share of the divisible profits of such partner from such partnership for such relevant year of assessment the same proportion as the liable turnover of such partnership for such relevant year of assessment bears to the turnover of such partnership for such relevant year of assessment;

"relevant income tax payable” in relation to—

(a) any person in so far as such person is not a partner of any partnership, means the sum which bears to the aggregate statutory income of that person for that relevant year of assessment, from every trade, business, profession or vocation carried on or exercised by that person, other than any trade, business, (not being any trade or business which deals in the wholesale or retail of such goods, not manufactured or produced by such person), profession or vocation, the commercial operations of which has commenced, whether by such person or by any other person or partnership, on a date which falls within the period of thirty six months immediately preceding the first day of that relevant year of assessment, the same proportion as the total income tax payable by such person for that relevant year of assessment bears to the total statutory income of that person for that relevant year of assessment; and

(b) any person, in so far as such person is a partner of any partnership, means the sum which bears to such part of the share of the divisible profits of such person from such partnership as is attributable to the liable turnover of every trade, business, profession or vocation carried on or exercised by such partnership, the same proportion as the total income tax payable by such person for that relevant; year of assessment bears to the total statutory income of that person for that relevant year of assessment;

"total income tax payable” in relation to any person means the sum ascertained by the application of the income tax rate as is specified in the appropriate Schedule to the Inland Revenue Act, to the taxable income of such person for that relevant year of assessment; and

[S 3(5) subs by s 3(6) of Act 7 of 2005.]

4. Remaining part of the service Charge not to be refunded.

Notwithstanding anything to the contrary in any law the portion of the Service Charge referred to in subparagraph (b) of subsection (4) of section 3, shall not be refunded.

5. Notice of chargeability.

Every person and every partnership chargeable with the Service Charge for any relevant year of assessment shall, by communication in writing addressed to the Commissioner-General, give notice of such charge ability, before the first day of June of that relevant year of assessment. Such notification shall disclose the income tax file number or the personal identification number as the case may be assigned by the Commissioner-General, to such person or partnership:

Provided that in the case of the relevant year of assessment commencing on April 1, 2004 such notice shall be given within a period of thirty days of the date of the coming into operation of this Act.

6. Service Charge to be paid in four quarterly installments.

The Service Charge which any person or partnership is chargeable with for any relevant year of assessment shall, notwithstanding that no assessment has been made on such person or partnership by an Assessor, be paid to the Commissioner-General in the manner specified by him in four quarterly installments on or before the thirtieth day of June, thirtieth day of September, thirty first day of December and thirty first day of March in that relevant year of assessment. Each such quarterly installment shall be one quarter of the Service Charge payable for that relevant year of assessment:

Provided that any person liable to pay any sum to the Commissioner-General of Inland Revenue for the period commencing on or after April 1, 2004 and ending on June 30, 2004 and to whom the provisions of the proviso to section 5 applies, shall be deemed to have complied with the provisions of this section if such sum is paid to the Commissioner-General on or before September 30, 2004.

7. Furnishing return of liable turnover.

Every person and partnership chargeable with the Service Charge for any relevant year of assessment shall, whether or not required by an Assessor in that behalf. furnish to an Assessor, on or before the last day of that relevant year of assessment, a return in such form and containing such particulars as may be specified by the Commissioner-General, of his or its, as the case may be, liable turnover. The return for each installment shall also show the basis of the calculation of the Service Charge and any other details as specified by the Commissioner-General under this section.

8. Maintenance of records.

Every person and partnership chargeable with the Service Charge shall maintain a record of the transactions of every trade, business, profession or vocation carried on or exercised by such person or partnership, in such manner as would facilitate the reconciliation of the return of liable turnover furnished by such person or partnership under section 7 of this Act, with such record.

9. Assessor to make assessments.

Where in the opinion of an Assessor, any person or partnership who or which being chargeable with the Service Charge for any relevant year of assessment—

(a) has not paid the Service Charge; or

(b) has paid an amount less than the proper amount which such person or such partnership ought to have paid as Service Charge for such relevant year of assessment,

such Assessor may assess the amount of the Service Charge which, in his opinion, ought to have been paid by such person or partnership as the Service Charge for that relevant year of assessment and shall by notice in writing require such person or partnership to forthwith pay—

(a) the amount of the Service Charge so assessed for that relevant year of assessment, if that person or that partnership has not paid any Service Charge for that relevant year of assessment; or

(b) the difference between the amount of the Service Charge so assessed and the amount of the Service Charge actually paid by such person or partnership for that relevant year of assessment, if such person has paid any amount as Service Charge for that relevant year of assessment.

10. Service Charge not paid deemed to be in default.

Any installment or part thereof the service charge not paid on or before the date specified for the making of the payment as are required in section 6 shall be deemed to be in default and any individual a partner of a partnership, a director or other principal officer of a company or any other body corporate including a public corporation, any member or an officer of any unincorporated body, which is liable to pay the service charge which is in default shall be deemed to be a defaulter for the purposes of this Part of this Act.

11. Certain provisions of the Inland Revenue Act, No. 38 of 2000 to apply.

The provision of Chapters XII, XIX, XX, XXI, XXII, XXIII, XXIV, XXV, XXVI and XXVII of the Inland Revenue Act relating respectively to the Appeals. Finality of Assessments and Penalty for Incorrect Returns, Tax in Default and Sums Added Thereto. Recovery of Tax, Miscellaneous matters, Repayment, Penalties and Offences, Administration and General matters shall mutatis mutandis, apply respectively to the Appeals, Finality of Assessments and Penalty for Incorrect Returns. Service Charge in default and sums added thereto, Recovery of Service Charge, Miscellaneous matters, Repayment, Penalties and Offences, Administration and General matters under this Act.

[S 11 am by s 4 of Act 7 of 2005.]

11A. Regulations.

(1) The Minister may make regulations in respect of all matters which are required by this Act to be prescribed or in respect of which regulations are required or authorised to be made under this Act.

(2) In particular and without prejudice to the generality of the powers conferred by subsection (1), the Minster may make regulations specifying the guidelines relating to the meaning of the expression "turnover” as is used in subsection (3) of section 2 is to be ascertained in its application to cases where the proviso to the definition of the expression "turnover” in that subsection does not apply.

(3) Every regulation made under subsection (1) shall be published in the Gazette and shall come into operation on the date of publication, or on such later date as may be specified therein.

(4) Every regulation made under subsection (1) shall, as soon as convenient after its publication in the Gazette, be placed before Parliament for approval. Every regulation which is not so approved shall be deemed to be rescinded as from the date of disapproval, but without prejudice to anything previously done thereunder.

(5) Notification of the date on which any regulation is deemed to be so rescinded shall be published in the Gazette.

[S 11A ins by s 5 of Act 7 of 2005.]

12. Interpretation.

In this Act unless the context otherwise requires:

"agent”, "allowance for depreciation”, "Assessor” and "company”, shall have the respective meanings assigned to them in the Inland Revenue Act;

[Am by s 6(1) of Act 7 of 2005.]

"BOI enterprise” in relation to any relevant year of assessment means any enterprise in relation to which the exemption of its profits and income from income tax, in terms of any agreement entered into by the Board of Investment of Sri Lanka with such enterprise under section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, subsists during the whole or any part thereof of that relevant year of assessment;

[Subs by s 6(2) of Act 7 of 2005.]

"business”, "capital asset”, "Commissioner General”, "disposal” shall have the respective meanings assigned to them in the Inland Revenue Act;

"Commissioner-General” and "Deputy Commissioner” shall have the same meaning as in the Inland Revenue Act,

"Inland Revenue Act” means the Inland Revenue Act, No. 38 of 2000;

"partnership”, "proceeds” and "profits or income” shall have the respective meanings assigned to them in the Inland Revenue Act;

"person” includes a company or a body of persons, but does not include—

(a) any registered society, within the meaning of the Co-operative Societies Law, No. 5 of 1972;

(b) any non-resident person carrying on business as an owner or charterer of an aircraft or ship;

[subs by s 6(3) of Act 7 of 2005.]

"statutory income”, "taxable income”, "trade”, and "year of assessment” shall have the respective meanings assigned to them in the Inland Revenue Act.

13. Date of Coming into operation of this part.

(1) The provisions of this Part of this Act shall be deemed for all purposes to have come into operation on April 1, 2004.

(2) Where any amount has been collected by the Commissioner-General as Service Charge in terms of this Part of the Act during the period commencing from April 1, 2004 and ending on the date of commencement of this Act, the Service Charge so collected shall be deemed to have been validly charged and levied and the Commissioner-General is hereby indemnified from any action civil or criminal in respect of the collection of such Service Charge.

PART II

Imposition of Cellular telephone Subscribers' Levy

14. Imposition of Cellular telephone Subscriber Levy.

There shall be charged and levied from every person using a cellular telephone, (hereinafter referred to as "the user”) for each year commencing on or after January 1, 2004 a levy called Cellular telephone Subscriber Levy (hereinafter referred to as "the levy”) at the rate of ten per centum calculated on the value of supply of services or future services by the telephone operator as referred to in section 15 to the user of such cellular telephone in respect of each month:

[S 14 am by s 2 of Act 37 of 2007; s 2 of Act 7 of 2008; s 5 of Act 13 of 2009.]

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Recent Updates

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LAW COMMISSION (AMENDMENT) ACT, NO. 19 OF 2016


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NATION BUILDING TAX (AMENDMENT) ACT, NO. 22 OF 2016


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LAW COMMISSION (AMENDMENT) ACT, NO. 19 OF 2016


VALUE ADDED TAX (AMENDMENT) ACT, NO. 20 OF 2016


PORTS AND AIRPORTS DEVELOPMENT LEVY (AMENDMENT) ACT, NO. 21 OF 2016


NATION BUILDING TAX (AMENDMENT) ACT, NO. 22 OF 2016


IMMIGRANTS AND EMIGRANTS (AMENDMENT) ACT, No. 7 OF 2015


LAW COMMISSION (AMENDMENT) ACT, NO. 19 OF 2016


VALUE ADDED TAX (AMENDMENT) ACT, NO. 20 OF 2016


PORTS AND AIRPORTS DEVELOPMENT LEVY (AMENDMENT) ACT, NO. 21 OF 2016


NATION BUILDING TAX (AMENDMENT) ACT, NO. 22 OF 2016


IMMIGRANTS AND EMIGRANTS (AMENDMENT) ACT, No. 7 OF 2015


LAW COMMISSION (AMENDMENT) ACT, NO. 19 OF 2016


VALUE ADDED TAX (AMENDMENT) ACT, NO. 20 OF 2016


PORTS AND AIRPORTS DEVELOPMENT LEVY (AMENDMENT) ACT, NO. 21 OF 2016


NATION BUILDING TAX (AMENDMENT) ACT, NO. 22 OF 2016


IMMIGRANTS AND EMIGRANTS (AMENDMENT) ACT, No. 7 OF 2015


LAW COMMISSION (AMENDMENT) ACT, NO. 19 OF 2016


VALUE ADDED TAX (AMENDMENT) ACT, NO. 20 OF 2016


PORTS AND AIRPORTS DEVELOPMENT LEVY (AMENDMENT) ACT, NO. 21 OF 2016


NATION BUILDING TAX (AMENDMENT) ACT, NO. 22 OF 2016


IMMIGRANTS AND EMIGRANTS (AMENDMENT) ACT, No. 7 OF 2015