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IT rate for the company engaged in manufacturing and exporting of coconut based foods and beverages

Could you explain me what is the exact IT rate for a company engaged in manufacturing and exporting of coconut based foods and beverages? This company purchases raw coconut from local suppliers and converts them into various products and exports the finished products (There's a small portion of local sales as well). Before 2018/19, company used 10% as IT rate and used 14% for 2018/19 due to tax rate changes. For 2019/20, company has not yet finalized annual audit and I just want to know whether the IT rate applicable for both 1st and 2nd period of 2019/20 is 14% or not? Also recently I got to know about a section called 59L which was passed in 2015 as a bill to amend previous IR Act. According to that section it says that "59L. Such part of the tax computed in accordance with this Act, for any year of assessment commencing on or after April 1, 2015, as being payable by any local entrepreneurs engaged in the intercropping activities or vegetable and food processing activities, be reduced by fifty per centum, on the profits and income from such activities". I think this is applicable under new IRD act as well. Now I'm confusing whether we can consider our company as a food processing local entrepreneur and use 12% (under 59L) of IT rate and consider 50% of IT credit (Simply 6% IT rate). Could you please explain me regarding this? Can we use 12% IT rate with 50% tax credit for 2019/20? Also If we can use 6% IT rate (or 12% IT rate with 50% tax credit), then is it possible to adjust tax rate from 01.04.2015 and request for IT refunds? Please explain me.

Kindly note that the Year of Assessment up to 2017/2018 have already time barred to ask for a refund through Return Amendment.(Section 200 of IR Act, No 10 of 2006) .Therefore we are of the view that you will not be able to claim such benefit for those years of assessment.

Further, You may need to refer the Section 59L of IR Act No .10 of 2006 (http://www.ird.gov.lk/en/publications/Income%20Tax_Documents/IR_Act_No_10[E]_2006_(Consolidation_2015).pdf -Page 135) to confirm whether your business is within the definition as per the section.If your business is within the definition, the Given exemption can be claimed for Y/A 2018/2019 onwards.

As per the Transitional Provisions(Gazzette No :No. 2064/53) such benefit can continue.
Refer https://www.taxadvisor.lk/data/uploads/order_under_sec_194_of_inland_revenue_act_that_the_regulations_of_transitional_provisions_no_2064_53.pdf

For the Y/A 2019/2020 following rates should be applied subject to 59L (50% benefit can be claimed)
-For First Nine Months
(b) in the case of a company predominantly conducting a
business of exporting goods and services

Import vehicle parts and scooters

Im in japan and supose to be a import vehicle parts and scooters to sri lanka.i have no idea about the taxes.need to know about the taxes the above items

Dear Sir,


Your question is in the process of evaluating by the  Chartered Accountants.Will let you know the answer during cource of the day.


Support Team


taxadvisor.lk


Avoid double taxation Sri Lanka/USA

I am a dual Sri Lanka/USA citizen resident in the USA. I have rental and dividend income in Sri Lanka. How do I avoid paying double tax on my Sri Lanka income in both Sri Lanka and the USA?

You are taxed as a non resident in Sri Lanka. Hence only income arising in or derived from SL is taxable in SL.  However WHT deducted on Dividend is a final tax in Sri Lanka.
You are entitled to deduct personal relief of Rs. 500,000 (w.e.f.01.01.2020 Rs. 3,000,000) and balance income willbe be taxed at progressive rates. You may be able to get credit in USA if such income is taxed in USA also.


Sale of a House - Company

If a private limited company owns a house which was built by the company itself and used by a director,now the company wants to sell that house to an outsider. Sales proceeds should be the actual purchase consideration or the market value is taken as the sale value for the tax purpose ? What are the taxes payable - Capital gain , VAT,NBT, IT at 28% or 14%? Note:Currently there is no turnover in the company and sale of House is not the business of the company as well. Sample figures : WDW/NBV of the Asset - 4,000,000/- Sales price - 8,000,000/- Market Value - 10,000,000/-

This is with reference to the question raised via our website and state the following.

OUR UNDERSTANDING OF THE TRANSACTION

The company has constructed a house for the director

How does our company register for VAT in Sri Lanka

We have set up a company in Sri Lanka in 2017. It is owned by a non-resident shareholder with the same individual as the sole director. It has not done any business until now (other than to open a local bank account). Now we expect this company will start business activity from 1 Jan 2019 with expected turnover of several million Singapore dollars per year. The first billing will be for 1 million dollars and it is essential that we are able to include output VAT in such billing and also to offset input VAT incurred from our expenses. Pls advise how we can ensure we can get registered timely. Same applies for NBT, if applicable. Thank you

Thank you for making an enquiry through our website.

To check the eligibility for the VAT registration, first we need to get an idea about the nature of the business activity that your company is engaging. Basically  what does the company's turnover comprise.


Thank for you making an enquiry through our website. Accordingly, we give our opinion on the question raised as follows.

Income Tax
As you stated, since you are aware of the Withholding Tax (WHT), we are not focusing to the depth of the WHT matter. However, we give the implication of income tax as follows.

As there is a Double Tax Agreement (DTA) between Germany and Sri Lanka, in computing the income tax liability, the provisions of the DTA shall prevail. Accordingly, we give below implication each and every possible income which could arise from this transaction.

1. The profits and income from sale of software -This could arise in case where the software is sold outright (i.e transfer the exclusive right). In this connection no tax liability shall arise unless your company is carrying out business in Sri Lanka through a permanent establishment situated in Sri Lanka. Therefore, no WHT is applicable.

2. Profits and income from use or right to use of software - if your company is receiving consideration on use or right to use of software, this falls to the meaning of

NBT on rent income

When a person(individual/ company) receives a rent income, is it outside the scope of NBT since there is no BUSINESS?

In the case of provision of services, the NBT shall be charged only where such services are carrying out as a business and exceeded the liable threshold limit. However, in the case of rent, as the rent income is recurring nature, question arise as to how such income does not fall to the business.


Tax exemption on dividends

If a company is exempt from income tax under section 17A of the Act as per an agreement with the BOI, will the dividends declared after 01st April, 2018 be exempt from income tax under section 9 (3) of the New Act, since the exemption for dividends has been granted by the old Act, not by the BOI agreement.
Exemption on dividends under Sec. 10(1)(k) of Inland Revenue Act,No 10 of 2006 will not be applicable from 01.04.2018. hence, we are of the view that dividend declared after 01.04.2018 will be subject to WHT.

Rent Income of a Company

If a company is fully engaged in renting out of residential accommodation, will the rent income be a part of Business income where we can deduct the actual expenses incurred in the production of income OR Investment income where no deduction is allowed for a company. "Service fee" which is an inclusion of business income, specifically excludes rent. However, can we consider it as effectively connected to the business that would otherwise be included in investment income?

It is a business income.


Tax Rate applicable for Companies (SMEs) dealing with liquor

If a company in engaged in local buying and selling of liquor and of which the turnover is less than Rs. 500Mn per year and has satisfied the the other conditions to be a "Small and Medium Enterprise", what is the tax rate (14% or 40%) that the Company is taxed at?

Though it is not excluded from (SMEs) definition,we are of the view that the tax rate applicable to liquor business is 40%.


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