Penalty on tax in default to be written off if dues as at 31 December 2020 settled in full by 31 March 2022
The Government has published a Tax Amnesty Bill which would indemnify persons who voluntarily disclose taxable supply, income or assets, against liability from investigation, prosecution and penalties.
Cabinet last week approved the Finance Bill which has been published in the gazette ahead of its tabling in Parliament.
The provisions of the Bill will apply to any person who has not disclosed any amount of taxable supply, income or assets, which were required to be disclosed under the provisions of any law in a value added tax return for any taxable period ended on or prior to 31 March 2020, or in a return of income for any year of assessment ended on or prior to 31 March 2020.
The Bill provides for a person who intends to invest an amount equivalent to the undisclosed taxable supply, income, or assets, immediately, to invest such amount in the purchase of shares issued by a resident company; Treasury bills or Treasury bonds issued by the Central Bank on behalf of the Government of Sri Lanka; any quoted debt securities issued by a resident company in the country; or any movable or immovable property.
This can be done on or after the date of commencement of this Act but prior to 31 December 2021.
In case a person is unable to immediately invest such an amount available in cash, whether in Sri Lankan rupees or in foreign currency, he shall deposit such amount in a bank account, on or after the date of commencement of this Act but prior to 31 December 2021.
If a person to whom the law applies intends to disclose any undisclosed taxable supply, income, or assets, other than immovable or movable property, he is liable to pay the Tax on Voluntary Disclosure at the rate of 1% per centum of such amount or income, or on the cost of such asset, invested or deposited, or any immovable or movable property.
The Bill also states the Commissioner General shall write off any penalty or interest, calculated in terms of the provisions of any law specified in relation to a taxpayer, in respect of which the payment due date was 31 December 2020, or a date prior to that date, if the taxpayer settles the full amount of the tax outstanding, under the provisions of said laws, on or prior to 31 March 2022.
The Government says the new Bill is to encourage entrepreneurs to disclose and invest undisclosed income and assets and is in keeping with the 2021 Budget proposal to impose legal provisions to exempt such investors from the obligation to pay taxes, penalty, or interest, and to pay only a 1% Tax on Voluntary Disclosure, free from investigation or prosecution.
The law will not apply to any person in relation to whom investigations or legal proceedings are pending, in relation to any undisclosed taxable supply, income or assets, or any person who has been convicted of a related offence.
(FT)