1. MAHESH RANAWAKAARACHCHI
Business Taxation By
MAHESH RANAWAKAARACHCHI
Deputy Commissioner - Department of Inland Revenue
B.B.Mgt.(Acc.) Sp. Hon., Finalist of CA Sri Lanka,
ATII, FPFA, NCBS, CTA (CA Sri Lanka)
MBA(Taxation)(PIM) and LLB Reading

2. INTRODUCTION OF TAX ATION

3. What is the Tax ?
Tax is a compulsory levy or a fee that imposed and charged by the Government from the public for common causes.
Cannot refuse to pay tax. Any refusal in this regard leads to punishment.
Tax impose a personal obligation on the tax payer. When a person become liable to pay tax, if it is the duty of him to pay it.

4. What is the Tax ?
Tax revenue is used for the general and common benefit of the people as a whole.
Tax is a legal collection. It can be levied only by the Government.
the payment of tax is regular and periodical in nature
Tax is levied on all people without any discrimination. but according to their ability to pay.

5. What is the Objective of taxation ?
Raising Government revenue
Removal of inequalities in income and wealth
Ensuring the economic stability
Capital accumulation
Creation of employment opportunities

6. Function and purpose of taxation
Economic factors
Collection of taxes - withdrawal from the economy.
Government expenditure
- Injection into the economy.
- Provision of public goods and services.
- Direct the economy towards policy objectives
Social Factors
Redistribution of wealth

7. Principles of Taxation
Equity
Tax system base on the ability to pay
Certainty
time of payment , manner of payment and amount to be paid, should be clear and plain to contributor and every other person.
Simplicity
tax system should be simple, easy and understandable

8. Principles of Taxation
Economy
minimum expenses for tax collection & maximum revenue to Government Treasury
Stability
tax structure once designed with care and long term objectives in view, must as far as possible be unchanged.
Progressivity
higher income groups should pay proportionately more than the lower income groups.

9. Who bear the TAX Tax will be affected on two ways. Direct affect :-
To pay the taxes if there is a liability to pay tax. Tax bear by the payee. It’s cant be transferred to other
Indirect affect :-
To compliance under special regulation available in the Tax law. Tax bear by the other person It’s can be transfer to other

10. Scope of Taxation legislation
Act
Gazette Notification
Ruling issued by the Department
Decided Tax Cases by courts
Departmental (IRD) procedures

11. Tax Authorities in Sri Lanka
There are basically four tax authorities In Sri Lanka
Inland Revenue Department
Sri Lanka Custom
Excise Department
Provincial counsel – Revenue Department

12. Department of Inland Revenue (IRD)

13. IRD Venue Inland Revenue Building ,Colombo 02. Mission
To collect taxes in-terms of relevant tax and other related laws, by encouraging voluntary compliance while deterring tax evasion and tax avoidance, and To enhance public confidence in the tax system administered by the Department of Inland Revenue by administering relevant tax and other related laws in a fair, friendly and expeditious manner and thereby facilitate a beneficial tax culture

14. IRD
Main Objectives
Get assurance whether tax payer remitted the correct taxes ,by correct way on due date.
Awareness of the Tax community and the General public
Information Source
Tax Payer service Unit (1st floor , IRD Building )
Paper notification

15. IRD
Tax System Since 1932
Income tax was first introduced in Sri Lanka in (First year of Assessment 1931/1932).
The Income Tax Department was established in the same year to administer this tax.
Mr. N.J. Huxham was the first Commissioner.
Year Introduction of the Self Assessment Scheme.
Year 1971-PAYE scheme was introduced.
Year 1979-Introduced current year basis taxation (79/80)

16. IRD Organization Chart
Commissioner General (CGIR)
Deputy Commissioner General (DCGIR)
Senior Commissioner (SCIR)
Commissioner (CIR)
Senior Deputy Commissioner (SDC)
Deputy Commissioner (DC)
Assistant Commissioner (AC)

17. IRD Taxes administrated Income Tax (IT) Value Added Tax (VAT)
- PAYE
- Withholding Tax on Interest, Treasury Bills, Company Debts Security
- Withholding Tax on Dividends
Value Added Tax (VAT)
-Value Added Tax on Financial Services (VATFS)
Nation Building Tax (NBT)
-Nation Building Tax on Financial Services (NBTFS)
Economics Service Charge (ESC)
Betting & Gamming Levy
Stamp Duty
Construction Guarantee Fund Levy

18. Income Tax Profit and Income Accounting Profit Vs Taxable Profit
“profits” or “income” means the net profits or income from any source for any period calculated in accordance with the provisions of this Act.
Accounting Profit Vs Taxable Profit

19. Income Tax Consequences for Non - Compliance
If Non Compliance to tax law, that will be happen,
Imposition of penalties by both CGIR and Magistrate
Prosecution action (Legal Action)
Tax liability will be estimated and issue the additional Assessment by the IRD

20. Income Tax PERVILAGE For Good Tax Payers Amount of tax paid more than
Rs.500,000 – Silver Card
Rs.1,000,000-Gold Card
for any year of assessment