Volume III

Finance Act – 2021

Arrangement of Sections

1. Short title.

PART I
Imposing the Tax on Voluntary Disclosure

2. Persons to whom this Part applies.

3. Undisclosed taxable supplies, income or assets to be invested or deposited.

4. Tax on Voluntary Disclosure.

5. Disclosure of undisclosed taxable supply, income or asset.

6. Immunity granted to declarants.

7. Secrecy.

8. Consequence of failure to comply with the provisions of this Act.

9. Avoidance of doubt.

PART II
PROVISIONS TO WRITE OFF TAX ARREARS UNDER CERTAIN LAWS

10. Persons to whom this Part applies.

11. Tax arrears to be written off in respect of certain taxes.

12. Tax arrears to be written off in respect of certain individuals.

13. Penalty on tax in default to be written off.

14. Tax arrears in dispute not to be written off.

15. Tax refunds to be set off against the tax arrears written off.

16. Commissioner-General to inform amounts set off against tax arrears.

17. Proper records shall be maintained.

18. Sinhala text to prevail in case of inconsistency.

19. Interpretation.

SCHEDULES

18 of 2021.

AN ACT to enable persons to voluntarily disclose undisclosed taxable supplies, income and assets required to be disclosed under certain laws; to provide for the imposition of a tax on the taxable supplies, income and assets so disclosed; to indemnify the persons who voluntarily disclose any such taxable supply, income or asset against liability from investigation, prosecution and penalties under specified laws; to grant certain concessions to persons who had already disclosed taxable supplies, income and assets under specified laws; and for matters connected therewith and incidental thereto.

[Date of Commencement: 17th September, 2021]

1. Short title.

This Act may be cited as the Finance Act.

PART I
Imposing the Tax on Voluntary Disclosure

2. Persons to whom this Part applies.

(1) The provisions of this Part shall, subject to the provisions of subsection (2), apply to any person who has not disclosed any amount of taxable supply, income or asset which was required to be disclosed under the provisions of any law specified in Schedule I hereto (hereinafter in this Part referred to as “undisclosed taxable supply, income or asset”), in a value added tax return for any taxable period ended on or prior to March 31, 2020 or in a return of income for any year of assessment ended on or prior to March 31, 2020.

(2) The provisions of this Part shall not apply to—

(a) any person in relation to whom investigations or legal proceedings under the provisions of any law specified in Schedule II is pending, in relation to any undisclosed taxable supply, income or asset;

(b) any person who has been convicted of an offence under the provisions of any law specified in Schedule II in relation to any undisclosed taxable supply, income or asset; or

(c) any amount of undisclosed taxable supply, income or asset held by any person, in respect of which an assessment under the provisions of any respective law specified in Schedule I or Schedule IV has been made:

Provided however, the provisions of paragraph (c) shall not apply to any amount of undisclosed taxable supply, income or asset which has not been taken into account in making an assessment referred to in that paragraph.

(3) Every person referred to in subsection (1), not being a person referred to in paragraph (a), (b) or (c) of subsection (2), shall hereinafter in this Part referred to as the “person to whom this Part applies”.

3. Undisclosed taxable supplies, income or assets to be invested or deposited.

(1) A person to whom this Part applies, shall invest or deposit an amount equivalent to the undisclosed taxable supply, income or asset, subject to the provisions of subsections (2) and (3).

(2) If a person to whom this Part applies, intends to invest an amount equivalent to the undisclosed taxable supply, income or asset, he shall—

(a) where he is able to immediately invest such amount, purchase—

(i) shares issued by a resident company;

(ii) treasury bills or treasury bonds issued by the Central Bank on behalf of the Government of Sri Lanka;

(iii) any quoted debt securities issued by a resident company in Sri Lanka; or

(iv) any movable or immovable property in Sri Lanka,

on or after the date of commencement of this Act but prior to March 31, 2022; or

(b) where he is unable to immediately invest such 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 March 31, 2022.

(3) Notwithstanding the provisions of subsection (1), the provisions of subsection (2) shall not apply to a person to whom this Part applies who, prior to the date of commencement of this Act—

(a) has utilised an amount equivalent to the undisclosed taxable supply, income or asset, to purchase—

(i) shares issued by a resident company;

(ii) treasury bills or treasury bonds issued by the Central Bank on behalf of the Government of Sri Lanka;

(iii) any quoted debt securities issued by a resident company in Sri Lanka; or

(iv) any movable or immovable property; or

(b) has deposited an amount equivalent to the undisclosed taxable supply, income or asset in a bank account.

4. Tax on Voluntary Disclosure.

(1) A person to whom this Part applies shall be liable to pay a tax to be called the “Tax on Voluntary Disclosure” to the Commissioner-General prior to making the declaration under section 5 subject to the provisions of subsection (2).

(2) Where a person to whom this Part applies intends to disclose—

(a) any undisclosed taxable supply, income or asset other than immovable or movable property in the declaration made under subsection (1) of section 5, he is liable to pay the Tax on Voluntary Disclosure at the rate of one per centum of such amount or income, or on the cost of such asset invested or deposited under section 3; or

(b) any immovable or movable property in the declaration made under subsection (1) of section 5, he is liable to pay Tax on Voluntary Disclosure at the rate of one per centum on the market value of such property on the date of the declaration.

(3) Any amount of the Tax on Voluntary Disclosure paid by a person to whom this Part applies shall not be deemed to be a tax credit or an expenditure within the meaning of the Inland Revenue Act and shall not be refundable.

5. Disclosure of undisclosed taxable supply, income or asset.

(1) Any person to whom this Part applies who has invested or deposited any undisclosed taxable supply, income or asset as specified in section 3 and has paid the Tax on Voluntary Disclosure as specified in section 4, shall on or prior to March 31, 2022, submit to the Commissioner-General a declaration (hereinafter in this Part referred to as the “declarant”) in relation to any undisclosed taxable supply, income or asset, substantially in the relevant form specified in Part I or Part II of Schedule V hereto along with the documents to prove the ownership, date of acquisition and cost or market value of the asset, subject to the guidelines issued by the Commissioner-General under subsection (2).

(2) For the effective implementation of the provisions of this Act, the Commissioner-General may issue necessary guidelines specifying the manner of payment and filing the declaration within one week of the date of coming into operation of this Act.

(3) —

(a) Upon receipt of a declaration made under subsection (1), the Commissioner-General shall verify whether such declaration is in accordance with this Act.

(b) Where the declaration is in accordance with this Act, the Commissioner-General shall accept the declaration in writing and inform of such acceptance to the declarant within 30 days of the date of receipt of the declaration.

(c) If the declaration is not in accordance with the provisions of this Act, the Commissioner-General shall reject the declaration and inform the declarant in writing the reasons for his rejection within 30 days of the date of receipt of such declaration.

(d) If the Commissioner-General fails to inform the declarant as specified in paragraphs (b) and (c) within 30 days the declaration shall be deemed to have been accepted.

(4) Any declarant whose declaration is rejected in terms of subsection (3), shall be entitled to submit a fresh declaration remedying any defects specified in the Commissioner-General’s decision under subsection (3) within 30 days of the receipt of the Commissioner- General’s decision.

(5) Any declarant who provides false or incorrect information in the declaration made under subsection (1) shall not be entitled to the immunity granted under section 6, notwithstanding the acceptance of such declaration by the Commissioner-General under subsection (3).

6. Immunity granted to declarants.

(1) A declarant whose declaration has been accepted by the Commissioner-General under subsection (3) of section 5 and, who has paid the Tax on Voluntary Disclosure as specified in section 4, shall be entitled to enjoy the full immunity from liability to pay any tax, penalty or interest or from any investigation or prosecution—

(a) under the provisions of any law specified in Schedule I hereto, other than the Value Added Tax Act, in relation to any year of assessment ending on or prior to March 31, 2020 in relation to the income or asset disclosed in the declaration made under subsection (1) of section 5;

(b) under the provisions of the Value Added Tax Act in relation to any year of any period ending on or prior to March 31, 2020 in relation to the amount of taxable supplies disclosed in the declaration made under subsection (1) of section 5, unless such tax has been collected by such declarant.

(2) Subject to the provisions of subsection (5) of section 5, the Commissioner-General shall ensure that full immunity as specified above, be granted to any declarant referred to in subsection (1).

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