Capital Gain Tax (CGT) was re-introduced in Sri Lanka by the Inland Revenue Act No. 24 of 2017 with effect from 1st April 01, 2018. The history of CGT dates back to 1978 when a tax rate of 45% was introduced, later reduced to 25% and finally being abolished in 2002.
The CGT is a tax on profit on disposing of investment assets. The effective tax rate under CGT is 10%.
What is meant by profit?
That is the gain, not the amount received on the realization of an investment asset.
What does “disposing of” mean?
Disposing of means, selling, transferring to someone or swapping for something else and getting compensation (E.g.: insurance payout at a loss)
What is an investment asset?
As per Sec. 195 of the Inland Revenue Act, an investment asset means capital assets held as a part of investment such as land or building; a membership interest in a company, partnership, or trust; security or other financial assets and an option, right, or other interest in an asset.
What are the exemptions from CGT?
If the profit is less than Rs. 50,000/- (if multiple gains, a cumulative amount less than Rs. 600,000/- within a year), the principal place of residence of an individual provided it has been owned by the individual continuously for three years before disposal and lived in at least for 2 years out of those 3 years (calculated daily), capital gains from share market, depreciable assets, a property (or land) gifted to blood relations, investment assets realized in two or more parts and realization of Investment assets jointly owned.
What is the cost of an investment asset?
The cost of investment asset held by a person as of 30th September 2017.
How is capital gain calculated?
Capital gain = Selling price-Cost as at 30/09/2017
The cost as of 30/09/2017 is equal to the market value of the asset at that time. If the property was acquired before 30/09/2017, then the cost would be valued as of 30/09/2017.
And if the asset was acquired after that date, then it will be the cost of acquiring that asset.
Every liable person should make payment to Inland Revenue Department within one month after the date of realization of the investment asset.
0 comments: