Tax Base of CGT
When would tax on gains realise?
Upon the transfer of ownership.
This will include;
Sale Exchange, Distribution, Cancellation, Redemption, Destruction, Loss, Expiration, Expropriation or surrender of an investment asset.
Calculation of Capital Gain Tax
Difference between the consideration received and the cost of the investment asset at the time of realisation.
“Investment Asset”
A Capital Asset such as ;
· Land or Building
· A membership interest in a company, partnership or trust
· A security or other financial assets
· An option, right or other interest in an asset,
Which is held as part of an investment, is an Investment asset.
Excluded Investment Assets from CGT
Capital Gains from the disposal of a principle place of residence of an individual will be exempted, provided it has been owned by the individual continuously for the last three years before disposal and lived in for at least two of those three years (calculated on a daily basis)
Capital gains from the share market will be exempted under the current Act of Sri Lanka.
Trading stock or depreciable assets.
Quoted shares listed in Colombo Stock Exchange.
Investment assets which are realised in two or more parts.
Realisation of investment asset that is jointly owned.
A property or land which gifted to blood relations.
Exempted amount from CGT
If a resident individual’s gain from the realisation of an investment asset that does not exceed Rs.50, 000/= and the total gains does not exceed Rs.600, 000/= in the year of assessment.
Cost of an Investment Asset
The investment asset held by an individual as at 30.09.2017 cost of asset is equal to the market value of the asset at that time.
Capital Gains Tax adjustment
Inland Revenue Act of Sri Lanka provides for certain adjustments to be made to the cost as well as the “consideration” received for the asset. Costs include Legal fees, advertising expenditure, repair cost, etc
Section 37
(4) In this section, “incidental expenditure” incurred by a person in acquiring or realising an asset shall include – (a) advertising expenditure, transfer taxes, duties and other expenditure of transfer; (b) expenditure of establishing, preserving or defending ownership of the asset; and (c) remuneration for the services of an accountant, agent, auctioneer, broker, consultant, legal advisor, surveyor or valuer relating to expenditure referred to in paragraph (a) or (b)
CGT Rate - 10%
Capital Loss
If the realisation of an investment asset result in a consequent loss, it will not be deductible against any gain from the realisation investment asset,
Furnishing of CGT Returns
& Payment of CGT after the realisation of investment asset.
Every liable person is required to Furnish Returns not later than
1 month after the date of realisation of the investment asset.
Similarly Payment of Tax is due not later than 1 month after the realisation of the investment asset.
Payment must be made either to the relevant Inland Revenue Metropolitan/Regional Office in the Area nearby or Central Document Management Unit (CDMU), 7th Floor (North Wing) of Inland Revenue building
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