Sri Lanka Offers The First Tax Amnesty in 21 Years For Capital Gains
With the parliament passing a special amnesty for capital gains tax for the first time since 2001, as per the Finance Act No. 18 of 2021 now people have the opportunity of paying just 1% of their returns when declaring their gains before the 31st of March this year. To get more insight into this tax and the process of claiming this discount, LankaPropertyWeb interviewed the Director of Lanka. Tax and tax consultant Mahesh Yogarajan.
Capital gains tax in Sri Lanka is charged on assets such as lands, buildings, a trust fund, or any other asset that can be identified as a store of value. The general tax rate for capital gains is between 10% – 18% however by declaring gains earlier there are numerous benefits people can enjoy. Some of these include complete indemnity from investigations and prosecutions, avoiding 75% of penalties, and saving up to 10%.
Commenting on special exemptions for this tax Mahesh added, “If you inherit an asset, receive it as a gift or have it transferred to you after a person’s death, the tax is calculated at the original price when it is being sold.” He also stated that for properties purchased and not inherited before the 30th of September 2017, valuations should be obtained as of that date to establish the baseline for cost or market value.
The exemption is particularly applicable for those that haven’t fully declared their assets and income and those who haven’t paid capital gains tax for properties that have been sold before the 31st of March 2020.
However, capital gains tax isn’t applicable to those that sell their residence after owning it for 3 years and living in it for 2 years.
Commenting on this Mahesh said, “Consider the timelines when you’re about to sell a property. If you can stay there an extra month and save ten percent on the gain, it might be worthwhile deferring the sale by that month to be more tax-efficient.”
Not declaring assets and paying taxes before the due period could lead to a fine of 10 million rupees or more or two years of imprisonment or both.
To get more details on the capital gains tax and how you can claim the special exemption, check out our interview with Mahesh Yogarajan below.
Posted Date: 15th March 2022