CHANGE OF RESIDENCE (SECTION 69 & 70 OF THE INLAND REVENUE ACT, NO. 24 OF 2017)
If a foreigner becomes a citizen of Sri Lanka and becomes a non-resident in the previous country, then any assets held in the foreign country by that person will be deemed realised and will be required to pay CGT on the value.
When a person resident in Sri Lanka ceases to be resident in Sri Lanka, the person shall be treated as having immediately before the person ceases to be so resident realised all assets owned by the person.
These shall not apply to an asset that is a domestic asset of the person immediately before becoming a resident or after ceasing to be a resident.
WHAT IS THE CAPITAL GAINS TAX?
The Capital Gains Tax (CGT) is a tax on the realisation of investment assets. CGT is a type of tax which is charged on the profit from a sale of property or an investment and was recently re-introduced in Sri Lanka under the Inland Revenue Act, No. 24 of 2017 and will come to effect from 1st April 2018. This will, however take into account any costs that were incurred on buying, improving and selling such assets and reduce those values from the overall amount. Capital assets include any land, building, machinery and share. However capital gains from the share market will be exempted under the current Act of Sri Lanka. The profits will be taxed at 10% and is effective from 1st April 2018.
WHAT’S AN INVESTMENT ASSET?
A Capital Asset (eg. Land or building, a financial asset) held as part of an investment
WHAT ARE THE EXEMPTIONS FROM CGT?
- The principle place of residence of an individual, provided that it has been owned by the individual continuously for the last 3 years before disposal and lived in at least 2 years of those 3 years (calculated on a daily basis).
- If the profit/gain is less than 50,000 and if the total profits gained within the year (through multiple gains) is less than 600,000
- Investment asset realised in two or more parts
- Realisation of investment asset that is jointly owned
- A property or land gifted to blood relations
- Trading stock or depreciable asset
WHEN IS AN ASSET DEEMED REALISED (I.E. YOU NEED TO PAY CGT)?
- Amount received or receivable on the realisation (cash received for sale)
- Consideration received other than cash (eg. Exchange of asset to another asset)
- Amount received in respect to owning the asset (eg. Altering, repair)
- Grant of an Option
- Transfer of ownership of asset (eg. Sale, exchange, distribute, transfer, cancel, loss, destroy)
- Death of an individual
- Realisation with retention of asset (lease, write-off, change of residence)