Capital Gain Tax (CGT) on Property in Sri Lanka
Capital Gain Tax
The Inland Revenue Act No.24 of 2017, taking effect from April 1, 2018 introduces Capital Gain Tax (CGT) on gain from the realization of investment assets. For income tax purposes, capital gain tax is treated as an investment income and it is charged in section 7(2) b as,
“Gain from realization of investment assets as calculated under chapter IV (section 36-51)”
Acts
- Inland Revenue Act, No.24 of 2017 [Certified on 24th October,2017]
- Guide to Inland Revenue Act (Draft)
Tax base and calculation of CGT
Capital Gain Tax is a tax on gains realized on the transfer of ownership including sale, exchange, transfer, distribute, cancel, redeem, destroy, loss, expire, expropriate or surrender of an investment asset. The only gain that should be subject to CGT will be the gain on the realization of an investment asset.
Capital gain is calculated as the difference between the consideration received and the cost of the investment asset at the time of realization.
“Investment Asset” (Sec.195)
Means a capital asset held as part of an investment, but –
Excludes the principle place of residence of an individual, provided it has been owned by the individual continuously for the three years before disposal and lived in for at least two of those three years (calculated on a daily basis);
“Capital Asset”(Sec.195)
Means each of the following assets: –
- 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 referred to in the foregoing paragraphs; but
- Excludes trading stock or a depreciable asset;
Excluded Investment Assets from CGT
- Principle place of residence (as mentioned above)
- Quoted shares listed in Colombo Stock Exchange
Exempted amount from CGT
Where resident individual’s gain from realization 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 a person as at 30.09.2017 cost of asset is equal to the market value of the asset at that time.
CGT Rate – 10%
Capital Loss
A loss from realization of investment asset will not be deductible against any gain from realization investment asset.
Furnishing of CTG Returns & Payment of Tax
Every Liable person shall file CGT return and make payment after the realization of investment asset.
Due Date for Payment of Tax :
Not later than one month after the date of realization of investment asset.
Due Date for Furnish Returns :
Not later than one month after the date of realization of investment asset.
Submit to :
The relevant Inland Revenue Metropolitan/Regional Office in the Area nearby.
Central Document Management Unit (CDMU), 7th Floor (North Wing) of Inland Revenue building