Introduction
On March 21, 2024, the Inland Revenue Department of Sri Lanka issued Extraordinary Gazette Notification No. 2376/25. This notification introduces significant reporting obligations under the Inland Revenue Act, No. 24 of 2017, as amended by the Inland Revenue (Amendment) Act, No. 4 of 2023. This notice mandates that specific government institutions and financial entities regularly provide prescribed information to the Commissioner General of Inland Revenue (CGIR). Here is a detailed look at what this means for you and how these institutions can stay compliant.
Key Points from the Notice
1. Prescribed Information Sharing
- The Minister of Finance, Economic Stabilization, and National Policies has detailed the types of information that must be shared regularly with the CGIR.
- This information must be submitted via a web-based platform or other electronic means approved by the CGIR. Specific details regarding the submission link or transfer method will be provided later.
2. Entities Required to Furnish Information
- The following entities are mandated to comply:
- The Registrar General of the Registrar General’s Department.
- The Registrar General of Companies of the Department of the Registrar of Companies.
- The Commissioner General of Motor Traffic of the Department of Motor Traffic.
- Officers of any Government Institution in charge of granting contracts for the supply of goods, works, or consulting and non-consulting services.
- Any financial institution, including banks and non-banking financial institutions regulated by the Central Bank of Sri Lanka.
- Chairman of Colombo Stock Exchange.
- The following entities are mandated to comply:
3. Commencement Date
- The obligation to furnish information as per Schedule I of the Gazette Notification commences on July 1, 2024.
Impact on Banks and Financial Institutes
The notice will affect the above institutes with enhanced reporting requirements, operational adjustments to match with the given information requests. Requirements will arise to familiarize the employees on the new reporting requirements and update internal processes to meet the information needs.
Impact on Government Institutions
Affected government institutions must ensure accurate and timely data submissions. Regular audits may be required to ensure compliance. Furthermore, implementing an electronic data transfer mechanism will be necessary.
Impact on the public
- Increased Transparency: Enhanced data sharing between institutions and the IRD will lead to greater transparency in financial and property transactions. This can help reduce tax evasion and ensure that all taxable activities are accurately reported.
- Improved Tax Compliance: The IRD will have access to more comprehensive data, enabling better tracking of individuals’ financial activities. Individuals will need to ensure their financial records are accurate and up-to-date to avoid discrepancies and potential penalties.
How to prepare by public
- Maintain Accurate Records: Individuals should ensure that their financial and property records are accurate and complete. Regularly review bank statements, investment records, and other financial documents to ensure consistency with reported data.
- Seek Professional Advice: Consult with tax professionals or financial advisors to understand the implications of these changes and ensure compliance. Professional guidance can help in optimizing tax obligations and avoiding potential issues.
Conclusion
If implemented properly, the new reporting requirements introduced by the Inland Revenue Department of Sri Lanka will have a broad impact on the public. While these changes aim to improve transparency and tax compliance, they also bring increased scrutiny and the need for diligent financial record-keeping. By staying informed and proactive, individuals can navigate these changes effectively and ensure compliance with the new regulations.
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