[World Tax News] Sri Lanka Releases Draft Bill to Amend the Inland Revenue Act and More

Editorial Team – [2026] 184 taxmann.com 76 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. Sri Lanka Releases Draft Bill to Amend the Inland Revenue Act

Sri Lanka has released a draft Bill proposing amendments to the Inland Revenue Act, No. 24 of 2017. The proposed changes, some of which have retrospective effect, are summarised below:

• Capital Gains Tax Rates – Increased from 10% to 15% for individuals and partnerships, and from 10% to 30% for trusts, unit trusts, mutual funds and NGOs (effective from the date of enactment).
• Interest Waiver – The Commissioner-General of Inland Revenue may write off outstanding interest on certain tax underpayments and late payments if the taxpayer pays the full principal tax and penalties within six months (effective from the date of enactment).
• Estimated Tax Statement – The requirement to file a Statement of Estimated Tax (SET) is removed. Instalment payments will generally be based on the taxable income of the preceding year, unless otherwise determined under procedures prescribed by the CGIR (effective 1 April 2026).
• Acceptance of Return – An individual’s return will be accepted without further assessment if the declared tax is at least 120% of the previous year’s tax, the full amount is paid without refund claims, and an affidavit confirms absence of fraud, evasion or wilful default (effective 1 April 2025).
• Cash Transaction Deduction – The restriction on deductions for cash payments exceeding LKR 500,000 is relaxed where the cash is directly deposited into the payee’s bank account (effective 8 May 2023).
• Definition of Reserves – The definition is expanded to include negative retained earnings, accumulated losses and deficits, but excludes revaluation reserves (effective 1 April 2025).
• Carry Forward of Excess Payments – Where qualifying payments to specified government institutions cannot be fully deducted due to insufficient assessable income, the excess may be carried forward to subsequent years (effective 1 April 2025).
• Export-related Payments – A deduction is allowed for payments relating to exports of goods or services from Sri Lanka even if the payment has no Sri Lankan source (effective 1 April 2018).
• Head Office Expenditure – Non-residents operating through a Sri Lankan permanent establishment may deduct head office expenditure up to the lower of the actual expenditure or 10% of assessable business income (effective 1 April 2025).
• Expanded Withholding Tax – The 5% withholding requirement is extended to additional professions such as auditors, personal trainers, actors, musicians, photographers, beauticians, cooks, social media specialists and translators (effective from the date of enactment).
• Return Filing Exemption – Individuals are exempt from filing a tax return where employment income is subject to advance personal income tax and interest income for the year does not exceed LKR 5,000 (effective 1 April 2025).
• Foreign Loan Interest – Interest on foreign loans is exempt where the loan is remitted to Sri Lanka in foreign currency through a bank and used locally (effective 1 April 2025).
• Capital Allowance for New Investments – A 100% capital allowance is available for investments in depreciable assets (excluding intangibles) for new undertakings with investments between USD 250,000 and USD 3 million (effective 1 April 2026).
• Enhanced Capital Allowance for Expansion – Claims for enhanced capital allowance on expansion projects require approval from the Board of Investment (effective 1 April 2026).

Source – Draft Bill

2. Georgia Introduces an Annual Reporting Requirement for International Controlled Transactions

Georgia has issued Order No. 52, dated 24 February 2026, published in the Official Gazette, introducing a new annual reporting requirement for information on international controlled transactions. Taxpayers must submit such information where the total value of international controlled transactions in the preceding calendar year exceeds GEL 500,000. This threshold also includes the market value of controlled transactions carried out at no cost, as well as the amounts of outstanding payables and receivables.

Taxpayers who file standard monthly tax returns are required to report this information through Annex 4, which is to be attached to the March monthly return (generally due on 15 April). The annex requires details such as the relevant related parties, the nature of their relationship, the type of transaction, the transaction value in both the transaction currency and GEL, and the transaction date, among other particulars. Additionally, taxpayers must disclose the status of their transfer pricing documentation, including whether the documentation has been prepared, is under preparation, or is intended to be prepared.

Taxpayers filing annual tax returns must provide the same information through Annex M, which is submitted along with the annual return (generally due on 1 April). The information required in Annex M is identical to that required in Annex 4 for the March monthly return.

Order No. 52 entered into force on 25 February 2026 and applies from the 2025 reporting period.

Source – Order No. 52

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