ACCA holds workshop on strategic impact of new Inland Revenue Act

With the aim of providing an insight into the key changes that senior management need to be aware of, in the new Inland Revenue Act No. 24 of 2017, implemented from 1 April, ACCA (the Association of Chartered Certified Accountants) recently held a workshop on the topic titled ‘Strategic Insights into the New IRD Act No. 24 OF 2017’.

The planned outcome of the workshop was to prepare ACCA members to comply with the new requirements and to clarify certain strategic impacts to enable them to advice business leaders.

The keynote speaker was Nisreen Rehmanjee, Vice President and Group Head of Tax Strategy of the John Keells Group.

Nisreen counts over 23 years of experience in both national and international taxation. She currently serves on the Tax Subcommittee of the Ceylon Chamber of Commerce and is a member of the ACCA Global Tax Forum. Her overseas experience includes a stint with the Global Tax Solutions team in London during her tenure with KPMG.

Nisreen commenced the presentation with the Scheduler system of taxation and the challenges to be faced in implementing it and explained the Act envisages the computation of profits from business and investment separately. She said that this is important in view of specific expense deduction rules and loss set off rules that have been introduced to arrive at the assessable income from each source. 

She noted that businesses needed to have systems and process in place to identify, track and segregate the various incomes and expenses in order to facilitate this process. She observed that the predominant criteria is applied to determine availability of the lower rate of 14% to a company, but once eligibility is established, all sources of income of the entity would be entitled to this rate.

Nisreen outlined salient feature of how realization of assets and liabilities would be taxed going forward including the key differentiators between impact on investment assets, capital assets of a business and depreciable assets. She touched on the changes effecting the claim of capital allowances specially highlighting its impact on buildings constructed on leased land which would henceforth be eligible as intangible assets.

Also discussed were rules on the utilisation of tax losses, deduction on account of interest/finance costs, taxation of exchange gains and losses and the tax impact on dividend receipts, payments and redistributions.

Nisreen concluded by highlighting the transitional provisions that are currently incorporated into the law and drew attention to other transitional concerns which still requires clarity from the Ministry of Finance and or the Department of Inland Revenue.

A panel discussion followed, moderated by Suren Rajakarier, Partner and Head of Audit and Assurance, KPMG Sri Lanka and Vice Chairman of the Member Network Panel of ACCA Sri Lanka.

The panelists comprised Nilanthi Sivaparagasam, CFO, Aitken Spence PLC, Dirk Perera, CEO, Union Assurance, Sharmila Jayasekera, Partner and Head of Tax, KPMG Sri Lanka and Amal Badugodahewa, Group Head of Tax, Carsons Cumberbatch PLC.

Nilanthi Sivapragasam and Amal Badugodahewa discussed the extent of corporate activism demonstrated by the Ceylon Chamber of Commerce and the Group Tax Forum. Shamila Jayasekera clarified certain difficulties and independence considerations that will be faced by a tax practitioner due to the requirement to sign off tax returns on behalf of companies and  the provision of declaring a scheme as ‘artificial’ by the IRD. 

Dirk Pereira provided insights  on how there was extensive discussions to ensure the insurance and financial services sectors were not negatively impacted while paying their fair share of taxes and Suren Rajakarier touched on the deferred tax impact on financial reporting due to the changes introduced.

Some of the conclusions were that the new tax regime is more income equalising, as there is very little space to reduce taxes through tax avoidance schemes. The panel also welcomed the move to allow legitimate business deductions which were previously disallowed, though concerns were expressed on limits placed on deduction of borrowing costs which may contribute to increased tax revenue but affect business expansion. The panel however believed that if the main objective of the new tax regime was to simplify administration then more needs to be done to give clarity on the areas which are unresolved as of now.