Proposed tax amendments offer clarity for Unit Trusts
View(s):The Unit Trust Association (UTA) of Sri Lanka last week issued a statement on key tax-related provisions concerning Unit Trusts included in the proposed Bill to amend the Inland Revenue Act.
Under the existing Inland Revenue framework, Unit Trusts are treated as pass-through vehicles for income tax purposes, with income taxed in the hands of unit holders. To enhance transparency and enable investors to meet their tax obligations accurately, the proposed Amendment Bill introduces a requirement for Unit Trusts to issue detailed income certifications to investors, the UTA said in its statement.
These certifications will outline income earned, exempt amounts, withholding taxes deducted, and other information as may be specified by the Commissioner General of Inland Revenue. The certificate must be issued within five months from the end of the relevant year of assessment.
UTA quoted Shehani Paranavitane, Partner – Tax at EY Sri Lanka, as saying that where such certification is not provided, the Bill proposes that the Unit Trust be treated as a company for income tax purposes. This measure is intended to encourage consistent disclosure and strengthen tax administration. The proposed requirement is expected to apply with effect from April 1, 2025.
The Amendment Bill also proposes revisions to the capital gains tax applicable to investment assets held by various categories of investors, including Unit Trusts.
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