According to the notice of 25 November 2020, under the Regulation 1 of the TP Gazette, transfer pricing regulations inter alia, are applicable to the local transactions made between associated enterprises (AE) as referred to in section 77 of the Inland Revenue Act No 24 of 2017 (IRA) provided one of such AE had been granted any tax exemptions or subject to different tax rates.
Certain tax exemptions and concessionary tax rates were introduced by the Government effective from either 01.04.2019 or 01.01.2020. Hence, if any such AE becomes entitled to such exemption or concessionary tax rates as the case may be, requirement to submit the transfer pricing documentations (Local file and Transfer Pricing Disclosure Form) would arise if the controlled transactions made with AE which is entitled to the aforesaid exemptions and/or concessionary tax rates, exceed LKR 200 million.
Any enterprise that carrying out aggregate controlled transactions exceeding LKR 200 million with associated enterprises during the year of assessment 2019/2020 is required to file the TPDF along with the return of income. Such enterprises are required to put a (√) in both “YES” cages under Return Schedules 1 and 2. Others are required to put a (√) in both “NO” cages under Return Schedule 1 and 2.
