Tax Relief: Major Amendments to Inland Revenue Bill 2026 📈

The Sri Lankan Government has agreed to withdraw several controversial clauses from the Inland Revenue (Amendment) Bill 2026 following Supreme Court challenges and industry pushback. This move is seen as a significant win for SMEs, startups, and the insurance sector. • Key Revisions & Withdrawals: Evidentiary Lockout: The harsh proposal to bar documents not submitted within strict timelines (6–9 months) from court proceedings has been completely dropped. Thin Capitalization: Attempts to redefine "reserves" were withdrawn, maintaining judicial precedents that protect businesses from unfair tax deductions on loans during loss-making periods. Life Insurance: Proposed changes to taxable profit calculations and IFRS 17 adjustments for life insurance firms have been scrapped. • Taxpayer Relief Measures: Interest Waiver Extension: The waiver on interest for late payments, originally ending March 2023, is now extended to 31 March 2025. Condition: Full principal tax and penalties must be settled within 6 months of the Act’s commencement to qualify. • Investor & Compliance Updates: Foreign Investment: Updated terminology replaces the 'Golden Paradise' visa with the Investor Category Residence Visa. Holders remain deemed non-residents, taxed only on Sri Lankan-source income. Ongoing Disputes: Legal challenges remain regarding the criminalization of administrative defaults and fast-tracked summary trials; Supreme Court determinations are expected this week. _Source: Provisional data based on Cabinet Memorandum and Court proceedings._