Confusion continues over the implementation of WHT
Continued from page 1
Under the new Foreign Exchange Act No 12 of 2017, all existing NonResident Foreign Currency Accounts (NRFC), Resident Foreign Currency Accounts (RFC), Resident NonNational Foreign Currency Accounts, Non-Resident NonNational Foreign Currency accounts have been re-designated as Personal Foreign Currency Accounts.
Existing Foreign Exchange Earner Accounts (FEEA), Inward Remittance Distribution Accounts (IRDA) and Foreign Currency Accounts for Agents of Foreign Shipping Line or Airlines (FCAAF SAs) will be considered as Business Foreign Currency Accounts (BFCAs).
Resident Guest Foreign Currency Accounts and Senior Foreign Nationals Special Accounts will remain as it is under the previous law, he revealed.
Personal Foreign Currency Accounts (PFCAs) and Business Foreign Currency Accounts (BFCAs) could be opened and maintained as Current (but without cheque drawing facility), Savings or Term Deposit accounts in any designated foreign currency.
The Finance Ministry in collaboration with the Central Bank has streamlined non-resident’s dollar accounts and the WHT will be levied accordingly, he said adding that no one should be confused over the current taxation.
Previously NRFC accounts were exempted from the tax as an incentive towards bringing in foreign currency earnings to Sri Lanka, without keeping them abroad.
But under the new act, WHT is applicable for NRFCs as well; he disclosed adding that the Finance Ministry is willing to amend any areas of the law including the withholding tax. However the confusion continued on the applicable date of the WHT as there was no clarity in the IRD circular issued for this purpose.
According to the IRD’s circular (SEC//20I8/01) issued on March 16 “tax should be withheld at the time the interest /discount /profit is paid or credited, reinvested, accumulated or capitalised”,
Clarifying the imposition of WHT a senior banker told the Business Times” if a deposit is made in July 2016 and matures in July 2018, the WHT will not be imposed pro rata from April 2018 but for the entire two years. (BS)