VAT Guide to Value Added Tax - sri lanka inland revenue ...

a business in Sri Lanka and not to a business outside Sri Lanka although the
owner of such business may be living outside Sri Lanka (Please see para
10.5.14 and 25.6)
Eg. I.
I introduced clients to a foreign insurance company which has no branch in Sri
Lanka. I received a payment in foreign currency which represents the fees for
introducing the clients and commission and other charges for subsequent work
done in respect of the insurance business carried on by the foreign
company with the Sri Lankan clients introduced by me. This work includes
making survey reports relating to claims made by the insured clients. Am I liable
to VAT on the payment received from the foreign company which was received in
foreign currency?.
A: Yes. You are liable to VAT. Firstly you are carrying on a taxable activity in Sri
Lanka. Secondly you are rendering services to a business in Sri Lanka although
it is carried on by a foreign principle. (Please see para 10.5.14) The fact that
the payment is received in foreign currency is not material. The criteria to be
considered are (i) the place where the taxable activity is carried on by you (ii) The
place where the services are performed by you and (iii) The place of business
where such services are utilized. The services supplied by you are utilized by a
business in Sri Lanka although it is carried on by a person outside Sri Lanka.
The services were utilized by the business of insurance carried on in Sri Lanka
by the foreign company.
Eg:.2. I am acting as the representative of a foreign company which is supplying goods
in Sri Lanka. I take orders on behalf of that company and fax them to that
company. In a few cases the Sri Lankan traders who give the orders import the
goods themselves, In other cases I import the goods and supply them to the
local traders, at the pre agreed price on behalf of the foreign company. The sale
proceeds are credited to a bank account in the name of the foreign company. I
am paid a fee for introducing customers and a commission in respect of the
orders canvassed by me. What is my position with regard to VAT ?.
A
In this case two persons and two taxable activities are involved. One is importing
and selling goods in Sri Lanka, which is a taxable activity carried on by you on
behalf of the foreign company. You should obtain a separate registration for
that. By virtue of section 55 you are liable in the like manner and to the like
amount as the foreign principle would be chargeable under the Act. The other
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