ESC is a is a levy imposed under the provision of the ESC Act No. 13 of 2006. The following are liable for ESC:

  • Individuals, partnerships, companies(including BOI), body of persons & Corporations who has aggregate liable turnover for the quarter Rs. 10 mn or more.
  • Who has continuously done business for 3 years
  • Buying and selling business (3 Years tax holiday is not applicable)

Liable Turnover

  • VAT (if registered for VAT)
  • In the case of a non resident airline & shipping line company operating in Sri Lanka
  • Bad debts

Not liable:
  • Insurance business life insurance and damages or destruction by strike, riot civil Common terrorism and paid into the consolidated fun
  • In the case of a non resident airline & shipping line company operating in Sri Lanka
  • Government Department, Local Government Authorities, Cooperative Societies

Rates applicable

  • When exempt from income tax (including BOI) - 0.25%
  • From the business of Distributor - 0.1%
  • Taxed at concessional rates in Fifth Schedule of the Income Tax Act - 0.5%
  • Primary conversion of any tea, rubber & coconut plantation - 0.5%
  • Buying and Selling - 0.5%
  • When Income Tax is at normal rates - 1%

When to pay ESC

  • 1st quarter return & payment 20th July
  • 2nd quarter return & payment 20th October
  • 3rd quarter return & payment 20th January
  • 4th quarter return & payment 20th April

How credit is given to Income Tax

  • ESC will rank higher then Income tax in paying
  • ESC paid for any quarter of an year of assessment can be set off against any Income Tax payable for that year of assessment
  • There is a 3 year limit to setting off for Income Tax.
  • In case of a partnership ESC is distributed among partners and deductable against partners tax