Sri Lanka Transfer Pricing
The Sri Lanka Ministry of Finance transfer pricing regulations apply to transactions between “associated undertakings,” i.e., transactions between related parties. The Annex provides an expansive definition of “control” for transfer pricing purposes, including shareholder control, being a primarly lender, providing of guarantees, duplicate directors, dependent agency, contractual relationships, ownership of intangables, or control of raw materials or comsumables. The Commissioner General of Inland Revenue (CGIR) has the power to call upon taxpayers to prove their transactions with associated persons as being arm’s length.
The taxpayer is to provide the “most reliable measure” of arm’s length price in relation to the transaction. The Sri Lanka transfer pricing regulations contain an overriding provision that permits the taxpayer to submit data from a two-year period preceding the taxpayer’s financial year.
The Sri Lanka transfer pricing regulations contains a de minimis rule. The threshold is Rs. 100 Mn, which the taxpayer is to determine by reference to aggregate values, as recorded in the taxpayer’s books of account. The Commissioner General of Inland Revenue (CGIR) has the power to call upon taxpayers to prove their transactions with associated persons as being arm’s length.
The Sri Lanka transfer pricing regulations apply to both domestic and international transactions. The database more likely is be found outside the country. The profit split method splits profits between associated enterprises on an “economically valid basis.” The transfer pricing regulations permit the taxpayer to enter into an Advance Pricing Agreement (APA).