It has been three months since we last touched on the subject of the Annual Registration Levy (ARL), and several weeks since the lapse of the extension of the deadline (June 30) for payment of the ARL by companies. However, the public, and more specifically, the business community, continues to have many questions which remain unanswered up to date.
With that in mind, we have identified some of the more frequently asked questions, and done our best to search out answers to them.
1) Does The Registrar Of Companies (ROC) Accept ARL Payments In Practice?
Many doubts still surround the recently introduced Annual Registration Levy. Image courtesy: cctca.com
Yes, the ROC accepts ARL payments from private companies, public companies, companies listed on the Colombo Stock Exchange (CSE), and ‘overseas companies’ (that is, companies incorporated overseas, but which have a registered presence in Sri Lanka) other than liaison offices.
Companies limited by guarantee, and off-shore companies, are not subject to the ARL.
An official ‘Levy Form’ has been issued by the ROC for payment of the ARL. The Levy Form, which can be downloaded from the ROC website, must be filled in electronically and a printout of it must then be manually signed by a director or the company secretary of the relevant company (in the case of private/public companies or companies listed on the CSE), or by the authorised signatory of the company (in the case of overseas companies). Once perfected in such a manner, the requisite sum payable under the ARL can be submitted along with it to the ROC.
As an update to our previous article on this subject, we would have you know that, according to a senior official at the ROC with whom we recently spoke, payments made to the ROC under the ARL requirement are not increased by further taxes.
The ROC issues an official receipt for all payments made to it, including payments under the ARL requirement.
2) Has The ARL Now Been Enshrined In Law?
No, it has not. Up to date, the requirement for companies to pay the ARL is not reflected in any written law, or in any Government Gazette Notification.
3) On what authority does the ROC impose the ARL?
In the absence of written law or regulation on the ARL, the ROC is said to be acting on the authority of instructions it has received from the relevant Ministry, in calling for ARL payments.
- According to the notice displayed at the ROC counter since the run up to the initial deadline for payment of the ARL (March 31), the ROC was acting on a Direction it had received from the Ministry of Industry and Commerce (MIC) (i.e. the Ministry to which the ROC directly reports) in calling for ARL payments.
- A key officer at the ROC informed us that the MIC, in directing the ROC to collect the ARL, was, in turn, acting on instructions it had received, pursuant to the 2016 Budget Proposals, from the Ministry of Finance (MOF).
- The ROC had also received direct instructions from the MOF, via Fiscal Policy Circular No. 01/2015 (II), issued on February 15, 2016, stating, inter alia, that the ARL had been “incorporated into the Schedule I of the Revenue Classification,” and that “Statutory Provision [regarding the ARL will] …be enacted under the Finance Act.” The MOF Circular specifically named the ROC as the relevant “Revenue Accounting Officer,” and accordingly requested the ROC “to carry out all the revenue accounting activities” pertaining to the ARL.
As an aside, it may interest you to know that the Levy Form itself, which states the words “Pursuant to Section 581 of the Budget Proposal 2016,” is the only ROC Form that cites something other than a legal provision as its basis!
4) What if my company has not met the deadline for payment of the ARL?
There are currently no consequences for non-payment of the ARL, but this could change in the future. Image courtesy: dollarsandcommoncents.net
We raised this question with key officers of the ROC when we last touched base with them on this subject, and we did so again this time, only to be met with the same answer, which was, in effect, that there are currently no consequences for the non-payment or delayed payment of the ARL. This is on account of the ROC not having received any instructions with regard to there being consequences applicable in such event.
In being informed of the above, however, we were cautioned that such consequences could apply at a future date, if/when the Finance Act is in fact amended to include the ARL, or regulations are issued to such effect and are published in a Government Gazette Notification.
5) Is there really a levy being imposed on companies wishing to liquidate?
As some may recall, the introduction of a levy of LKR 500,000 (which was later shaved down to LKR 50,000) was proposed, along with the ARL, with regard to companies wishing to voluntarily liquidate. According to Finance Minister Ravi Karunanayake, the introduction of this levy was in order to “discourage voluntary registration” of companies (vide Section 581 of the 2016 Budget Proposals). Needless to say, the Finance Minister’s rationale for the introduction of this levy too, is riddled with ambiguity.
We have been made to understand, by a senior official at the ROC, that this levy is in fact being actively collected by the ROC at present.
According to the Finance Minister’s budget speech last year, the introduction of the ARL was to “discourage voluntary registration”. Image courtesy: asiantribune.com
As stated above, the ROC imposes and currently accepts ARL payments, issuing formal receipts in recognition of such payments, despite the legality of the ARL itself still being in question. Furthermore, scores of representatives of companies have rushed to make ARL payments on time, perhaps on the very understandable (though apparently mistaken) assumption that there would be penalties to face in the immediate future, in the event of delay or non-payment of the ARL.
But what about companies that do not have ready cash and are not in a position to make payments which may turn out to be superfluous? Should such companies, especially small-scale businesses, prioritise the payment of the ARL when to do so could jeopardise their very existence? Will their teetering at the edge of the ARL cost them the added burden of having to pay penalties for their delays at a later date? Will it ultimately take court action (akin to what we recently saw happen with regard to VAT) to resolve the ARL dilemma? And more importantly, can an economy flourish in the midst of such fundamental fumbling?
While at this point we, as the public, do not have answers to many of the questions that have arisen with regard to the ARL, it is vehemently hoped that giving voice to such questions, even in forums such as this, will give rise to open dialogue on the subject, and, ultimately, result in a solution that is progressive and fair by all.
Cover image courtesy: wikipedia.org
