Income Tax

Income Tax (Amendments to the Inland Revenue Act, No.24 of 2017)

1.1 Exemptions

1.1.1 The Earnings by any non-resident person on any sovereign bond denominated in local or foreign currency will be exempted.

1.1.2 Interest income earned by any resident person on sovereign bonds denominated in foreign currency, including Sri Lanka Development Bonds (SLDB) will be exempted.

1.1.3 Interest income earned by any person on NRFC and RFC accounts will be exempted for 5 years

1.1.4 Interest income, up to Rs.5,000/- per month, earned by children of less than 18 years of age, in relation to any deposit account maintained in a financial institution, will be exempted.

1.1.5 Interest paid to any person outside Sri Lanka on loans granted by such person to any person in Sri Lanka will be exempted. This exemption will not be applicable to loans granted by a Non-resident company to its Holding company or a Subsidiary Company in Sri Lanka.

 

1.2 Withholding Tax (WHT)

1.2.1 Royalty payments not exceeding Rs.50,000 per month, subject to Rs.500,000/- for each year of         assessment, made to any resident individual will be exempted from WHT.

1.2.2 Rent payments not exceeding Rs.50,000 per month, subject to Rs.500,000/- for each year of assessment, made to any resident individual will be exempted from WHT.

 

Income Tax Incentive 

1.3 Incentives for Information Technology The requirement of minimum 50 employees in order to qualify for the additional deduction equal to 35% of the salary cost when calculating the income from the business of IT will be removed.

1.4 Investment Incentives for Existing Businesses Tax concessions by way of accelerated depreciation will be granted instead of regular depreciation for the new investments made by existing businesses.

 

Definition 

1.5 Definition of Gross Income The “gross income” referred to in item (iii) of the subparagraph (3) of paragraph 4 of First Schedule will be the total income excluding the investment income. The concessionary tax rate of 14% will be applied only on the income from an activity eligible for the concessionary tax rate. The investment income will be liable for tax at 28%.

 

1.6 High value Investment Incentives

Proposed Incentives to Accelerate High Value Domestic and Foreign Direct Investments

LARGE SCALE PROJECTS (INVESTMENT ABOVE $100 MILLION)

The incentive regime for large scale projects is as follows;

(a) Income tax computation for Investments over $100 mn:

A person that invests a total sum of US$ 100 mn or more in depreciable assets, excluding intangible assets, in a project approved by the Board of Investment of Sri Lanka established under Board of Investment Law No. 4 of 1978 shall be eligible for a deduction of 150% of such actual expenditure incurred in each of such years on such assets for a period of 10 years from commercial operations;

Applicable up-front taxes: Only during project implementation or construction period until commencement of commercial operations, the following exemptions from up-front taxes are proposed for investment projects above $100mn.

NBT: Exempt
PAL: Exempt
Cess: Cess will be exempt on all project related items
Duty and other taxes on negative list items: The negative list shall not apply and $100 mn projects may import project related items or purchase locally at their discretion.

 

Note: The necessary guidelines for claiming exemptions will be published.

Since it is difficult to separate project related items that are intended for use in residential components, in investments made in mixed development projects as long as the investment (depreciable assets excluding intangible assets, land, and residential units for sale) criteria is met, up-front tax exemptions will be applicable
for the residential component as well.

 

(b) Investments over US$ 1 Billion
For investments over US$ 1 billion, in addition to the benefits outlined in above, the period for deduction of unrelieved losses shall be 25 years.

The rate of dividend tax paid by the company to a non-resident shall be zero during the period that such dividends are paid out of profits sheltered by enhanced capital allowances.

Expatriate employees in a company investing more than US$ 1 billion shall be exempt from withholding tax on employment income during the period that profits are sheltered by enhanced capital allowances.

(c) Mid-size Investments over US$ 50 million
For investments over US$ 50 million but less than US$ 100 million, the additional deduction would be 100% on actual expenditure under the same conditions of above (a). The provisions of above (b) will also apply, whereby upfront taxes will be exempt for such investments during the period of construction, prior to commencement of commercial operations.

Value Added Tax (VAT)

Value Added Tax (VAT) [Amendments to the Value Added Tax Act, No.14 of 2002]

(1) The piece based VAT rate applicable on domestic sale of certain garments by the export oriented BOI companies will be revised from Rs.75/- to Rs.100/-

 

(2) The term “locally produced rice products” will be re-defined for the purpose of clarity and certainty.

 

(3) VAT imposed on the supply of condominium housing units will be implemented with effect from April 1, 2019 where deed of agreement relating to such supply is not executed prior to April 1, 2019.

 

(4) Provisions will be incorporated in the VAT Act, enabling the Minister to prescribe the basis for chargeability of VAT on certain goods as may be determined by the Minister, with the view of revenue protection.

 

(5) Pharmaceutical machineries will be re-defined for the purpose of VAT Act.

Nation Building Tax (NBT)

Nation Building Tax (NBT) [Amendments to the Nation Building Tax Act, No.9 of 2009]

(1) The exemption on the importation of rough unprocessed gem stones for reexport after cutting and polishing will be granted for the lapidary service providers registered under the National Gem & Jewellery Authority.

 

(2) Exemption on manufacturing cigarettes will be removed

 

(3) The cost of the infrastructure projects will be reduced by the removal of NBT on main construction contractor.

 

(4) NBT at the rate of 3.5% will be imposed on foreign payments made using Electronic Fund Transfer Cards (both Debit and Credit cards) to purchase goods or services including offshore digital services.

 

(5)  In order to remove the NBT anomaly among Tour Operators, DMC Agencies and hoteliers who are receiving foreign currency will be adjusted.

 

(6) With the view of promoting livestock industry, NBT will be removed on the importation of Lucerne (alfalfa) meal and pellets.

Economic Service Charge (ESC)

Economic Service Charge (ESC) [Amendments to the ESC Act, No.13 of 2006]

(1) Amendment to the definition of the term “distributor” Definition of the term “distributor” will be clarified to include any person or partnership, appointed by an importer of any goods to Sri Lanka, for the sale in the wholesale market, of such goods

 

(2) Revision of rate of ESC applicable on exports

The rate of ESC applicable on the turnover arising from the export of goods or services will be 0.25 per centum.

 

 (3)  Revision of ESC applicable on the importation of certain articles or goods

(3.1) ESC will be charged at the rate of 0.5% on the importation of any article or goods other than any capital      goods as prescribed by the Minister of Finance taking in to consideration the economic benefit to the country

(3.2) ESC base on the importation of any article or good will be the aggregate of the CIF as approved by the Director General of Customs and the amount of any Custom import Duty, CESS PAL and SCL payable in respect of such articles or goods.

 

Ports and Airports Development levy (PAL)

(1) With the view of promoting tourism sector and to reduce the upfront cost of local manufacturing industry, PAL on the items classified under HS Codes 0712.20.00, 0712.90.10 and 7801.10.00 will be reduced to 2.5%.

 

(2) The lapidary sector will be encouraged by the removal of PAL on the items classified under HS Codes 8464.10.00, 8464.20.00 and 8464.90.00.

 

(3) PAL on the high tech machinery and equipment items classified under HS Codes specified will be reduced to 2.5%.

 

(4) In order to remove the disparity between direct imports and purchase from BOI companies, PAL on the sale of pleasure or excursion vessels and yachts manufactured by any BOI company to another BOI company which chartering such vessels and yachts for its business, will be removed.

 

(5)  With the view of promoting livestock industry, PAL will be removed on the importation of Lucerne (alfalfa) meal and pellets.

 

Betting and Gaming Levy

Betting and Gaming Levy (Amendments to the Betting and Gaming Levy Act, No.40 of 1988)

(1)  Revision of Annual Levy

(1.1)   Annual levy for carrying on the business of gaming other than playing rudjino will be revised to Rs. 400 million

(1.2)  Annual levy for carrying on the business of playing rudjino will be revised to Rs.1 million

 

(2) Revision of Casino Entrance Levy  –  Casino entrance levy will be revised to US $ 50 per person

 

(3) Revision of Levy on Gross Collection  –  Rate of the levy on gross collection will be revised to 15%

 

Excise (Special Provisions) Duty

(1) Excise Duty on cigarettes will be increased by 12%

(2) The exempt quantum of sugar contained in beverages will be revised

(3) Excise Duty on palm oil fatty acids will be revised

(4) Excise Duty on refrigerators will be revised to 25%

(5) Excise Duty on vehicles imported as Chassis fitted with engines will be reduced

(6) Motor vehicles

i. Excise Duty on hearses will be revised.

ii. Excise Duty on the hybrid and electric vans will be revised to reflect the energy efficiency benefits.

iii. Excise Duty on the Single cabs will be revised.

iv. Excise Duty on Buddy Trucks with cargo carrying capacity less than 2,000 kg will be reduced.

v. Excise Duty  on passenger vehicles revised

Customs Import Duty

Revision of Customs Import Duty

(1) Rate of the Custom Import Duty on selected goods will be revised

(2)  Unit rate of the Custom Import Duty will be increased by 10% on importation of selected goods

(3) Custom duty applicable on imported fruit drinks will be adjusted with effect from June 1, 2019.

(4) Custom Duty on Undenatured Ethyl Alcohol will be increased by Rs.200 to Rs.1000 per litre

(5) Custom Import Duty will be removed on importation of Go-Kart which is an off road sports vehicle and Go-Kart Tyres to facilitate promotion of international sport tourism.

 

CESS Duty

(1) CESS on Beedi leaves will be increased up to Rs.3,500/- per kg.

 

(2)  CESS on items classified under following HS Codes will be removed. (0408.11.00 0802.32.00 0802.62.00 0810.20.00 0813.10.00 0408.91.00 0802.41.00 0802.70.00 0810.30.00 0813.20.00 0802.21.10 0802.42.00 0802.90.10 0810.40.00 0813.30.00 0802.22.00 0802.51.00 0802.90.90 0810.70.00 8418.21.10 0802.31.10 0802.52.00 0808.40.00 0812.10.00 8418.21.90)

 

(3) CESS on items classified under following HS Codes will be adjusted. (2106.90.50 3401.19.20 3920.63.99 3924.10.90 7217.90.10 2202.99.91 3920.51.91 3920.69.91 4011.10.90 8708.91.20 2202.99.99 3920.51.99 3920.69.99 6505.00.10 8708.91.90 3401.11.20 3920.63.11 3924.10.10 6505.00.90)

 

(4) CESS will be removed on importation of Go-Kart which is an off road sports vehicle and Go-Kart Tyres to facilitate promotion of international sport tourism.

 

Other Fees and Charges

(1) The rates of fees and charges of government agencies which have not been revised in last 03 years will be increased by 15%.

 

(2) Passport fee will be revised as follows; (Alteration Fee – Rs.1,000/- per unit, Processing fee (Urgent basis) – Rs.15,000/- per unit, Processing fee (Normal basis) – Rs.3,500/- per unit)

 

(3) Fee for the reservation of a vehicle registration number in advance from the current registration number will be revised as follows;

Fee (Rs.)                       Available Number Limit

70,000/-                               10,000

90,000/-                                20,000

100,000/-                                30,000

 

(4) A lifetime personal vehicle registration numbers will be issued on a fee of Rs. 1 million

 

Stamp Duty

(1) Stamp Duty on the usage of credit cards for foreign purchases will be removed in line with the imposition of NBT on the foreign payments.

 

Tax Administration

(1) Minimum employment requirement imposed on the companies predominantly engaged in the Information Technology Services will be removed, to be eligible for the special additional deduction of 35% on the salary expenses incurred.

 

(2) A Revenue Intelligence Unit will be established at Ministry of Finance, to take steps to assist our main Revenue Collection Departments, such as, Customs, Inland Revenue and Excise, to broaden their revenue collection bases, increase total revenue collected and minimize leakages & evasion.

 

 

 

Interest Subsidy on Loan Schemes

Ran Aswenna

Category 01

Beneficiaries – Small scale farmers and farmers’ organizations, Floriculture farmers, Entrepreneurs in ornamental fish related businesses.
Maximum Loan Amount (Rs.)- 5,000,000.
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
On lending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Category 02

Beneficiaries – Agro & fish processing and multiday boats with modern facilities
Maximum Loan Amount (Rs.)- 300,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Category 03

Beneficiaries – Companies engaged in commercial scale farming
Maximum Loan Amount (Rs.)- 750,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Govi Navoda

Beneficiaries – Small scale farmers and farmers’ organizations (for mechanizing the cultivation activities)
Maximum Loan Amount (Rs.)- 500,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Repayment Period – 7 years (including 1 year grace period)

Riya Shakthi

Beneficiaries – Owners of the school service vans
Maximum Loan Amount (Rs.)- 4,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Repayment Period – 5 years

‘City Ride’ Loan Scheme

Beneficiaries – Private bus owners who are willing to purchase a luxury bus/low flow board instead of the existing old bus and the reputed companies who are willing to provide comfortable transport service for their employees.
Maximum Loan Amount (Rs.)- 10,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Repayment Period – 5 years(including 1 year grace period)

‘Mini Taxi’ / electric threewheel Loan Scheme

Beneficiaries – Persons who are 35 years of age or above, who owns a three-wheel and it is used in hiring purpose are eligible for this loan to purchase a small motor vehicle / electric three-wheel to use as a taxi. The existing three-wheels should disposed.
Maximum Loan Amount (Rs.)- 2,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Repayment Period – 5 years

Rivi Bala Savi

Beneficiaries – Household who are expected to fixed Solar power panels
Maximum Loan Amount (Rs.)- 350,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 5 years

Diri Saviya

Category 01

Beneficiaries – Poultry producers
Maximum Loan Amount (Rs.) – 50,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 100%
Onlending Rate – 0%
Repayment Period – 4 years (including 3 months grace period)

Category 02

Beneficiaries – Self-employees
Maximum Loan Amount (Rs.)- 1,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Category 03

Beneficiaries – Entrepreneurs engaged in animal
husbandry
Maximum Loan Amount (Rs.)- 5,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Jaya Isura

Category 01

Beneficiaries – Small enterprises with an annual turnover between Rs. 10 million to Rs. 250 million and with an employment cadre of 5 to 50 who are engaged in agriculture, fisheries, ornamental fisheries, livestock, floriculture, horticulture, light engineering, printing, tourism, handicrafts, wood based products, apparel, information technology, manufacturing industry and renewable energy sectors.
Maximum Loan Amount (Rs.)- 100,000,000 (Export). 50,000,000 (Non-Export)
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 7 years (including 1 year grace period)

Category 02

Beneficiaries – Medium entrepreneurs with an annual turnover between Rs. 250 million to Rs. 750 million and with an employment cadre of 51 to 300 who are engaged in agriculture, fisheries, ornamental fisheries, livestock, floriculture, horticulture, light engineering, printing, tourism, handicrafts, wood based products,apparel, information technology, manufacturing industry and renewable energy sectors.
Maximum Loan Amount (Rs.)- 400,000,000 (Export) 200,000,000 (Non-Export)
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 25%
On lending Rate – 10.40%
Repayment Period – 7 years (including 1 year grace period)

Soduru Piyasa

Beneficiaries – Owners of the houses with the less than 1,500 sq.ft. who expect to expand or complete the house
Maximum Loan Amount (Rs.)- 200,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Maximum Repayment Period – 7 years

Madya Aruna

Category 01 (To purchase media equipment)

Beneficiaries – Registered journalists
Maximum Loan Amount (Rs.)- 300,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 100%
Onlending Rate – 0%
Repayment Period – 5 years (including 1 year grace period)

Category 02 (To upgrade media equipment)

Beneficiaries – Registered journalists
Maximum Loan Amount (Rs.)- 150,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 5 years (including 1 year grace period)

‘My Future’ Loan Scheme

Beneficiaries – Student who passed Advance Level
Maximum Loan Amount (Rs.)- 1,100,000
Annual Effective Interest Rate – 13%
% of the Interest Subsidy – 100%
Onlending Rate – 0%
Repayment Period – 12 years

Erambuma’ Credit Scheme

Beneficiaries – Young Graduates and National Vocational Qualifications 5, 6 and 7 Level certificate holders
Maximum Loan Amount (Rs.)- 1,500,000
Annual Effective Interest Rate – 12%
% of the Interest Subsidy – 100%
Onlending Rate – 0%
Other facility – Fully Government guarantee
Repayment Period – 7 years (including 2 years grace period)

Green Loan

Category 01

Beneficiaries – Bio degradable bags and packing material producers, small scale hoteliers, and organic fertilizer producers.
* Three wheeler owners (only for fixing meter and maximum amount is Rs. 20,000)
Maximum Loan Amount (Rs.)- 1,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Repayment Period – 10 years (including 1 year grace period)

Category 02 (Homestay Programme)

Beneficiaries – Persons who are run or willing to run Homestays for tourists
Maximum Loan Amount (Rs.)- 5,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – more than 50%
Onlending Rate – 6%
Repayment Period – 10 years (including 1 year grace period)

‘Home Sweet Home’ Loan Scheme

Beneficiaries – Private and public sector waged employees to purchase/construct the first house through following activities; * To purchase a house from housing development projects implemented by the National Housing Development Authority (NHDA), the Urban Development Authority (UDA), or the private sector
* To purchase a house from housing projects constructed by the private sector
* To purchase a single house
* To build a first house for their own use
Maximum Loan Amount (Rs.)- 10,000,000
Annual Effective Interest Rate – 12% (for the first 5 years)
% of the Interest Subsidy – 40% (for the first 5 years)
Onlending Rate – 7% (Subsidy paid for first 5 years only)
Maximum Repayment Period – 25 years

‘Rakawarana’ Loan Scheme

Category 01

Beneficiaries – Individuals and the institutions who have the capacity to maintain a child day care centers. A staff with NVQ certificate holders should be employed and those centers should be operated in accordance with the national guidelines for child day care centers used by the Ministry of Women and Child Affairs and Dry Zone Development
Maximum Loan Amount (Rs.)- 3,500,000 for each center
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Repayment Period – 7 years (including 2 years grace period)

Category 02

Beneficiaries – Private sector investors who are willing to construct and improve Elderly care centers. A staff with NVQ certificate holders should employed and these centers should be operated in accordance with the SLS1506: 2015 standards.
Maximum Loan Amount (Rs.)- 10,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
On lending Rate – 3.46%
Repayment Period – 7 years (including 2 years grace period)

‘Sigithi Pasala Loan Scheme

Beneficiaries – Investors who are willing to establish new preschools or to refurbish existing preschools. A qualified staff should be employed.
Maximum Loan Amount (Rs.)- 2,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 50%
Onlending Rate – 6.93%
Maximum Repayment Period – 7 years(including 1 year grace period)

‘Sihina Maliga’ Loan Scheme

Beneficiaries – Sri Lankan migrant workers registered under the Foreign Employment Bureau and currently working abroad. The applicants should have remitted a considerable amount of money earned in any foreign currency to any bank operating in Sri Lanka. Loan should be for following purposes:
* Build a new house
* Renovate the existing House
* Demolish the existing house and put up a new house
* Purchase a new house
* Purchase a land and put up a house or
* Purchase a house and renovate it
Maximum Loan Amount (Rs.)- 10,000,000
Annual Effective Interest Rate – 13.86%
% of the Interest Subsidy – 75%
Onlending Rate – 3.46%
Maximum Repayment Period – 15 years (including 2 years grace period)

Rooftop Solar Power Generation Line of Credit – RSPGLoC

Category 01

Beneficiaries – Households
Onlending Rate – 8%
Maximum Capacity – 50 Kilo watts
Repayment Period – 10 years

Category 02

Beneficiaries – Entrepreneurs
Onlending Rate – 8%
Maximum Capacity – 50 Kilo watts
Donor Agency – ADB (USD 50 million for 1st tranche and top-up to USD 200 million based on progress)
Repayment Period – 10 years (including 6 months grace period)

Small and Medium-sized Enterprises Line of Credit Project – SMELoC

Beneficiaries – SME Entrepreneurs
Maximum Loan Amount (Rs.)- 50,000,000
Onlending Rate – 11 – 14 %
Donor Agency – ADB (USD 175 million)
Repayment Period – 10 years (including 2 years grace period)

‘Pavithra Ganga’ Initiative

Beneficiaries – The companies that already discharge their waste into the Kelani River, lagoons
Maximum Loan Amount (Rs.)- 30,000,000
Onlending Rate – 6.5%
Donor Agency – JICA
Repayment Period – 10 years (including 2 years grace period)