The Sri Lankan government announced on Sunday a new investment incentives scheme and new income tax structure that will come into effect with the passage of the new Inland Revenue Act in Parliament.
Finance Minister Ravi Karunanayake, giving out details of the new investment relief approach of the government, said significant tax exemptions and incentives have been granted to the investors depending on the size of the investment.
The minister, however, stressed that the tax holidays would hereafter be granted only when the investment is made, and not prior to that.
He said the generation of one million job opportunities, spurring investments to meet the target of USD 5-6 billion Foreign Direct Investments per year and giving a much clearer and simpler tax structure are the intentions of the new proposals.
“Earlier, there was a convoluted process and investors were perturbed. Now we have given a straightforward approach to them,” he said.
The minister, who was addressing a press conference at his ministry premises on Sunday, said the Inland Revenue Bill that received Cabinet approval was already sent to the Government Printer to publish in the Gazette.
The minister, commenting on the borrowings, said the government borrowings exceeded the limit approved by Parliament from 2011-2014, but this amount was lesser than the approved limit in 2015 and 2016.
According to the new investment incentive scheme announced, investments over USD 2 billion for ports development will be fully exempted from the Corporate Tax. Incentives have also been given to investments less than USD 3 million, investments that generate significant number of employment opportunities, as well as large-scale investments.
The minister explaining the new income tax structure said, hub activities, export of IT/BPO services, export of gold, gem and jewellery, relocation of International Head Quarters, earning from international trading platform, organic fertilizer production, solid waste management, export of services by individuals, agriculture/poultry/dairy, middle income housing would be exempted from the Corporate tax.
Higher rates of Corporate Tax apply for liquor, tobacco, and betting and gaming. Tax free threshold for Personal Income Tax is Rs 500,000 per annum and this threshold for PAYE tax is Rs 1.2 million.
Tax on Capital Gain will be 10 percent, and it is applicable to land and buildings and other investments excluding quoted shares.