Professional Documents
Culture Documents
Value Added Tax - The VAT rate has been reduced from
11% to 8% for manufacturing and increased to 12.5% for
service sector
4
5
10
Budget 2016
One
Page 1.1
Page 1.2
Budget 2016
Two
Income tax
2.1 Corporate income tax
Income tax rate changes There will be two income tax rates
applicable at 15% and 30% as follows.
v
The higher rate 30% is applicable on the profits and income of the
following
Liquor
Tobacco
Page 2.1
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Page 2.2
(j)
(k)
(l)
Concessions
v
Agriculture
Page 2.3
Page 2.4
Page 2.5
Page 2.6
(n)
(o)
Page 2.7
Description
Tax free allowance
Balance
Total
Present
Taxable
income
prior to
tax free
allowance
Tax
Rs.000
Rs.000
500
9,500
1,960
10,000
1,960
Proposal
Taxable
income
prior to
tax free
allowance
Tax
Rs.000
Rs.000
2,400 7,600 1,140
10,000 1,140
Page 2.8
Page 2.9
Budget 2016
Three
Value Added Tax (VAT)
3.1
(b)
(c)
Page 3.1
3.2
(b)
3.3
Page 3.2
Budget 2016
Four
Nation Building Tax
4.1 Rate - The rate of NBT is proposed to be increased from the current
2% to 4% from January 1, 2016. This would result in manufactures
and service providers paying NBT on their sales at 4% and importers
paying NBT on liable imports at 4%. In the absence of any specific
comments on banking and financial services it is assumed the current
method of computation would apply and the value addition would be
liable to NBT at 4%.
Wholesalers and retailers on the other hand would be eligible for the
existing exemption of 50% on their turnover (as per the existing law)
resulting in the effective rate of NBT paid by them increasing from 1%
to 2% as a result of the budget proposals.
4.2 Input tax - It is assumed that the input NBT currently granted to
manufactures would continue to be in effect together with the
existing exemptions available, other than those mentioned below.
4.3 Exemptions - There are no new exemptions proposed for NBT.
However the following exempted items would be made liable to NBT at
4% from January 1, 2016.
(a)
(b)
(c)
Telecommunication Services
Electricity
Import and sale of Lubricants
Page 4.1
Page 4.2
Budget 2016
Five
Page 5.1
Budget 2016
Six
Page 6.1
6.2 Changes to cross border duties and taxes (at the point of import) The following changes to Custom Duty, CESS, Ports and Airport
Development Levy, Excise (Special Provisions) Duty and Special
Commodity Levy are proposed to be gazetted with effect from
November 20, 2016.
(a) Customs Duty
v
Page 6.2
Page 6.3
(e) CESS
v
Page 6.4
Page 6.5
Type of
Import
Japanese /
Thai domestic
models
imported to
Sri Lanka
Vehicles
imported by
brand new
dealers
Common
vehicle
models
imported by
new dealers
and parallel
importers.
Cars of origin
other than
mentioned in
point#1
above,
imported
exclusively by
used car
importers.
Pricing Methodology
Source
Manufacturers
website and other
official publications.
http://www.customs.g
ov.lk/news/Values%20
17-11-2015.pdf
Invoice issued/
certified by the
manufacturer of the
vehicle.
Invoice issued/
certified by the
manufacturer of the
vehicle. Alternatively,
Minister to fix values
in consultation with
Ministry and Sri Lanka
Customs.
Authorized website, or
other authorized
published sources of
the manufacturer.
Page 6.6
(b)
(b)
Page 6.7
v
v
v
Page 6.8
Budget 2016
Seven
Oil refinery
Renewable energy
Integrated car manufacturing
Manufacturing steel bridges for the region
Fertilizer, manufacturing triple super phosphate
Satellite technology
Aircraft repair and logistical support
Integrated sugar industry
Page 7.1
(e) It is also not clear at this point whether the New Investment Act will
grant tax concessions and exemptions from indirect taxes such as
VAT, NBT and import point taxes such as PAL and Customs duties.
(f) It is proposed to provide tax holidays and Government lands to
investors who invest in lagging regions of the country.
(g) It is proposed to allow foreigners to borrow 40% of their investment
in condominiums from banks in local currency.
7.2 Administrative proposals
(a) Tax holidays will be granted, supervised and monitored by the
Ministry of Finance. The Board of Investment (BOI) and the Inland
Revenue Department will not grant any tax holidays other than
facilitation and implementation of the concessions.
(b) An organization under the name of Agency for Development will be
established. This agency is to replace the BOI, the Export
Development Board and Sri Lanka Tourism Development Authority.
(c) The Agency for Development will ensure that applications for foreign
investments are completed to commence business within 50 days.
(d) New Export Processing Zones will be set up. It is proposed to give the
management of these Zones to private sector management
companies.
(e) Highly environmentally sensitive industries will be facilitated to
operate in specifically designated areas such as Puttalam,
Hambantota and Kilinochchi.
7.3 Investing in listed companies
(a) It is proposed to exempt dividend income on investments made by
non-citizens or foreign companies in listed shares through inward
remittances. The withholding tax of 10% on dividends will not apply to
such dividend income.
Page 7.2
Page 7.3
Budget 2016
Eight
(b)
(c)
(d)
Page 8.1
8.2 The Honorable Minister has also proposed to revise the following
taxes and levies:
Tax/Levy
Changes
Stamp duty
Telecommunication
Levies
Mansion
Tax
Betting &
Gaming
Levy
Effective
date
January
1, 2016
January
1, 2016
Not
specified
January
1, 2016
Page 8.2
8.3 The Hon. Minister of Finance has proposed to impose the following
new taxes, levies and charges:
Tax/Levy
Environmental
Fee
Annual license
fee
Changes
Effective
date
January
1, 2016
Not
specified
Not
specified
Not
specified
Not
specified
Not
specified
Page 8.3
8.4 The Honorable Minister has proposed to revise the following taxes,
levies and charges:
Tax/Levy
Changes
Beedi
manufacturing
license fee
Embarkation
Levy
Passport fee
Dual
citizenship fee
SAARC Visa
fee
Company
registration
fees
Local
government
rates
Effective
date
Not
specified
Not
specified
January
1, 2016
Not
specified
Not
specified
Not
specified
Not
specified
Page 8.4
Budget 2016
Nine
Public investments
In his budget speech, the Hon. Minister of Finance proposed the following
allocations of funds for socio economic activities identified by the
Government.
Area
Description
Agriculture
and
aquaculture
Proposed
Amount
Rs. Mn
1,000
2,000
1,000
100
100
250
200
100
150
150
50
Page 9.1
Area
Description
Infrastructure
Building Warehouses
Construction of Cold Stores
Expansion of Fisheries Harbours
Agro Livestock and Fish Processing Park
Building of Aquaculture Parks
2500 Cluster Villages Programme
(including Decentralized Budget
Allocation for Parliamentary Members)for infrastructure and livelihood
development for local community
empowerment
Digitalization of the EconomyInformation, Communication and
Technology strategy transformation
including free wi-fi in public places, state
universities, public sector establishments,
introduction of national digital identity,
national payment platform, providing 200
smart digital classrooms.
Land Bank
MICE Convention Hall
Setting up of Innovation Accelerator
Upgrading Nenasala Centres
New Building for Inland Revenue, Excise,
Postal Departments and National
Lotteries Board
Introduction of Traffic Encoder
Kelani Valley Railway Line
Augmenting Railways and Bus Transport
Improving Jaffna Railway Line
Indian Ocean Marine Affairs Corporation
Upgrading Industrial Estates and
Agriculture Technology
Proposed
Amount
Rs. Mn
1,000
2,000
750
100
100
21,000
10,000
500
3,000
100
100
2,000
500
1,500
1,000
200
50
500
Page 9.2
Area
Environment
and wildlife
Welfare
Description
Developing Road Network- Ratnapura
expressway, extension of marine drive
upto Panadura, extension of Pamankada
Ratmalana Road, new bridge over Kelani
river, reconstruction of 25 bridges and 3
flyovers.
Elevated Road from Cotta Road to
Kaduwela- on Build Operate and Transfer
basis
Fort Access Road
North-East Highway
Water Transport
Yan Oya Project
Megapolis and Western Province
Development- projects to be implemented
on Public Private Partnership basis
Urban Development
Estate Infrastructure Development
Development of Industrial Zones
National Environment Conservation
Programme
Wild Life Conservation
Interest Subsidy for Conversion of Three
Wheelers from Fuel to Electricity
Distribute Canned Fish at Concessionary
Price through Lak-Sathosa
Rural Housing
Interest Subsidy for Senior Citizens
National Council for Elders
National Child Protection Authority
Accreditation of Child Caregiver Training
Rectification of Salary Anomalies of Sri
Lanka Police
Lump Sum Payment for July Strikers
Seed Capital for Contributory Pension
Scheme for Artists
Proposed
Amount
Rs. Mn
15,000
10,000
4,000
1,000
250
1,000
10,000
2,500
1,000
700
2,000
1,000
50
300
4,500
1,500
10
100
50
3,000
500
25
Page 9.3
Area
Description
Industries
Education,
vocational and
universities
Proposed
Amount
Rs. Mn
500
2,000
500
100
500
200
100
500
100
3,000
4,000
2,000
10,000
15,000
30,000
250
450
250
3,000
300
500
6,000
3,000
150
Page 9.4
Area
Description
Accounting
and auditing
Youth affairs
and sports
Health
Proposed
Amount
Rs. Mn
1,000
100
250
500
500
500
100
30
50
3,000
Development of Sports
Dialysis Centres
Kidney Hospital - Polonnaruwa
Establishment of 3 Cancer Hospitals
Upgrading Anuradhapura, Jaffna,
Kurunegala Hospitals
1,000
6,500
2,000
3,000
3,000
250
1,500
2,500
5,000
250
200
Page 9.5
Area
Description
Provincial
development
Others
Proposed
Amount
Rs. Mn
3,500
14,000
10,000
150
1,500
50
200
300
200
500
50
10
250
Page 9.6
Budget 2016
Ten
Exemptions
v Employment income - An employee, receiving any loan from the
employer free or at subsidized rate of interest, will be exempt
from income tax on such benefit if such loan is granted by the
employer not out of money borrowed for that purpose. Therefore,
for the employee to be entitled for exemption, the employer will
have to provide evidence that money was not borrowed for that
purpose.
Page 10.1
v Interest income
Senior citizens - Any interest arising in, or accruing to, any
resident individual who is a citizen of Sri Lanka, from any
deposit maintained in a bank or financial institution
(approved by Central Bank of Sri Lanka (CBSL)) or in any
registered co-operative society, will be exempt from income
tax in respect of
Page 10.2
Page 10.3
(b)
(B)
Page 10.4
Page 10.5
v Any ground rent or royalty payable for any period prior to April
1, 2014 and paid after April 1, 2014 which is deductible under
section 32(5)(a), or annuity paid by such person
(d)
(e)
Qualifying payments
v Any donation to the National Kidney Fund is a qualifying
payment.
v The cost of acquisition or merger, for the purposes of qualifying
payment, in relation to financial sector consolidation is
redefined to be
any expenditure incurred by any bank, any financial institution
or any leasing company, by way of cost of acquisition or merger
of any other bank, any other financial institution or any other
leasing company, where such cost is ascertained by considering
all the facts on a case by case basis in accordance with the
guidelines issued by the CBSL, in the manner specified by the
CGIR for that purpose.
Page 10.6
(g)
(h)
Page 10.7
dividend tax which is payable at the rate of 15% under the above
section.
(i)
(j)
(k)
(l)
(m)
Page 10.8
(o)
(p)
Page 10.9
Rates
v Second Schedule
With regard to unit trust management companies, the
applicability of a reduced rate of 10% has been limited to
such part of taxable income from the management of the
respective unit trust.
It has been made clear that for any YA commencing on or
after April 1, 2014, the concessionary rate of 12% is not
applicable to companies engaged in the manufacture of any
article or the provision of any service. However, such
companies will be entitled to the same concessionary rate of
12% under section 59B of the IRA, depending on the annual
turnover.
v Fourth Schedule - Fees for technical services paid or credited to
any person or partnership out of Sri Lanka is also brought under
this schedule, so that tax could be withheld at 20% (in the
absence of lower rate under the Double Tax Agreement or
determined by the CGIR).
v Fifth Schedule - Item 46 of the Fifth Schedule applicable to
individuals (who are citizens) providing professional services as
referred to in section 59F has been removed, and the
methodology of tax computation has been embedded to that
section itself.
Page 10.10
Rate - The rate of VAT was reduced from 12% to 11%. This is
effective from January 1, 2015.
(b)
(c)
Page 10.11
Leasing
v
Supply of
Page 10.12
Import of
Page 10.13
(b)
(c)
Page 10.14
(d)
(e)
Exemptions
v
Page 10.15
Page 10.16