KPMG in Sri Lanka summarizes developments regarding the Finance Bill for 2018 which was presented in the Parliament recently and this includes Budget Proposals of 2018 in addition to the Budget Proposals for 2016 and 2017.
The following proposals of the Budget 2018 has been included in the said Bill:
An institution licensed under the Tourism Development Act which has a turnover of less than LKR 3mn per quarter or LKR 12mn per annum will be liable to Tourism Development Levy at the rate of 0.5%. This proposal was included in the Budget 2017.
There has been revisions to the company registration fees and the Luxury taxes applicable on the importation of Motor Vehicles.
It should be noted that the Finance Bill is yet to be legislated into Law.
Value Added Tax (VAT)
The VAT Amending Act for 2018 was passed in the Parliament on 16 August 2018.
The most anticipated amendment to the VAT Act was the removal of the exemptions on the sale of condominium properties with effect from 16 August 2018. However the Department of Inland Revenue issued a notice that a policy decision was taken to only to remove the exemption on from 01 April 2019. Sale of housing units which has a total value of LKR 15mn will be continue to be exempted from VAT even after 01 April 2019.
In addition to the above, certain other exemptions were repealed to expand the VAT base.
Further a VAT refund scheme has been introduced for the Tourists at the time of departure. However the refund scheme will not be applicable for goods such as, bottled water, aerated water, cooked meals and goods which are consumed (partially or fully).
Nation Building Tax (NBT)
The NBT Amending Act for 2018 was passed in the Parliament on 18 July 2018.
The amending Act include exemptions on the importation of non-motorized equipment and accessories for watersports including Kayaks, Canoes, Kite surfing and diving as well as non-powered equipment and accessories for aero sports as a measure to incentivize the tourism industry. The importation of gem stones for the purpose of re-export is also exempted for NBT. Further the exemption in relation to the importation of liquor has been removed.