KPMG in Sri Lanka provides update on the Finance Act as well as the Inland Revenue Act.
The Finance Act has been passed in Parliament and the Speaker has certified the same on 01 November 2018. Salient features of the Finance Act are as follows:-
- An additional levy called Debt Repayment Levy is introduced on the Banks and Financial institutions at 7% on the value addition calculated for VAT on Financial Services purposes and paid to the Commissioner General of Inland Revenue on monthly basis. The said levy will be effective from 01 October 2018 to 31 December 2021.
- An annual Cellular Tower Levy of LKR 200,000 will be levied on each tower owned by the every mobile telephone operator with effect from 01 January 2019.
- A 25 cent levy is charged on each SMS sent as bulk advertisement. This will be a tax imposed on the Advertiser. This levy will be effective from 01 January 2019.
- 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% with effect from 01 January 2019.
Update on the Inland Revenue Act
The Ministry of Finance proposed certain amendments to the prevailing income tax law on 11 October 2018. Following are the exemptions and concessions which the Ministry has proposed:-
- Income tax exemptions:-
- Interest earned by children under 18 years of age, on deposits maintained in any financial institution
- Interest paid to non-residents on loans obtained by any person.
- Any gain including interest, discount or capital gain earned by non-residents on sovereign bonds denominated in local or foreign currency, issued by or on behalf of the Government
- Withholding tax exemptions :-
- Royalty payments made to residents, which do not exceed LKR 50,000/- per month, subject to a maximum of LKR 500,000/-per year of assessment
- Lease rentals paid to non-residents in relation to the Leasing of Aircrafts, by a resident entity engaged in the air transportation
- Reduction of the Withholding Tax rate applicable on rent from 10% to 5% for residents persons
These aforementioned amendments were expected to be read in the Budget. However these amendments are yet to be passed into law.
The Annual Government Budget for the fiscal year 2019 was scheduled to be presented in the Parliament on 05 November 2018 was postponed. Now the current Finance Minister announced that the Budget will be read in Parliament on 05 March 2019. Hence there has been no new revenue proposals during the period.