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Sri Lanka: Tax proposals in 2019 budget

Sri Lanka: Tax proposals in 2019 budget

The budget proposals for 2019, as presented in Parliament in March 2019, include the following tax measures:

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  • The "economic service charge" (as levied on the aggregate of costs, insurance and freight value of imported goods) to be imposed on all imports, with an adjustment to the base, a reduction of the rate for targeted exports, and an expansion of the term "distributor"
  • An exemption from income tax for interest income accruing to a resident person on foreign currency-denominated sovereign bonds as well as exemptions for certain foreign currency accounts, interest accruing to minors, interest of a person outside Sri Lanka
  • Investment incentives for certain large-scale projects that make investments in depreciable assets (other than intangible assets)
  • Accelerated depreciation for expansions by existing businesses
  • Expanded tax incentives for businesses engaged in IT services
  • An additional deduction for employers equal to 50% of certain salary costs related to an employee's maternity leave of three months, and 100% for the fourth month of maternity leave
  • Changes to the term "gross income" for purposes of the concessionary rate of 14% available to a company predominantly engaged in specified business activities
  • Exemption from withholding tax on certain royalty and rent payments made to a resident individual
  • Imposition of value added tax (VAT) on certain identified supplies of condominium housing units
  • Clarification of the terms "locally produced rice products" and "pharmaceutical machinery" for VAT purposes
  • Provisions concerning the "nation building tax" (the levy that affects five sectors of gems, cigarettes, construction, debit and credit cards, and the leisure industry)
  • An increase to the rate of the excise tax on cigarettes, and changes to the excise tax rate on certain liquors
  • Measures concerning the luxury tax on motor vehicles and other provisions concerning automobile transactions
  • Provisions concerning the customs duty imposed with respect to certain imported goods


Read a March 2019 report [PDF 3 MB] prepared by the KPMG member firm in Sri Lanka

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