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Sri Lanka

Government and institution measures in response to COVID-19.

Government and institution measures in response to COVID-19.

Return to homepage  |  Last updated: 28 October, 2020

General Information

The Department of Inland Revenue issued a release reflecting proposed tax amendments to the Inland Revenue Act No. 24 of 2017 and Value Added Tax Act No. 14 of 2002 (as amended). There are also tax relief measures announced in response to the COVID-19 pandemic.

Tax measures – Direct and Indirect

(e.g. payment deferrals, rate reductions…)

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Recovery Plan Overview

  • CBSL policies
  • Increased government expenditure
  • SLTDA commences “Safe and Secure” certifications to encourage tourism
  • Import restrictions to stabilize currency

Main measures

(1) Increased Government expenditure

  • The Government of Siri Lanka (GoSL) issued an interest free advance of Rs. 10,000 to all low income households (Samurdhi beneficiaries and Samurdhi card holders) and vulnerable families, registered senior citizens, disabled persons etc during the initial lockdown in March 2020.
  • The GoSL also allocated Rs. 400 Mn to distribute Rs. 5,000 each to those who have lost their incomes due to curfews in particular districts due to the COVID-19 pandemic during the second wave in October 2020.

(2) CBSL policy implementation to reduce adverse economic impact

The Central Bank of Sri Lanka issued the following policies:
Debt Moratoriums:

  • A 6 month debt moratorium on sectors such as SMEs engaged in manufacturing, services, agriculture, construction, value addition and trading businesses, tourism, self-employed businesses and foreign currency earners whose business has been negatively affected and have to repay loans in foreign currency. This was extended for a further period of six months commencing from 1 October 2020 to 31 March 2021.
  • A six-month debt moratorium on the leasing rentals of all three wheelers, school vans, lorries, small goods transport vehicles and buses, and related assets such as motor bikes and taxies operated by the self employed/ owners.
  • A debt moratorium until 30th of May on personal loans granted to all private sector non-executive employees.
  • A three-month debt moratorium for all personal loans and leasing rentals of value less than LKR 1.0 Mn.
  • Tourism moratorium was extended to March 2021 due to the airport closure and zero tourism earnings

Further relief measures with respect to existing and new loan facilities for businesses to face low level economic activity

  • The initial six-month refinancing facility worth LKR 50.0 Bn was increased to LKR 150.0 Bn. The limit to exceed LKR 150 Bn limit due to high amount of loan applications.
  • Every LCB and LSB was to reduce the penal interest rates charged on all loans and advances.
  • The working capital purpose loan facility to be granted to eligible performing and non-performing borrowers subject to conditions.
  • The Monetary Board issued an order on the maximum interest rates applicable on pre-arranged temporary overdrafts to reduced rates.
  • CBSL imposed caps on interest rates on some loan products and penal charges as a relief for retail customers.

Expansionary Monetary Policy

  • The Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank were reduced multiple times. The bank rate was lowered to 8.5%.

Liquidity was made available in the system

  • D-SIBs and non-SIBs were permitted to draw down their Capital Conservation Buffers there by facilitating smooth credit flows to the economy. 
  • Liquidity worth LKR 459.4 Bn was injected into the banking system between February and June 2020. 
  • The Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of LCBs was reduced.

(3) SLTDA ”Safe and Secure” certification to revive tourism

  • In order to re-build the tourism sector, the Sri Lankan Tourism Development Authority (SLTDA), with guidance from the Ministry of Health and WHO, have developed a set of guidelines which enhance cleanliness and hygiene practices at all tourism related venues and services. 
  • Entities that are compliant with these guidelines will also be assessed by an independent professional body. When all requirements are met, they will receive a “Safe and Secure” certification to display as a mark of assurance to tourists. 
  • KPMG Sri Lanka has been awarded this contract and will undertake all compliance audits.

(4) Import restrictions on non essential goods

  • The GoSL imposed import restrictions on certain non essential goods including vehicles, tiles, apparel and cosmetic products etc. in order to stabilize the currency.
  • This temporary measure was made to compensate reduced foreign currency receipts due to reduction in foreign currency earnings by tourism (airport closure and limited travel due to the pandemic), worker remittances (job losses due to countries such as the Middle Eastern countries facing the pandemic) and exports (reduced spending power and reduced store visits due to the COVID-19 pandemic in export markets, mainly Europe and USA for apparel exports).