Tax System of Sri Lanka - · PDF fileTax System of Sri Lanka The Sri Lankan government offers a wide range of incentives for investors. These incentives are available foreign provided

Tax System of Sri Lanka
The Sri Lankan government offers a wide range of incentives for investors. These incentives are available foreign provided the investment is undertaken through a company incorporated in Sri Lanka
Incentives offered fall under two classes or "regimes" and the investor may be eligible for inducements provided by either of these regimes.
BOI Incentives under Section 17 of the BOI Law General incentives under the 'normal laws' of the country

Tax structure of Sri Lanka

The tax is levied on the Income of any person arising in or derived from Sri Lanka.
A resident is taxable on world income Any other person is taxable only on income arising or derived in
Sri Lanka.
Income tax

Economic Service Charge (ESC)
An Economic Service Charge is imposed on any person carrying on a trade, business , profession or vocation.
The rate of ESC is 0.25% to 1% on total turnover or receipts it is exceeds SRL 7.5Mn or USD 75,000 per quarter.
This can be set off against the income tax payable and can be carried forward for four years , but no refund is due.

Custom DutySri Lanka Customs is a key state organization operational at the frontiers and its main functions center around revenue collection and enforcing Customs law and other related rules and regulations In the process the department endeavors to ensure smooth movement of people and goods across the border. Custom duty is applicable for the import and export procedures.

Remittance Tax In addition to paying theStandard corporate income tax , remittances made by abranch to a foreign headoffice are subject to a 10%tax.
Social Responsibility Levy( SRL)SRL is imposed on Companies at 1.5% of the income tax liability

Value Added Tax (VAT) and Turnover Tax (TT)
VAT is levied on supply of most goods and services , as well as the most import of goods. Standard rate is 12% with a reduced rate of 5% applying to essential items. Certain supplies are zero-rated or exempt.Retail and wholesale businesses that supply goods are subject to a turnover tax of 1%

Nation Building Tax (NBT)
The Government has imposed a new levy termed the Nation Building Levy akin to the National Security Levy which prevailed at the rate of 3% on turnover.Importers , Manufactures and Providers of services are liable for NBT.The levy is payable for any quarter where turnover for the quarter exceeds Rs.100,000.

Tax Concessions for Qualifying Activities
Tax concessions are dealt under two regimes;Board of Investment (BOI) Regime in terms of regulations under the BOI law.
Normal Tax Regime statutorily mandated in terms of the Inland Revenue ACT and amendment thereto.

Tax Concessions for Qualifying Activities
Incentives under BOI regime are legally enforced in terms of agreements concluded under BOI law and hence would prevail for the specified period as stipulated therein and are valid forthe lifetime of the Company.
Incentives under the Sri Lanka tax status which are time based would legally prevail for the time period as mandated statute. Transactions based incentives , could be withdrawn by amendment to legislation at a future date prospectively.

Agriculture (Normal Tax Regime)

Agriculture (Normal Tax Regime)
Qualifying Activity Core Conditions Income Tax Incentives
Agriculture and Agro processing
Agriculture Cultivation of land with plants of any description , rearing of fish or animal husbandry including poultry farms , veterinary and artificial insemination services and other support services.
Agro processing Processing of any agricultural product or fishing product including deep sea fishing.
Company
New undertakingon or after 01/04/2006 with minimum Investment
Rs.50Mn Incorporated pre 01/04/2002
Rs.10Mn Incorporated post 01/04/2002
Year 1 -5 0%
Year 6 -7 10%
Year 8 onwards 15%

Agriculture ( BOI Regime)

Fishing & processing of sea food
New Company
Minimum Investment Rs.7.5Mn
Minimum Employees -20
Year 1 10/15 0%

North /East Province Cultivation and processing
Dairy farming and livestock development
Cultivation and processing of fruits and vegetables
Rice Mill for the grinding of rice and/or the making of rice based products
Regional development outside Colombo and Gampaha District
New Company
Minimum Investment Rs.15Mn
Minimum Employees - 20
Year 1 - 15/20 0%

Tourism and Recreation (Normal Tax Regime)
Providing accommodation to Tourists in Manor Houses or Thematic Bungalows
Registered with Ceylon Tourist Board on or after 01/04/2003
Provide accommodation for 10 years from date of registration with Tourist Board
Year 1 3 0%
Exhibition of any cinematographic Film
Exhibition of cinematographic film on or after April 2007
In new cinema or upgraded cinema defined
Year 1 5/10 0%

Tourism and Recreation (Normal Tax Regime)
Infrastructure Development Tourism and Recreation
Company
Investment to be made within 1 year from commencement of undertaking
Year 1 5 0%
Year 6 7 10%
Year 8 onwards 20%

Tourism and Recreation (BOI Regime)
Tourism and /or Recreation New Company
Minimum Investment US$ 500,000
Year 1 -5 0%
Year 6 -7 10%
Year 8 onwards 20%
Tourism and Recreation or construction and operation of hotels North/East Province
Regional Development outside Colombo/Gampaha Districts
New Company
Minimum employees - 25
Year 1 -15 0%

Information Technology (Normal Tax Regime)
Information Technology and allied services
Company
New Undertaking on or after 01/04/2006 within minimum Investment
Rs.50Mn-Incorporation pre 01/04/2002
Rs.10Mn-Incorporationpost 01/04/2002
Year 1 -5 0%
Year 6-7 10%
Year 8 onwards 20%(15% if export oriented)

Information Technology (BOI Regime)
Information technology and / or information technology enabled services
Company
Employing minimum of 15 technically qualified local persons
Year 1 -5/12 0%
First two years 10%
Thereafter 20%(15% if export turnover > 70% in foreign currency)

Small Scale Infrastructure(Normal Tax Regime)
Power Generation
Tourism and Recreation
Ware housing and cold storage
Garbage collection or disposal
Construction of houses
Construction of hospitals
Company
Minimum Investment Rs.10 Mn within 1 year from commencement of undertaking
Year 1 -5 0%
Year 6 -7 10%
Year 8 onwards 20%

Small Scale Infrastructure (BOI Regime)
Power GenerationTourism and RecreationConstruction and/or operation of
warehousesGarbage collection and /or
disposalConstruction of supermarketsConstruction of housesConstruction of hospitalsWater supplyInfrastructure required for film or
cinema industrySpecial project as approved by
cabinet of Ministers/Cabinet sub committee on investment facilitation
New Company
Year 1 5 0%
Year 6 -7 10%
Year 8 onwards 20%

Small Scale Infrastructure (BOI Regime)
Infrastructure or construction activity approved by the Board
Minimum Investment US$ 5Mn
Mew Company
Year 1 -5 0%
Year 6-7 10%
Year 8 onwards 20%

Large Scale Infrastructure(Normal Tax Regime)Qualifying Activity Core Conditions Income Tax Incentives
Power generation ,transmission or distributionSea ports, air ports,
highways or railwaysIndustrial parksWarehouses or storesSanitation facility or solid
waste management systemWater servicesUrban housing or town
center development
CompanyMinimum Investment
Rs.1,000Mn
Rs.2,500Mn
Rs.5,000Mn
Rs.7,500MnInvestment to be completed
within 1 year from commencement of operation
Year 1-6 0%Year 7 onwards 15%
Year 1 -8 0%Year 9 onwards 15%Year 1-10 0%Year 11 0nwards 15%
Year 1 -12 0%Year 13 0nwards 15%

Large Scale Infrastructure (BOI Regime)
Establishment of industrial estates including development and management of Industrial Estates and Special Econom

Documents

Tax System of Sri Lanka - · PDF fileTax System of Sri Lanka The Sri Lankan government offers a wide range of incentives for investors. These incentives are available foreign provided