TAX Proposals 2015

Income Tax Exemptions

Profits and income made from Unit Trust from investments starting from 1 January, in US$ deposits or US$ denominated securities listed in Foreign Stock Exchanges
Profits and income arising or accruing to a company, partnership or body of people out of the country from any payment made as royalty for starting up IT/BPO companies in Sri Lanka for 2 years since the inception of such company.
Interest or discounts arising to any person from investments made after 1 January in corporate debt securities issued by UDA.


Income Tax Concessions
Deduction of 10% income tax on profits and income arising from sale of products manufactured using imports to sustain competitiveness, for manufacturers started businesses in 1970's.
Concessionary tax rate of 16% on professionals to be expanded to cover other categories of employment.
Concessionary rate of 12 on agriculture to be extended to sugar industries.
Annual turnover limit increased to US$ 750 million from Rs 500 million.
Tax on half of profits of any internationally award winning Movie or Drama, will be exempted for 5 years from the date of receiving such recognition.


Tax concessions for new investments
The time to complete investments and commence operations, by new undertaking from 1 April 2014 and which would not be able to complete projects by 1 April 2015 and commercial operations prior to 1 April 2016, will be extended to 1 April 2017.
Tax holiday periods to be rationalized depending on the nature of the activity approved to carry such undertaking.
Any undertaking with an investment above US$ 2 million will be granted front loaded depreciation allowance, on the acquisition of any fixed asset on which depreciation allowance are claimable. Where such be granted on dividend distributed out of such profits or deemed dividend tax, for 5 years from date of commercial operation.
Tax on profits and income of existing manufacturing enterprises, will be reduced by 50% up to a maximum of Rs 500 million for 5 years, if such enterprise was liable for income tax rate of 28% and expands operations to other provinces other than Western province by investing more than Rs 300 million after 1 January 2015 and prior to 1 January 2017 by the acquisition of fixed assets which depreciation allowance was claimable.


Any company registered with Inland Revenue for tax on or before 31 December 2015 with a committed investment of more than Rs 500 million for manufacturing business withing a specified period would be entitled for a 50% reduced tax for 7 years from the date of commercial operation.


Withholding Tax on Interest Income from Deposits
The withholding tax on individuals and charitable institutions will be revised by introducing a 2.5% single withholding tax irrespective of interest amounts.
Exemption on interest income of Senior Citizens will be expanded by removing the threshold.
A triple deduction to any person registered with Tertiary Vocational Education Commission, on expenditure incurred on standard skill development training provided to trainee.



VAT
Vat will be reduced to 11% from 12%
Imported machinery, equipment and spare parts by SLPA to be exempted
current limit of the sample value for exemption from VAT will be expanded to
Rs 50,000 from 25,000
Vat on Wholesale and Retail
i. The present chargeability threshold value of supplies for a consecutive period of 3 months will be reduced to Rs 100 million, for person or partnership business.


ii. VAT Registration Threshold liable supplies for registration will be increased to Rs 15 million per annum
NBT
Exemptions on imported machinery, equipment and spars by SLPA
Current limit of sample value for exemption increased to Rs 50,000 from Rs 25,000
NBT Registration Threshold on turnover to be increased to Rs 3.75 million
Other amendments
to encourage Modernization, disposal of machinery used for more than 10 years by BoI companies to be exempted by duty.
 CESS and Custom Duty revised to strengthen domestic value addition
 Consolidation of taxes to further simplify tax system, Excise duty will be charged in lieu of VAT, NBT, CESS, Customs Duty, Port and Airport Levy on certain articles.


In Lieu of VAT and NBT, Excise Duty will be charged on liquor and cigarette manufactures. Custom Duty and CESS will be charged from imported liquor. Ciggarette imports to be charged Excise Duty.
Recovery of Tax in Arrears
 A special refinance programme which is re-payable in 5 years will be provided at 6% interest to facilitate settlement of EPF/ETF and post 2010 tax arrears.


Techinical rectification and administrative provisions
Necessary amendments will be made to respective provisions of the Inland Revenue Act. No 10 of 2006, VAT Act No 14 of 2002, NBT Act No 9 of 2009, ESC Act No 13 of 2006, Finance Acts, Betting and Gaming Levy Act 40 of 1988, Default Tax Act No 16 of 2010, Telco Levy Act No 21 of 2011, Ports and Airports Development Levy Act No 18 of 2011, Tax Appeals Commission Act No 23 of 2011, Import Export Act No 1 of 1969, SDP Act No 14 of 2008 in order to streamline the revenue administration and rectify certain ambiguities and unintended effects.


Amendments to Appropriation Act No 36 of 2013 for the Financial Year 2014
The maximum borrowing limit specified in the appropriation Act No 36 of 2013 is increased by Rs 200 billion, which includes the bonds issued for capitalization of state enterprises and recording foreign debt disbursements. Consequential amendments will be made to section 2(1) and section 2(@) of the said Act. These amendments are incorporated in the printed estimates for 2015 which are now under submission to parliament. The required amendments will be introduced at the committee stage of the Appropriation Bill.

Effective dates of Proposals, unless stated
otherwise
 Income Tax effective from April 1 2015
VAT, NBT and Betting and Gaming Levy effective from January 1 2015
CESS, Ports and Airports Development Levy, Custom Duty, Excise and Special Commodity Levy with immediate effect