The Government is planning to introduce new measures that will be boost foreign investments into Government securities.
Under the Inland Revenue Act No. 24 of 2017 (effective 1 April 2018), the interest or discount paid to non–resident persons and commercial banks in Sri Lanka on government securities is liable to income tax.
In order to maintain the status quo in relation to tax liability of foreigners on government securities, the exemption will be expanded to income from interest or discount paid to non-residents under the Inland Revenue Act, no. 24 of 2017, as well, sources said.
Last year, cumulative net foreign inflows to the Government securities market amounted to $ 452 million, up from $ 310 million as of end October 2017.
Analysts said that the original rule under the Inland Revenue Act had raised concerns among existing and prospective foreign investors in to Government securities and there was a danger of such investments being pulled out or scaled down. With the proposed change, the anomaly has been rectified making the foreign investment regime more favourable thereby boosting foreign inflows to the country.
The move is expected to reignite interests from foreign investors, they added.