30/11/2019
Effects of Income Tax Changes on Economic and Entrepreneurial Growth in Sri Lanka
As you all know, the new Government has granted the approval for new Tax Proposals / Measures with the view to provide systematic incentives promote business and investments.
Proposal on Value Added Tax (VAT) and National Building Tax (NBT)
Rate of VAT should be reduced from 15% to 8% with effect from 1st December 2019. However, rate of VAT applicable on the supply of Financial Services should be continued at 15%.
National Building Tax (NBT) shall be abolished from 1st December 2019.
Threshold of registration for VAT purposes will be increased from Rs.12 Million per annum to Rs.300 Million per annum with effect from 1st January 2020.
Tourism industry shall be treated as “Zero Rated Export” for the purpose of VAT, If the 60% of the input’s are sourced from local supplies / sources.
Proposals on Income Tax
Income from Agriculture, Fisheries and Livestock shall be exempted from income, effective from the year of assessment 2019/20.
Income Tac Rate applicable on construction industry shall be reduced from 28% to 14%, effective from the year of assessment 2019/20.
Religious institutions shall fully be exempted from Income Tax with effect from 1st December 2019.
Tax free threshold of employment income of all public and private sector employees for the purpose of PAYE Tax shall be increased from Rs.100,000per month to Rs.250,000 per month, and excessive personal income shall be liable for Income Tax at progressive rate of 6%, 12% and 18% for every tax slab of Rs.250,000 with effect from 1st January 2020.
Interest Income upto Rs.250,000 per month shall be exempted from Withholding Tax (WHT) with effect from 1st January 2020.
Personal Income upto Rs.3,000,000 per annum from any source of income shall be exempted from tax and excessive personal income shall be liable for income tax at the progressive rate of 6%, 12% and 18% for every tax slab of Rs.250,000 with effect from 1st January 2020.
Income earned from supply of service for the receipt of foreign currency shall be exempted from Income Tax effect from 1st January 2020.
Income from Information Technology (IT) and enabling services shall be exempted from all Taxes.
Do you think these Tax changes will boost the businesses and Economy as whole?
