[Sri Lanka] Key changes to VAT, personal and companies tax

Sri Lanka is raising VAT to 12 per cent, corporate tax to 30 per cent and the highest personal income tax rate to 34 per cent from 18 per cent, in a bid to raise 195 billion rupees to pay state worker’s salaries, EconomyNext reports.

Value added taxes will be raised to 12 per cent from 8 per cent immediately through gazette notice and the change is expected to be rubber-stamped by the parliament later, according to documents released by the office of Prime Minister Ranil Wickremesinghe.

A telecom levy will be increased from 11.25 per cent to 15 per cent through a letter from the regulator to be rubber-stamped by parliament later.

Sri Lanka experienced the worst currency crisis in the history of the island’s 72-year central bank after 2.3 trillion rupees was printed to finance the budget and repay bonds from previous deficits dating back to 2020.

In December 2019, taxes were cut in an extraordinary administrative move while parliament was dissolved. It is not clear whether it was a world first for a Westminister-style parliament.

The government is expecting to raise 125 billion rupees from the taxes for the rest of 2022 and 195 billion rupees in a full year.

Key tax changes planned from October:

Personal Tax

• The highest personal income tax rate raised to 34 per cent, starting with the lowest slab of 1.2 million at 4 per cent
• Tax exemption threshold brought down to 1.8 million rupees from 3.0 million
• Withholding tax on employment income to be made mandatory
• Professional fees over 100,000 rupees to be charged a withholding tax
• Withholding tax on interest and dividends.
• Exemption for senior citizen interest income of 1.5 million rupees.

Companies

• Standard corporate income tax to be raised from 24 to 30 per cent.
• Concessional corporate tax to be raised to 15 per cent from 14 per cent.
• Extra allowance for marketing expenses to be dropped
• Betting and gaming annual fee raised to 500 million rupees from 200 million
• Betting and gaming gross revenues to be charged 15 per cent tax, from the current 10 per cent
• Betting agents to be charged 5 million a year, increased from 4 million a year

Value Added Tax

• Immediately raise the rate to 12 from 8 per cent.
• VAT threshold to be reduced to 120 million from 300 million rupees.
• Review exemptions list in 2023

Sri Lanka is raising VAT to 12 per cent, corporate tax to 30 per cent and the highest personal income tax rate to 34 per cent from 18 per cent, in a bid to raise 195 billion rupees to pay state worker’s salaries, EconomyNext reports.

Value added taxes will be raised to 12 per cent from 8 per cent immediately through gazette notice and the change is expected to be rubber-stamped by the parliament later, according to documents released by the office of Prime Minister Ranil Wickremesinghe.

A telecom levy will be increased from 11.25 per cent to 15 per cent through a letter from the regulator to be rubber-stamped by parliament later.

Sri Lanka experienced the worst currency crisis in the history of the island’s 72-year central bank after 2.3 trillion rupees was printed to finance the budget and repay bonds from previous deficits dating back to 2020.

In December 2019, taxes were cut in an extraordinary administrative move while parliament was dissolved. It is not clear whether it was a world first for a Westminister-style parliament.

The government is expecting to raise 125 billion rupees from the taxes for the rest of 2022 and 195 billion rupees in a full year.

Key tax changes planned from October:

Personal Tax

• The highest personal income tax rate raised to 34 per cent, starting with the lowest slab of 1.2 million at 4 per cent
• Tax exemption threshold brought down to 1.8 million rupees from 3.0 million
• Withholding tax on employment income to be made mandatory
• Professional fees over 100,000 rupees to be charged a withholding tax
• Withholding tax on interest and dividends.
• Exemption for senior citizen interest income of 1.5 million rupees.

Companies

• Standard corporate income tax to be raised from 24 to 30 per cent.
• Concessional corporate tax to be raised to 15 per cent from 14 per cent.
• Extra allowance for marketing expenses to be dropped
• Betting and gaming annual fee raised to 500 million rupees from 200 million
• Betting and gaming gross revenues to be charged 15 per cent tax, from the current 10 per cent
• Betting agents to be charged 5 million a year, increased from 4 million a year

Value Added Tax

• Immediately raise the rate to 12 from 8 per cent.
• VAT threshold to be reduced to 120 million from 300 million rupees.
• Review exemptions list in 2023