Sri Lanka frees close to 54,000 businesses from Value Added Tax payment
The government of Sri Lanka has freed nearly 54,000 businesses from the Value Added Tax (VAT) payment requirement with effect from January 01, 2020. The concessions were announced by Sri Lanka’s President Gotabaya Rajapaksa last November.
The new administration led by President Rajapaksa on November 27 announced many tax concessions to revive the country’s business sector.
Among the string of tax concessions were the revision of VAT-free threshold of the small and medium enterprises (SMEs) from Rs.3 million per quarter or Rs.12 million per annum to Rs.75 million per quarter or Rs.300 million per annum.
The local media has reported that Sri Lanka’s Inland Revenue Department (IRD) has this week published a list of tax payers numbering close to 54,000, whose taxable supply has never exceeded Rs.75 million for any taxable period prior to December 31, 2019 and deactivated their VAT registrations with effect from January 1, 2020.
Highlighting the implications of the move from January 01, Ernst & Young (E&Y) Sri Lanka has reportedly stated that such deactivated persons or businesses are no longer required to issue tax invoices on their business dealings going forward.
Further, E&Y Sri Lanka has reportedly advised its clients not to issue tax invoices to the persons in the list of deactivated persons or non-registered persons when supplying goods or services.
While the impact on the businesses is yet to be quantified, given its magnitude it is expected to provide a windfall for the SMEs immediately by way of higher earrings for those paying VAT at 15 percent during the last 3 years, higher than the earlier 12 percent, reports further state.
Besides, even those businesses, whose quarterly revenue exceed Rs.75 million, will now have to pay VAT at a substantially lower rate of 8 percent, which was reduced from 15 percent, along with the scrapping of 2 percent Nation Building Tax (NBT).
OSL take:
The tax incentives offered by the government of Sri Lanka is indicative of the overall expansion of the country’s economy. Also, the incentives would add to the improvement of the country’s business conducive environment in the country. Sri Lanka continues to improve its standing in the ease of doing business environment in the country. Foreign businesses could therefore confidently explore business opportunities in Sri Lanka.
| Article Code : | VBS/AT/20200108/Z_4 |