Sri Lankan government proposals in Budget 2019 aimed at attracting more investments to the country
The government of Sri Lanka has reportedly proposed increased capital allowances for investments under the Inland Revenue Act and has removed para-tariffs for high value projects with the aim of boosting foreign direct investments (FDIs) to the country.
“Whilst Sri Lanka achieved its best ever FDI in 2017 and 2018, it is essential to further expand investment into the country,” Sri Lanka’s Finance Minister Mangala Samaraweera has said while delivering the 2019 budget on Tuesday.
“Therefore, an incentive package to attract high value investments is proposed,” the Minister has said.
“This includes significant capital allowances of up to 150 percent of investment value and removal of up-front taxes for investments over US$ 50 million, US$ 100 million and US$ 1,000 million.”
Current law allows for 100 percent capital allowance for investments between US$ 3-100 million, and 150 percent for investments over US$ 100 million per year of tax assessment.
Investments in the Northern Province over US$ 3 million currently get a 200 percent capital allowance to help rebuild the war-torn region.
However, under the new proposals, income tax for companies investing over US$ 50 million will get an additional 100 percent deduction on actual expenditure on depreciable assets for a period of 10 years after operations commence.
Investments of over US$ 100 million are tipped to receive a 150 percent capital allowance.
“For investments over US$ 1 billion, the period for deduction of unrelieved losses shall be 25 years,” the Minister has added.
Also, divident taxes and withholding taxes on salaries paid by a company to a non-resident will be exempt from taxation if the investments are over US$ 1 billion under the new proposals while investments of over US$ 100 million will also be exempted from nation building taxes, ports and airports levy, cesses and negative list item tariffs under free trade agreements.
OSL take:
The government of Sri Lanka in its 2019 budget proposals has presented many incentives for foreign investors with the aim of boosting foreign direct investments to the country. The government has also taken many measures to improve the ease of doing business environment in Sri Lanka making the country an attractive business destination. The proposed increased capital allowances for investments under the Inland Revenue Act and removal of para-tariffs for high value projects would definitely attract foreign businesses/investors to Sri Lanka.
| Article Code : | VBS/AT/11032019/Z_6 |