ECONOMYNEXT- Sri Lanka has proposed increased capital allowances for investments under the Inland Revenue Act, and removed para-tariffs for high value projects to boost foreign direct investments (FDIs), a minister said.
"Whilst Sri Lanka achieved its best ever FDI in 2017 and 2018, it is essential to further expand investment into the country," Finance Minister Mangala Samaraweera said while delivering the 2019 budget on Tuesday.
"Therefore, an incentive package to attract high value investments is proposed," he said.
"This includes significant capital allowances of up to 150 percent of investment value and removal of up-front taxes for investments over 50 million US dollars, 100 million US dollars and 1,000 million US dollars."
Current law allows for 100 percent capital allowance for investments between 3-100 million US dollars, and 150 percent for investments over 100 million US dollars per year of tax assessment.
Investments in the Northern Province over 3 million US dollars currently get a 200 percent capital allowance to help rebuild the war-torn region.
Under the new proposals, income tax for companies investing over 50 million US dollars 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 100 million US dollars are tipped to receive a 150 percent capital allowance.
"For investments over 1 billion US dollars, the period for deduction of unrelieved losses shall be 25 years."
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 1 billion US dollars under the new proposals.
Investments of over 100 million US dollars will also be exempted from nation building taxes, ports and airports levy, cesses and negative list item tariffs under free trade agreements. (Colombo/Mar06/2019-SB)