Sri Lanka Treasury bonds 10-pct tax removed
ECONOMYNEXT – Sri Lanka will end the practice of charging a 10 percent withholding tax on government securities under a new Inland Revenue Act to be effective from April 2017.
During the ‘committee stage’ of legislating the new bill, Finance Minister Mangala Samaraweera moved changes to clause 84 of the proposed bill last week.
The new section d) of clause 84 adds the exemption that ‘discount interest or paid to a person on security of treasury bond under the Registered Stock and Securities Ordinance (Chapter 420) or Treasury bills under the Local Treasury Bills Ordinance (Chapter 417)’.
At the moment, a 10 percent withholding tax is in effect for Treasury bills. Interest is quoted in the market net of tax.
Interest income is part of taxable income under the new law. There is also a capital gains tax of 10 percent on investments. it is not clear yet how the final tax on government securities will apply.
Gems auctioned under the Gems and Jewellery Authority Act of 1933 will be subject to the withholding tax, as will be lottery proceeds (about 500,000), betting and gaming wins, rent, royalty, natural resource payments.