Sri Lanka removes ad-hoc tax concessions; new incentives for SMEs

Apr 05, 2017 (LBO) – Sri Lanka’s Finance Ministry has removed ad-hoc and unproductive tax concessions offered by various agencies and under various regimes from the new Inland Revenue Act.

Finance Minister Ravi Karunanayake said in a cabinet decision that the government policy is to broaden the income tax base by removing excessive tax incentives/expenditures and thereby raise government revenue. Accordingly, all income tax incentives are proposed to be streamlined and will solely be based on the investment made on capital assets, employment generation and the area in which the investor invests. The finance minister added that further such incentives will be dealt under the Inland Revenue law. The new Inland Revenue Act which provides for the imposition and collection of income tax is being re-drafted as proposed in the Budget 2017 and approved by the Cabinet of Ministers.

The new act provides for a new investments incentive scheme and an incentive scheme for small and medium investors who invest for the period from 2017 to 2019.