Corporate Tax
• Proposed Corporate Tax Structure delayed by 1 year; Previous system to continue for 2016 only.
• Previous System to continue:
a) Tourism, construction, agriculture, exports and SME which were earlier liable at 10% and 12% will increase to 17.5 %
b) Liquor and tobacco will be at 40%
c) All other sectors will remain at 28%
• New System to apply from 2017:
a) 30% tax rate: Banking and financial services, insurance and whole sale, retail trade
b) 15% tax rate: All other sectors
Income Tax
• Proposed Income Tax Structure delayed by 1 year; Previous system to continue for 2016 only.
• Previous System to continue:
a) Previous slabs of 4%, 8%, 12% and 16% will apply
• New System to apply from 2017:
a) A flat rate of 15% was proposed; But the flat rate has increased to 17.5%
b) Individual income up to LKR 2.4Mn per annum and to tax income above the exempt limit at a flat rate of 17.5%.
Nation Building Tax
• NBT current rate of 2% will continue. Proposed 4% will not apply
• Threshold lowered to LKR 3mn per quarter from 3.75mn per quarter of turnover
• Exemptions for Electricity, Lubricants and Telecommunication Services removed
Value Added Tax
• VAT increased to 15% from the current 11%. Proposed 2 tier structure of 8% and 12.5% will not apply
• Exemptions for Telecommunication Services, Private Education and Private Healthcare removed
• VAT to be imposed on retail and wholesale sector excluding essential items
Capital Gains Tax
• Proposed to reintroduce Capital Gains Tax on listed shares and real estate.
• Tax on capital gains from sale of shares quoted in the CSE was abolished in 1987 and tax on capital gains arising on other assets were abolished in 2002.
• During the previous system before 1987 capital gains were calculated on the basis of realized increases in value at the time the gain is in fact realized.
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