The Government yesterday Gazetted the new income tax structure, introduced in the budget 2017, while introducing an investor incentive scheme, which provides new concessions to investors. Minister of Finance Ravi Karunanayake said the new tax structure would come into effect, when the Gazette notification was approved by Parliament.
The corporate tax system will be simplified to 3 tier rate structures under which Small and Medium Enterprises, export of goods and service, local IT industry, manufacturing furniture, education, tourism, fisheries, renewable energy, freight forwarding, EPF, ETF, Pension Funds and Charitable institutions, will be subjected to a concessionary rate of 14 percent.
Banking, finance, insurance, manufacturers and traders will be subjected to standard Corporate Tax rate of 28 percent and liquor, tobacco, betting/gambling will be subjected to a higher Corporate Tax rate of 40 percent.
According to the Gazette Notice several areas of businesses such as hub activities (Entire Port, international logistics) export of IT, export of gem and jewellery, solid-waste management, agriculture, poultry, dairy and middle-income housing will be exempted from the Corporate Tax.
As per the Gazette a person will not be levied income tax if his or her annual earnings were up to Rs. 1.2 million per year and will not be liable to Pay As You Earn (PAYE) if the monthly salary was less than Rs. 100,000.
However, it was announced by the Minister that the Government had come up with an investor incentive scheme, which was formulated with an enhanced depreciation allowance for a person who incurs expenses in respect of depreciation of assets other than intangible assets.
Accordingly investments in the Northern Province less than US $ 3 million will be entitled to a depreciation allowance of 200 percent, while investments made in other areas will be subjected to a depreciation allowance of 100 percent.
However, the investments will have to be carried out within three years in order to qualify for the scheme.
Investments between US $ 3 to 5 million and provides employment to not less than 250 persons will be entitled to 200 percent depreciation allowance, while the investments between $ 3 to 5 million in other provinces will be subjected to 100 percent depreciation allowance provided they generate 250 employment opportunities.
For investments between $ 50 to 100 million there will be a deprecation allowance of 100 percent while unrelieved losses can be claimed in 10 years, while for investments between $ 100 million to 2 billion will be subjected a depreciation allowance of 150 percent while the unrelieved losses can be claimed in 10 years.
Investments over $ 2 billion will be subjected to a depreciation allowance of 150 percent while unrelieved losses could be claimed in 25 years.
Depreciation allowance of 100 percent has been given to investments more than $ 2 billion on ports developments, while unrelieved losses can be claimed in 25 years these kinds of investments will exempted from Corporate Tax up to the period, which the investment allowance is fully absorbed. The Corporate Tax would be 7 percent for the ensuing 15 years.