sjms associates budget highlights 2013

8/12/2019 SJMS Associates Budget Highlights 2013

1/50


2/50

08th November 2012

Dear Client

B U D G E T P R O P O S A L S 2013

His Excellency the President and the Minister of Finance and Planning MahindaRajapakse presented the 9th consecutive Budget of the UPFA Government today. Thismemorandum includes the salient features of the budget proposals for 2013.

The Budget for 2012, said to be development oriented, to develop the country after 30years of civil conflict and had granted concessions and incentives to reactivate and upliftthe economy. Taxes were streamlined and reduced to bring down rates to acceptablelevels, or to be amongst the lowest in the region.

In this background, His Excellency the President presented the 9th Budget, maintaining

the present tax structure. Amendments have been to clear ambiguity, provide claritywith regard to transfer pricing regulations, Tax Appeals Commission Act, etc., and grantconcessions to certain identified sectors.

It should be noted that information provided in this booklet or proposal may be subject tochanges at the time of legislation. Therefore, it is advised that any conclusion or decisionshould be arrived at only after due consideration and consultation.

For further information and guidance, the Tax Advisory division of SJMS Associates willbe pleased to assist you.

This information could be viewed on our website at www.sjmsassociates.lk

Yours faithfully,

SJMS ASSOCIATES

Chartered Accountants


3/50


4/50


5/504

Budget Highlights 2013


6/505


1. Income Tax

1.1 Personal Income Tax

1.1.1 Tax Exemptions

(a) Exemptions to individuals

Proposed

The income from emoluments arising in Sri Lanka of any individual;

- who is an expert and a not a citizen of Sri Lanka,

- brought to Sri Lanka by a BOI Company,

- during the period of a tax holiday under Section 17A or Section 16D of the

Inland Revenue Act, where the total investment made is out of foreign direct

investment exceeding USD 50mn, if such services are essential to carry out

the activities of the Company, as determined by the BOI on a request made

for this purposes will be exempt from income tax.

An expert referred to here is an individual who has expertise in such field

as may be determined by the Commissioner-General, as being a field in

which sufficient expertise is not available among the citizens of Sri Lanka.

The number of experts in an undertaking to whom this provision is applicable

shall not exceed five.

Present

Exemption is available for emoluments arising in or out of Sri Lanka, of anexpert

being a non-citizen employed under a Strategic Development Project or any

undertaking which has entered into an agreement with the Government of SriLanka.

(b) Source - wise exemption

Proposed

Income from investments in bonds obtained by persons outside Sri Lanka will be

exempt from income tax.

Present

Only loans are covered under the exemption.


7/506


2. Concessionary Rates

1. Tax concessions to Sri Lankan citizens earning outside Sri Lanka

(a) Resident of Sri Lanka

Proposed

The profits and income earned from any source outside Sri Lanka by an individualwho is a resident and citizen of Sri Lanka will be exempt from income tax, if the

income earned is remitted to Sri Lanka through a bank in Sri Lanka.

Present

The exemption is applicable only for income derived through services rendered

and royalty income received.

(b)Permanent resident outside Sri Lanka.

Proposed

The profits and income earned outside Sri Lanka by individuals who have

obtained permanent resident status in any other country or any similar status in

which such individual obtains the citizenship in Sri Lanka and any other country

will be exempt from income tax.

Present

The exemption is applicable to Dual Citizens only.

Employment Category MaximumProposed

Income TaxRate

MaximumPresent

Income TaxRate

Employment income of a pilot referred to underSection 40A

16 % 20%

Employment income of a qualified employee referredto under Section 40B ( where identified professionalservices are provided to persons out of Sri Lanka forpayment in foreign currency)

16 % 20%

Employment income in the form of compensation

for loss of office or employment referred undersubsection (2) of Section 35, where such scheme isnot uniformly applicable to all the employees

16 % 20%


8/507


1.2 Corporate Income Tax

1.2.1 Exemptions for Institutions

Proposed

Profits and income (other than income from dividends and interest) of the

following will be exempt from income tax:

- College of General Practitioners of Sri Lanka established under Act No 26 of

1974

- Sri Lanka Social Security Board established under Sri Lanka Social Security

Board Act No 17 of 1996

- Any Public Corporation to the extent of provision of services, free of charge,

out of the funds allocated by Parliament from the Consolidated Fund or out

of any loan arranged through the Government

- Sri Lanka Savings Bank which is merged with National Development Trust

Fund (NDTF)

- Lanka Puthra Development Bank

Present

These institutions are not granted exemptions under Section 7.

1.2 Exemptions For Specific Sources

a. Profits and income earned from off-shore business

Proposed

Profits and income earned in foreign currency by a resident company or

partnership in respect of any off-shore business, where goods are procured

from one country and transported to another country other than Sri Lanka. (with

effect from 1.4.2012)

Present

Exemption is only in respect of any off-shore business which does not in any

way involve any goods manufactured or produced in Sri Lanka or any goods

imported to Sri Lanka.

b. Royalty, franchising fee or any payment for designing made for to anyforeign collaborator

Proposed

Royalty, franchising fee or any payment for designing made to any foreign

collaborator by a BOI registered company during the period of tax holiday under


9/50


10/50


11/5010


- Supply of goods manufactured in Sri Lanka and provision of services to

foreign ships for which payments are in foreign currency.

- Sale of any product manufactured in Sri Lanka through a foreign exchange

earning account authorized by the Central Bank of Sri Lanka for whichpayment is in foreign currency.

- Sale of goods (up to the quantity approved by the BOI as import replacement)

manufactured in Sri Lanka by an export oriented BOI registered company to :

Any BOI registered enterprise enjoying a tax holiday under Section 16C

, 17A or 16D of the Inland Revenue Act or the Strategic Development

Projects Act and permitted to import project related goods or raw materials,

duty free, under the provisions of the BOI agreement during the project

implementation period , or

Any person eligible to import specific goods duty free under any Government

authority.

Present

The current tax rate is 28%

d. Organic tea in bulk

Proposed

Organic tea in bulk will be classified as non - traditional goods and will be

taxed at 12%.

Present

It is considered under traditional goods and is taxed at 28%.

e. Turnover threshold for undertakings eligible for 10% concessionary rate

Proposed

The turnover threshold for undertakings engaged in the manufacture of any

article or provision of any service for which a concessionary tax rate of 10%

is applicable,has been increased to Rs.500mn.

Present

Current turnover threshold is Rs. 300mn.


12/5011


f. Power generation Industry

Proposed

Tax rate of 12% is applicable on the profits and income of a person orpartnership from operating any mini hydro power project or other alternative

energy source.

Present

Profits and income are liable at 28%.

g. Companies obtaining a listing on the Colombo Stock Exchange

Proposed

Income tax payable will be reduced by 50% for a company, which lists its

shares after 1st April 2013 and issues 20% 20% of its shares to the general

public.

The 50% reduction is applicable for the year of assessment in which shares

are listed and two years immediately succeeding that year of assessment.

Present

Such a concession is not available.

h. Sale of manufactured goods to local market by export oriented companies

Proposed

The profits and income from sale of manufactured garments or ceramic

products in the local market by an export oriented enterprise will be liable at

the rate of 12%.

Present

A rate of 28% is applicable for local sales only.

i. BOI registered enterprises after the expiration of tax holiday

Proposed

If the taxation position of a BOI registered company after the expiration

of the tax exemption period is more disadvantageous than the taxation

position it would have been subjected to had it not been a BOI company,

the provisions of the Inland Revenue Act will apply.


13/5012


Tax concessions under BOI agreement will not be extended through

supplementary agreements.

Present BOI registered companies are not entitled to apply concessionary rates of

tax available under the Inland Revenue Laws, even if the concessionary rates

under the Inland Revenue Act are more attractive than BOI concessions as

per the BOI agreement.

1.2.3 Ascertainment of profits and income

The following expenses are allowed to be deducted under Section 25.

a. Capital Allowances

Proposed

Capital allowance rates applicable on plant, machinery and equipment ac-

quired after 01.04.2013 will be as follows, for:

technology upgrading purposes or introducing any new technology

50%

energy efficiency purposes, providing more than 30% of the total

requirement of the power generation out of alternative energyresources - 100%

the establishment of back office system for stockbrokers to be

compliant with the CSE requirements in relation to risk

management 100%

any export industry 50%

Present

The rate applicable for plant and machinery in general is 33 1/3% with the

exception of the rate for energy efficient equipment being 50%, regardlessof the level of efficiency achieved.

b. Special Levies paid to the Government

Proposed

Special levies paid to the Government by a Public Corporation or Govern-

ment owned business undertakings are fully allowable.

Present

There is no such provision in respect of special levies .


14/5013


c. Research and Development Expenses

Proposed

The triple deduction granted for expenditure on research and developmentcarried out through government institutions will be extended to research

carried out through private institutions as well.

Present

A triple deduction is applicable for research conducted within Sri Lanka

through a Government institution only.

d. Advertising Expenses

Proposed

Expenses incurred on specific sponsorship of international sports events

approved by the Minister of Sports are fully allowed with effect from

01/08/2012.

Present

25% of such expenditure is disallowed.

1.3 Withholding tax on interest income from corporate debt security

Proposed

Deduction of WHT will be on the full interest for the respective period, at the

time of issue.

Where the security is issued with a floating rate of interest, deduction will be

at the commencement of each reviewing period.

Where no deduction has been made up front, deduction will be at the time

of payment of interest.

Present

Deduction shall be made at the time such interest is paid or credited or when a

discount is allowed.


15/5014


1.4 Administrative Provisions

(A) Inland Revenue Act

(i) Residency of an Individual

Proposed

Status of residency to be decided only through the 183 days rule.

Present

An individual who has been a resident for two or more consecutive years of

assessments will be treated as a resident until the year of assessment in which

he commences to be continuously absent from Sri Lanka for an unbroken period

of 365 days.

(ii) Time Bar

Proposed

Time bar period comes in to effect after 18 months from the completion of the

year of assessment.

Present

Time bar period comes in to effect after 32 months from the end of the year of

assessment.

(B) Tax Appeals Commission Act

The following changes will be made:

(a) Time period to hear and conclude appeals that were pending in the Board

of Review as at 31.03.2011 and transferred to Tax Appeals Commission to

be extended.

(b) Provisions to be introduced to continue hearing appeals that arose under

the Inland Revenue Act No. 28 of 1979, and No ,38 of 2000 or Finance Act

No. 11 of 2004.

(c) Provisions for stating cases for the opinion of the Courts of Appeal (by the

Tax Appeals Commission) will be included in the Tax Appeals Commission

Act itself.


16/5015


(d) Time for preferring an appeal to the Commission will be modified to be one

month from the date of transmission of reasons for respective determination

of the Commissioner General.

(e) In respect of the deposit (25 % of tax) to be made as a prerequisite for

preferring an appeal to the Commission, changes will be made to refund

any excess of such deposit and transfer the tax to the Commissioner

General of Inland Revenue.

(f) The bank guarantee (in place of deposit), the beneficiary thereof and tenor

thereof will be specified.


17/5016


2. VALUE ADDED TAX (VAT)

2.1 Exemptions

Proposed

The following exemptions are proposed

The supplies made by the following institutions:

Central Bank of Sri Lanka (Including the VAT on Financial Services)

Any Public Corporation to the extent of provision of services on behalf of the

Government, free of charge, out of the funds allocated by Parliament from the

Consolidated Fund or out of any loan arranged through the Government.

The supply of services to a unit trust by the unit trust management company.

The supply of hotel accommodation to any sportsman, organizer of any sport event or

sponsor arriving in Sri Lanka for participating in any sport event or activity connected

with sport.

Locally manufactured products out of coconut waste (coco peat, coir fiber, grow

pellets, grow bags, twist fiber, coconut husk)

The import or supply of the following items

Item HS Code

Bowsers 8704.23.10

8704.32.10

8704.23.20

8704.32.20

Bulldozers, graders, levellers, excavators 84.29

Fire fighting vehicles 8705.30.10Road tractors for semi-trailers 8701.20.10

Raw materials for the manufacture of energy

saving bulbs

8543.90

The VAT exemption applicable on services which result in the improvement of quality,

character or value of any fabric or garment will be restricted to services provided to

non-exporters and extended to cover such services related to yarn.


18/5017


2.2 Imposition of VAT for Wholesale and Retail Businesses

Proposed

Any person or a partnership who carries on a business of wholesale or retail tradeand makes a quarterly turnover/supplies including exempt turnover/supplies, of not

less than Rs. 500mn, will be liable to be registered for VAT. However, VAT will be

chargeable on liable supplies only.

Present

Wholesale and retail businesses are not liable for VAT.

2.3 Sale of Manufactured Goods to Local Market by Export Oriented Companies

Proposed

Enterprises engaged in the manufacture of garments or ceramic products will be

permitted to increase their domestic sales up to 40% and would be liable to pay VAT

and NBT on such local supply.

The Rs. 25/= per piece on sale of garments will be removed.

Present

Rs. 25/= per piece is payable on sale of garments in the domestic market.

2.4 Administrative Provision

SVAT Scheme

Relevant amendments will be incorporated to the VAT Act and the guidelines

issued for SVAT where necessary, with a view to further simplify the scheme.

The guidelines will be regularized through Gazette notifications.

Provisions will be made to make SVAT registration mandatory.

Penal provisions will be introduced for non-compliance with the statutory

requirements under the SVAT scheme.


19/5018


Filing of VAT Returns

Proposed

The date for filing the VAT return will be extended to the 30th day of the followingmonth. The due date for payment which is the 20th date of the following month will

remain unchanged.

Present

The return has to be filed by the 20th day of the following month.

2.5 VAT Concessions to SME Sector

Any person or partnership, with an annual liable turnover/ supplies not exceedingRs. 12mn, from all the businesses carried on by such person or partnership will

not be liable to pay VAT.

Accordingly, the quarterly VAT threshold will be Rs. 3mn

2.6 Amnesty Provision

VAT payable by any person having a turnover not exceeding Rs. 300mn per year

from every trade or business carried on by such person for any period ending

prior to 1st April 2011, and having not complied with tax laws, will be exempted

from payment of such VAT, if the past earnings are invested prior to 31st March

2014, in any trade or business and such person duly complies with tax laws.

2.7 Effective date of Proposals

These VAT proposals are expected to come into effect from 1st January 2013.


20/5019


3. NATION BUILDING TAX (NBT)

3.1 Liable turnover

Proposed

Any person or partnership, with an annual liable turnover not exceeding Rs.12mn, from

all the businesses carried on by such person or partnership, including wholesale or

retail business, will not be liable for NBT. Accordingly, the threshold for NBT will be

Rs.3mn per quarter.

Present

The current threshold for NBT is Rs.500,000 per quarter. Rs.2mn per annum.

3.2 Exemptions

Proposed

Exemption from NBT have been proposed for the following.

The following articles have been included under excepted articles

(PART I, EXCEPTED ARTICLES)

Article HS Code

Solar panel modules, accessories or solar home

systems for the generation of solar power energy

8501.31.10 8513.10.10

9405.10.10 9405.10.20

9405.20.10 9405.20.20

9405.40.30 9405.40.40

9032.89.10 8539.31.20

8541.40

Coal 2701.11

2701.12

2701.19

The import of goods for any international sports event approved by the Minister of

Finance.

Gems imported subject to Special Service Fee at the rate specified in the Gazettepublished under Section 6A (a) of the Customs Ordinance, (Chapter 235) includingany subsequent sale of such gems as processed gems.


21/5020


NBT on local sales of imported gems that is not subject to any processing (imposed

in lieu of Turnover Tax) remains taxable.

The turnover of the following institutions will not be liable for NBT

Central Bank of Sri Lanka

Any Public Corporation to the extent of provision of services allocated on behalf

of the Government, free of charge out of the funds voted by Parliament from the

Consolidated Fund or out of any loan arranged through the Government.

Present

Services provided by a public corporation, insofar as such services are in respect of

the export of any article from Sri Lanka are not liable for NBT.

3.3 Amnesty provisions

a. NBT payable by any person having turnover not exceeding Rs. 300 Million

per year from every trade or business for any period ending prior to April

1, 2011, and not complied with NBT laws, will be exempted from payment

of NBT, if the past earnings are invested prior to 31.03.2014, in any trade or

business and duly comply with tax laws; and

b. The profits and income from such trade or business (carried on by

capitalizing such earnings) will be exempt from income tax for a period of

five years.


22/5021


4. ECONOMIC SERVICE CHARGE (ESC)

4.1 Exemptions

a. Funds voted by Parliament from the Consolidated Fund or from any loan

arranged through the Government for the provision of services by any

Public Corporation on behalf of the Government of Sri Lanka will not be

treated as turnover for the purpose of ESC.

b. Central Bank will be exempt from ESC.

4.2 Amnesty Provisions

a. ESC payable by any person having turnover not exceeding Rs. 300 Million

per year from every trade or business for any period ending prior to April

1, 2011, and not complied with ESC tax laws, will be exempted from

payment of ESC , if the past earnings are invested prior to 31.03.2014, in

any trade or business and duly comply with tax laws; and

b. The profits and income from such trade or business (carried on by

capitalizing such earnings) will be exempt from income tax for a period of

five years.


23/5022


5. MISCELLANEOUS

5.1 CESS

Cess will be increased or imposed on import of the following items :

Item H S Headings/ H S Code

Dairy products 04.03 04.04 04.06

Birds eggs 04.08

Edible products of animal origin 04.10

Cut flowers and flower buds, Foliage 06.03 06.04

Fresh, preserved, dried vegetables

and fruits/ Other vegetable and fruitproducts

07.02 07.04 07.05 07.06

07.07 07.08 07.09 07.10

07.11 07.12 07.14 08.01

(except 0801.31.10 and 0801.31.90) 08.02

08.03 08.04 (except 0804.10) 0805.10.20

0805.40 0805.50 0805.90 0806.20

08.07 0808.30 0808.40 08.09

08.10 08.11 08.12 08.13

08.14 20.01 20.02 20.03

20.04 20.05 20.06 2007.91

2007.99 20.08 (except 2008.30.10 and 2008.50.10)

20.09 (except 2009.11.10)

Edible oils 15.08 15.09 1512.21 1512.29

1531.21 1513.29 15.14 15.15

15.16.20

Margarine 1517.10

Sausages and preserved meat

products

16.01 1602.32 1602.50 1602.90

16.03

Honey and jaggery 17.02

Confectionaries 17.04 18.06

Bakery products 19.05

Food preparations 21.03 21.04 21.05

Mineral water 22.01 22.02

Vinegar 22.09


24/5023



Salt 25.01

Lubricants 2710.19.80

Gauze and bandage 30.05 58.03

Putty 3214.10

Soap 34.01 (except 3401.20)

Adhesives 3506.91 3903.90.10 3905.12 3905.21

3906.10.10 3906.90.10 3919.90

Handles for toothbrushes 3926.90.60

Tyres for cars and light truck 4011.10 4011.20.90

Soap wrappers 48.11 (except 4811.10)

Wet cleansing tissues 56.01

Fabrics 50.07 51.11 51.12 51.13

52.08 52.09 52.10 52.11

52.12 53.09 54.07 54.08

55.12 55.13 55.14 55.15

55.16 58.01 58.02 5804.21

5804.29 5804.30 58.06 58.09

58.11 59.01 60.01 60.0260.03 60.04 60.05 60.06

Steel 7214.20.90 7306.61.90

Aluminum wire 7605.11

Radiators and parts 8708.91

Taxi meters 9029.10.10

Prefabricated buildings 94.06


25/5024



Urinals Water less 3922.90Jute fabrics 53.10

Groats and meal of maize (corn) 1103.13

Natural honey 04.09


Cinnamon 0906.11

Cloves 0907.10

Natural Sands

Waste 2505.10.10

Other 2505.10.90

Other 2505.90

Quartz 2506.10.10

Clay 25.07

Phosphate 2510.10.10

Stones (Emery, corundum) 2513.20

Stones (Gravel, pebbles, etc) 2517.49

Mica

Crude 2525.10

Waste 2525.30

Steatite

Not crushed 2526.10

Crushed 2526.20

Other minerals 25.30

Ilmanite 2614.00.10

Rutile 2614.00.20

Titanium 2614.00.90

Zirconium 2615.10

Niobium, tantalum. vanadium 2615.90

Cess on import of the following items will be reduced/ removed :

Cess on exports of following items will be increased :


26/5025


Item H S Code

Go Karts 8703.21.62

Trishaws 8703.21.518703.31.60

8703.21.54 8703.21.55 8703.31.50

Motor Cars (less than 1,000 cc) 8703.21.69 8703.21.79 8703.21.92 8703.21.93

Trucks g.v.w. is between 5 & 20tonnes

8704.22.30 8704.22.40 8704.32.30 8704.32.40

Trucks g.v.w. is exceeding 20tonnes

8704.23.30 8704.23.40

Single Cabs 8704.21.81 8704.21.82 8704.31.71 8704.31.72

Aerated Water 2201.10.90 2202.10 2202.90.90

Pipe Tobacco Exception will be removed

Hearses 2403.19.10 2403.91.10 2403.99.10

Item H S Code

Chilies crushed or ground 0904.22.10

Canned fish 1604.11 1604.12 1604.13 1604.14

1604.15 1604.16 1604.17 1604.19

1604.20

Black gram 0713.31.90

Maldive fish 03005.59.10

Grapes 0806.10

Coriander crushed or ground 0909.22

Turmeric crushes 0910.30.90

Ground Nut shelled 1202.42

Mustard seeds 1207.50

Seeds of cumin 0909.30

Palm oil crude and refined 1507.10 1507.90 1511.10 1511.90.10

1511.90.20 1511.90.90 1512.11 1512.19

1513.11.11 1513.11.19 1513.11.21 1513.11.29

1513.19.10 1513.19.90

5.2 Excise (Special Provisions) Act No 13 of 1989

The Excise (SP) Duty on the following HS Codes will be revised:

5.3 Special Commodity Levy Act No. 48 of 2007

In order to encourage local industries, the Special Commodity Levy presently

applicable on the following items will be revised.


27/5026


5.4 Betting & Gaming Levy

The present tax structure of the business of betting and gaming will be revised

as follows:

The annual levy payable will be revised as follows:

(a) The business of bookmakers:

Proposed

- Betting business through agents - Rs. 2,000,000 per year

- Where live telecast facilities are used - Rs. 500,000 per year

- Where live telecast facilities are not used - Rs. 25,000 per year

Present

- Betting business through agents - Rs. 1,000,000 per year

- Where live telecast facilities are used - Rs. 300,000 per year

- Where live telecast facilities are not used - Rs. 50,000 per year

(b) The business of gaming

Proposed

Gaming including rudjino - Rs. 100mn per year

Present

Gaming including rudjino - Rs. 50mn per year

Proposed

In lieu of indirect taxes, a levy of 5% of gross collection for each month in addi-

tion to the levy under paragraph (a) and (b)

Present

Indirect taxes were applicable.

Betting and Gaming Activities

Proposed

The present income tax at the rate of 40% will remain unchanged. No operator

is permitted to carry on a business of betting or gaming activities without a reg-

istration from the Department of Inland Revenue for tax purposes.


28/5027


Present

Income tax rate is 40%. But an operator is not required to register with the De-

partment of Inland Revenue.

5.5 Port and Airport Development Levy (PAL)

Proposed

Additional exemptions are given below:

Medical equipment to be donated to an institution which provides free health-

care services with the approval of Ministry of Health.

Present

Above articles are subject to PAL at 5%

Proposed

PAL on the consumables for the textile & apparel industry under the following

H.S Codes Nos will be reduced to 2.5%

Description H.S Code

Solar panel modules, accessories or solarhome systems for the generation of solarpower energy

8501.31.10, 8541.40, 8513.10.10, 9405.10.10,9405 .10 .20 ,9405 .20 .10 ,9405 .20 .20 ,9405.40.30,9405.40,9032.89.10 8539.31.20

Coal 2701.11, 2701.12, 2701.19

Description H S Code

Sinkers, needles and other articles used in forming stitches 84.48.51

Sewing machine needles 84.52.30

Other parts of sewing machines 84.52.90

Ironing parts 84.51.90

Organic surface active agents 34.02

Anionic 34.02.11

Cationic 34.02.12

Non-ionic 34.02.13

Other 34.02.19

8708.91 Radiators and parts

9029.10.10 Taxi meters

94.06 Prefabricatedbuildings


29/50


30/5029


such vehicles will not be liable to semi luxury dual purpose motor vehicle

levy payable on or after 01.01.2013.

Part IV of the Finance Act No 12 of 2012 will be amended to provide for the fol-lowing:

(a) To publish regulations to form the basis in which the guideline and ap-

proval would be granted.

(b) To determine the scope of the exemptions to be granted

(c) To declare the relevant areas to be brought under the Acts.

5.10 Embarkation levy / Visa fee

(a) The present embarkation fee will be increased to US$ 25.00

(b) Online visa fee will be increased by US$ 5.00

5.11 Stamp Duty (Special Provisions Act No. 12 of 2006)

Stamp duty on the instrument of transfer of stocks transferred by any per-

son to a margin trading account (slash account) and vice versa will be

exempted.

Charges

5.12 Transfer Pricing Legislation

(a) Separate provisions will be made for the determination of arms length price

of goods and services in local transactions of associated undertakings;

(b) Provisions will be introduced for advance pricing arrangements.

(Section 104 of the Inland Revenue will be amended)

Instrument Duty Rs.

Affidavit 250.00

Policy of instrument 1/- for every Rs. 1,000 or part thereof or theaggregate of the premia payable on the policy.

Notary warrant 2000/-

Periodic licence to carry on tradeor business etc.,

2,000/ or 10% of licence whichever is less

Licence for sale of liquor 20,000

Demand for payment on usage ofa credit card

15/- for every 1,000/- or part thereof


31/5030


Description Rs.

For registration of a limited Company 15,000

For registration of an unlimited company 12,500

For registration of a company limited by guarantee 25,000

For registration of mortgages, charges and debentures 5,000

For registration of an annual return 5,000

The registration of any document required or authorised to be registered orrequired to be delivered, sent, given or forwarded to filed with, the Registrar General of Companies, other than the notices and reports required to bedelivered to the Registrar General of Companies by a receiver or manager, an

administrator or a liquidator

1,000

For approval of a name of a company (Name Request) 1,000

For inspection of a file kept by the Registrar General of Companies 500

For certification of any document or extract thereof filed with the Registrar General of Companies

500

For inspecting the register of charges 500

For registration of Company Secretaries 5,000

Amount to be credited to a bank to defray the expenses of an off-shore companyfor the purpose of its office in Sri Lanka

USD100,000

For registration of an off-shore company 100,000

For renewal of an off-shore company 100,000

For registration of a place of business in Sri Lanka by an Overseas Company 50,000

For re-registration of an existing Company 10,000

Description Rs.

Marriages

Registration of Marriages by a Christian Minister 100.00 Registration of Marriages (General)

i. Entry of a marriage notice at the office 100.00

ii. Entry of a marriage notice at another place 20.00

iii. Registration of a marriage at the office 750.00

iv. Registration of a marriage outside the office (section 38-1) 1,000.00

v. Registration of a marriage outside the office (section 38-2) 5,000.00

vi. Issue of Registrars certificate 1,000.00

5.13 Changes to fees and charges

The Department of Registrar of Companies

The Registrar Generals Department


32/5031


i. Receiving a marriage notice under section 16(1) and (2) 50.00

ii. Receiving a marriage notice under section 16(3) 50.00

iii. Receiving a marriage notice under section 16(4) 100.00

iv. Obtaining a special licence 500.00

v. Obtaining a licence to register a marriage outside the office between 6.00a.m. to 6.00 p.m

100.00

vi. Obtaining a licence to register a marriage outside the office between 6.00p.m. to 6.00 a.m

500.00

vii. Registration of a marriage at the office 100.00

viii. Registration of a marriage outside the office

Within 6.00 a.m. to 6.00 p.m 500.00

Within 6.00 p.m. to 6.00 a.m 1,000.00Obtaining a certified copy of Kandyan marriage certificate 1,000.00

Birth

Registration of Births Occurred at Sri Lanka or Foreign Country No Change

Obtain a Certified Copy of the Certificate of Birth

If the number of the certificate of birth and the registered date is known 50.00

If the number of the certificate of birth and the registered date is not known

for search of birth registers for period of 03 months 100.00

for search of birth registers for period of 02 years 200.00

Registration of Kandyan Marriages

Description Rs.

Alteration of Information in a Birth Register 25.00

Registration of Past Births

within 12 months of occurrence more than 12 months of occurrence

10.0025.00

Translate Birth Certificate 200.00

Deaths

Registration of a death which occurred in Sri Lanka or Foreign Country No Change

Alteration of Information in a Death Register 25.00

Obtain a Certified Copy of the Certificate of Death

i. If the death certificate number & the registered date is known 50.00

ii. If the death certificate number & the registered date is not known

iii. - for search of death registers for period of 03 months for search of death registers for period of 02 years

50.00150.00

Registration of a Past Death

i. Within 12 months of occurrence of the death 10.00

ii. More than 12 months of occurrence of the death 25.00

Translate Death Certificate 200.00


33/5032


Description Rs.

Original of Deeds sought to be registered at the Land registry per document 5.00

Revenue to Central Government

Charge levied on a Caveat effective of 06 months

(to be in effect for a period of 02 years) 2,500.00

Charge levied for a Land Registry Search 500.00

Stamp Fees for Annual Notarial Registration 1,000.00

Charges to be paid by a Registered Attorney for Case File records (perproxy instead of a case)

200.00

Vehicle Category New RevenueLicensing fee

(Rs.)

Lorry, Ambulance, Hearse

Petrol

up to 2,000 kg 1,500

exceeding 2,000 kg but not exceeding 5,000 kg 2,000






exceeding 30,000 kg 7,000

Day Book entry Registration Fees

Revenue Licensing Annual Fee for Motor Vehicles


34/50


35/50


36/5035


6. CUSTOMS DUTY

The policy on customs duty structure remains unchanged except for the following

revisions :

H S Code Proposed Customs Duty

1. To promote local Livestock industry

Milk powder

0402.10 30% or Rs. 125/- per kg(A Duty waiver of 15% or Rs. 18/- per kg)



2. To encourage local value added industries

Glass beads

7018.20 Free

Maize starch

1108.12 15%

Molded or pressed articles of paper pulp

4823.70 5%

Polyester resin

3907.91.00 Free

Pneumatic tyres of rubbers

4011.20.10 (New NSH) 15% or Rs. 70/- per kg

4011.20.90 (New NSH) 15% or Rs. 70/- per kg

4011.10 30% or Rs. 140/- per kg

Wet cleaning Tissues

5601.21.10 (New NSH) 30%

5601.21.90 (New NSH) Free

5601.22.10 (New NSH) 30%


5601.29.10 (New NSH) 30%


Structure and parts of structure - Iron or steel

7308.90.90 30%


37/5036


H S Code Proposed Customs Duty

Coated Papers Printing or graphic purposes

4810.22 5%

4810.29 5%

3. To promote use of water preserving sanitary ware

Urinals Water less


4. To promote use of renewable energy sources

Day lighting devices which capture sunlight transfer & diffuse light in a building interior

7610.90.10 (New NSH) 5%

9405.50.20 (New NSH) 5%5. To make the taxes on imports to be in line with the domestic taxes

Beer made from malt

2203.00 Rs. 150/- per 1

Spirit

2207.10 Rs. 250/- per 1

2207.20.10 Rs. 200/- per 1

2207.20.20 Rs. 200/- per 1

2207.20.90 Rs. 200/- per 1

Spirits obtained by distilling grape wine or grape marc

2208.20 Rs. 1,250/- per 1

Whiskies

2208.30 Rs. 1,250/- per 1

Rum

2208.40.10 Rs. 1,250/- per 1

2208.40.90 Rs. 1,250/- per 1

Gin & Geneva

2208.50 Rs. 1,250/- per 1

Vodka

2208.60 Rs. 1,250/- per 1

Liquors and cordials

2208.70 Rs. 1,250/- per 1

2208.90.10 Rs. 1,250/- per 1

2208.90.90 Rs. 1,250/- per 1


38/5037


OUR COMMENTS

Budget overview

The 2012 budget aims to cut the budget deficit to 5.8% whilst maintaining an economicgrowth of 7.5%.

The budget proposals have been formulated by targeting the following three importantobjectives to be realized over the next three years commencing 2013:

- Transform the country in to a poverty-free upper middle income economy- Strength food, water and environment security- Place the country on a path to realize quality education, skills development,

research and technology revolution

The budget proposals are in line with the objective of transforming Sri Lanka into uppermiddle income country by reaslising a per capita income of US$ 4,000/- by the year2016.

The proposals aim at further enhancing the environment to promote domesticinvestments and foreign direct investments.

Our comments on some of the proposals are given in the ensuing paragraphs.

Benefits to Small and Medium Entities (SME)

Several favourable proposals have been made to promote small and mediumenterprises. The system and procedures concerning taxes and levies imposed by theGovernment as well as provincial and local authorities have been simplified.

A notable exemption is where a person or partnership with an annual liable turnover/ supplies not exceeding Rs. 12mn not being liable to Nation Building Tax (NBT) andValue Added Tax (VAT). This is a significant increase from the previous threshold forVAT and NBT, which were set at Rs. 2.5mn and Rs. 2mn respectively. Further, it hasbeen proposed to revise the annual turnover of Rs. 300mn for manufacturers andservice providers, referred to under section 59b, to Rs. 500mn for the application ofthe concessionary tax rate of 10%.

With these proposals it is expected that the SME sector would enjoy considerable taxsavings that would allow them to expand their businesses and also encourage newentrepreneurs.

Impact of telecommunication levy on IT and BPO sectors

The present 20% rate of telecommunication levy will be reduced to 10% in respect ofservices provided through internet / broad band, with a view to facilitate IT and BPOsectors.

Developments in tourism industry

A 25% discount on the lease rental as determined by the Government Chief Valuerfor local investors has been proposed. Further, concessions on land leasing will beoffered, if a foreign investor forms an equity partnership, of which at least 30% is


39/5038


represented by the local investor. However, the sale of state land to foreigners wouldbe prohibited.

The above proposal is highly encouraging for local investors to set up tourism related

businesses and would also allow foreign direct investments to flow to the countrythrough local partnerships.

Moreover, supply of hotel accommodation to any sportsman, organizer of any sportevent or sponsor arriving in Sri Lanka for participation in any sport event or activityconnected with sport will be exempt from VAT.

Specific sponsorship expenses of international sporting events would be fully allowedas a deduction for tax purpose provided these are approved by the Minister of Sports.

The above proposals are likely to promote the hosting of sporting activities and thereby,indirectly boost tourism.

Relaxations in foreign exchange control

Corporate entities could borrow up to US$ 10mn per annum over the next three yearswithout having to obtain approval from the Exchange Control Department. For licensedcommercial banks, the limit goes up to US$ 50mn. This would enhance access toglobal financial markets.

Further, entities engaged in the supply of goods and services to tourism and foreignbusinesses would now be permitted to accept foreign currencies

Value Added Tax and Nations Building Tax on wholesale and retail business

For the first time, the wholesale and retail business has been brought in to the VAT andNBT system. The imposition of VAT and NBT on wholesale and retail businesses, thequarterly turnover / supplies of which exceeds Rs. 500mn, would contribute to expandthe tax base and also promote equity in taxation with the high spending society beingmade to absorb the additional tax.

This proposal aims at safeguarding several small and medium sectors. As such, smallboutiques and shops will not be liable for these taxes. It would be interesting to seehow this would affect the pricing of the products in supermarket.

Concessionary tax rates

Several concessionary tax rates have been proposed for different sectors includingunit trust management companies, poultry farming, organic tea in bulk, mini hydropower project or other alternative energy sources.

Another concession is the three year tax holiday calculated at 50% of the applicabletax rate, to be granted to companies listed newly in the Colombo Stock Exchange witha minimum public holding of 20%.

The above concessions would enhance the development of business sectors as wellas the capital market.

In conclusion, the 2013 budget aims at reducing poverty, uplifting the living conditionsof the poor through equity in taxation, discouraging imports, boosting exports andbeing cautious about over burdening the society at large. It is a balanced budget forthe people.


40/5039


2013/14

%

2012/13

%

2011/12

%

2010/11

%

2009/10

%

2008/09

%

Income Tax

Quoted CompaniesTaxable Income > Rs. 5 Mn.

First 5 years 28 28 28 33 1/3

33 1/3

33 1/3

Thereafter 28 28 28 35 35 35

Taxable IncomeRs. 5 Mn. 28 28 28 35 35 35


41/5040


Note :(1) To be paid by both buyer and seller(2) Of turnover(3) Divisible profit in excess of Rs. 600,000/-

2013/14%

2012/13%

2011/12%

2010/11%

2009/10%

2008/09%

Concessionary Rate

Qualified Export 12 12 12 15 15 15

Profits / Construction/

Tourism

12 12 12 15 15 15

Agriculture 10 10 10 Exempt Exempt Exempt

Venture Capital

Companies

12 12 12 20 20 20

Unit Trust Management

Companies

12 28 28 35 35 35

Petroleum Exploration 12 12 12 15 15 15

Exports with 65% value

addition

10 10 10 15 15 15

Share transaction levyon sale of shares ofquoted companies

0.3 (1) 0.3 (1) 0.3 (1) 0.2 (1) 0.2 (1) 0.2 (1)

ESC 0.1 - 1 (2) 0.1 - 1 (2) 0.1 - 1 (2) 0.05 -1 (2) 0.05 -1 (2) 0.05-1(2)

Partnership 8 (3) 8 (3) 8 (3) 10 (3) 10 (3) 10 (3)


42/50


43/5042


2013/14

%

2012/13

%

2011/12

%

2010/11

%

2009/10

%

2008/09

%

Deduction of Losses (restricted)

Life Insurancebusiness

Loss

restricted

to Life

Insurance

business

profit

Loss

restricted

to Life

Insurance

business

profit

Loss

restricted

to Life

Insurance

business

profit

Loss

restricted

to Life

Insurance

business

profit

Loss

restricted

to Life

Insurance

business

profit

Loss

restricted

to Life

Insurance

business

profit

Finance Leasingbusiness

Lossrestrictedto finance

leasing profit


leasing profit


leasing

profit


leasing profit


leasing

profit

Lossrestricted

tofinance

leasingprofit

Limited to 35 % of totalStatutory

Income

35 % of totalStatutory

Income

35 % of totalstatutoryincome



35 % oftotal

statutoryincome

Value Added Tax

Standard 12 12 12 15 15 15

Zero 0 0 0 0 0 0Luxury 12 12 20 20 20 20

NBT

Standard 2 2 3 3 - -

Retail & Wholesalebusiness

2 of 50 % ofturnover


2 of 50 % ofturnover - - -

Distributors 2 of 25 % ofturnover




44/5043


Sri Lanka

%

India

%

Bangladesh

%

Singapore

%

Malaysia

%

Corporate Tax

Quoted Company 28 32.4 27.5 17 25

Unquoted Company 28 32.4 37.5 17 25

Clubs and Associations 10 30.90 10 - 25

(Income from

members not

liable)

17 0 - 26

Foreign Dividends Exempt 16.22 Exempt Exempt Exempt

Remittance Tax

( Non resident company) 10 - 10 - 37.5 - -

Capital Gains (Listed) - 16.22

(Short term)

15 Exempt Exempt - Liable

only on sale of

land & building

Partnership Tax 8 30.90 10 - 25 Exempt -

Withholding TaxInterest 10 42.02 10 15 15

Royalty 10 or 15 10.51 10 10 10

Dividends 10 21.01 10 Exempt Exempt

Rent - - - 15 10

Management Fee 5 10.51 10 17 -

Directors Fees 10 or 16 Taxed at

normal rates

- 20 -

Capital Allowance

Buildings 10 10 10 General20 Factory

25 Initial3 Annual

10 Initial3 Annual

Plant & Machinery 33 1/3

15 20 33 1/3

20 Initial (General)

14 Annual

(General)

20 (Heavy)

Furniture 20 10 10 33 1/3

20 Initial

10 Annual

Motor Vehicles 20 15 20 33 1/3

20

Computers 25 60 30 100 20 Initial

80 Annual

Appendix B

Comparison of Current Corporate Taxes, Withholding Taxes, Indirect Taxes etc., Y/A

2011/2012


45/5044


Indirect Taxes

Value Added Tax (VAT) 12 0 &14.5 15 7 5 or 10

Nation Building Tax

(NBT)

(Retail / Wholesale )

2

2 of 50 of

T/O - - - -

Economic Service

Charge (ESC)

0.1 to 1 - - - -

Customs Duty 0 - 32 24.42

average

- - -

Excise Duty 0 - 22 10.30 - - -


46/5045


Appendix C

Comparison of Effective Tax Rates for Resident Individuals

Y/A 2002 / 2003 - 2012 / 2013

An Employee whose salary is Rs. 150,000 per month (1) Rs. 200,000 per month (2)

Y/A Personal

Allowance

Taxable Income Income Tax Average

Effective Rate

Rs.

(1) Rs.

(2)Rs.

(1)Rs.

(2)Rs.

(1)Rs.

(2)Rs.

2002 / 2003 240,000 960,000 1,560,000 264,000 474,000 22.0 26.3

2003 / 2004 240,000 960,000 1,560,000 234,000 414,000 19.5 23.0

2994 / 2005 300,000 900,000 1,500,000 198,000 378,000 16.5 21.03

2005 / 2006 300,000 900,000 1,500,000 105,000 275,000 8.8 15.3

2006 / 2007 300,000 900,000 1,500,000 105,000 280,000 8.8 15.6

2007 / 2008 300,000 900,000 1,500,000 105,000 280,000 8.8 15.6

2008 / 2009 300,000 900,000 1,500,000 105,000 280,000 8.8 15.6

2009 / 2010 300,000 900,000 1,500,000 75,000 180,000 6.2 10.0

2010 / 2011 300,000 900,000 1,500,000 75,000 180,000 6.2 10.0

2011 / 2012 500,000 700,000 1,300,000 36.000 96,000 3.0 5.3

2012 / 2013 500,000 700,000 1,300,000 36,,000 96,000 3,0 5.3

Appendix D

Retiring Benefits - Lump sum payment ( Gratuity, EPF, ETF, Compensation for loss of employment )

RateY/A Nil 5% 10%

2007/2008 (1)(A) First Rs. 5,000,000 Next Rs. 1,000,000 Balance








2011/2012 (1)(A) First Rs, 5,000,000 Next Rs. 1,000,000 Balance


(A) Government Sector - All Retiring Benefits are exempt from tax.(1) If the period of Provident Fund contribution is over 20 years(2) If the period of \Provident Fund contribution is below 20 years(3) Provident Fund Retiring benefits exempt from 2011/2012


47/50


48/5047


Contacts

SJMS Associates Tel. + 94 11 5444400 / 5444408/09 [email protected] Castle Lane Fax. + 94 11 2586068

Colombo 04.

Ms. S. Y. Kodagoda Tel. +94 11 5444400/ 5444410 [email protected]. P. Sivasubramaniam Tel. + 94 11 5444400 / 5444408/09Mr. D. Dahanayake Tel. + 94 11 5444400 / 5444408/09 [email protected]. M. Ratnayake Tel. + 94 11 5444400 / 5444408/09 [email protected]. I. Karunaratne Tel. + 94 11 5444400 / 5444408/09 [email protected]. L. Fernando Tel. + 94 11 5444400 / 5444408/09 [email protected]

Polytechnic Building Tel. + 94 11 5360151 - 4 / 566782930 - 2/1 Galle Road Fax. + 94 11 2507522Colombo 06

Ms. T. Varathaluckshmy Tel. + 94 11 5444400 / 5444408/09 [email protected]

Branch

SJMS Associates Kandy Tel. + 94 081 2228684 or 562864925/1/1 George E. de Silva Fax. +94 081 2203071MawathaKandy

Mr. R. Rajendran [email protected]

Correspondent Office

Ranaweera Nagasinghe & Co. Tel. + 94 041 222236541/5B Old Market Road Fax. + 94 041 2221415KotuwegodaMatara

Mr. S.J. Ranaweera [email protected]


49/50


50/50

Printed

by

CeylonP

rintersPLC

sjms associates budget highlights 2013

Documents