Sri Lanka Sets New Tax Policies

November 22, 2011 Taxation in Sri Lanaka

Tax Changes in Sri LankaSRI JAYAWARDENAPURA-KOTTE – Sri Lanka will devalue its national currency and implement a series of tax policies changes, with the aim of further developing the country’s position rapidly expanding, export orientated economy.

In a speech made by President Mahinda Rajapaksa on November 21st in Sri Jayawardenapura-Kotte announcing the new government budget plan for 2012, a wealth of new

announced a wealth of new taxation measures and fiscal policies aimed at boosting the country’s economic expansion and increasing export levels.
While outlining the plan the President said that Sri Lanka is turning its back on decades of destructive economic policies and social disparities, and will now follow a progressive path aimed at creating an efficient outward orientated economy.

In order to boost the country’s international competitiveness and raise export levels, the national currency will be devalued by 3 percent. From the start of 2012 the government will also remove Value Added Tax on the import of equipment for textile production in order to improve the nation’s production and export capabilities. Customs duties on yarn will be removed in order to fuel an expansion of the textiles sector.

New policies will also be implemented with the aim of encouraging the creation of new businesses, with tax holidays of up to 6 years being offered to companies formed in the export or import substitution sectors. The tax incentive will apply to companies with initial capital investments of up to LKR 300 million. Large companies with investments of up to LKR 2.5 billion could see tax holidays of up to 12 years.

With the goal of developing the national tertiary education sector the government will also provide greater financing to courses leading to employment in the traditional employment sectors of the economy. Throughout 2012 approximately 11 500 new university graduates will be granted employment in key production sectors.

Photo by ComSec