- Contact Details
- Services Offered
- Agreements on Avoidance of Double Taxation
- Approval Process
- Import/Export Facilitation
- Free Trade Agreements
- Industrial Labor Relations
- Investment Policy
- Key Target Sectors
- Land Policy
- Tax Regime
|b||Hotels, Hospitals, Utilities, Tourism Sector Projects and any other Infrastructure Project|
|– During Project Implementation Period|
|1. Project less than USD 3 Million||3,500|
|2. Project between not less than USD 3 Million and not more than USD 10 Million||6,600|
|3. Project more than USD 10 Million||8,800|
|4. Strategic Development Project||16,500|
|– Thereafter during Tax holidays & Concessionary Tax Period|
|1. Project less than USD 3 Million||2,300|
|2. Project between not less than USD 3 Million and not more than USD 10 Million||5,500|
|3. Project more than USD 10 Million||7,700|
|4. Strategic Development Project||11,000|
|– After Tax holiday & Concessionary Tax Period /After Project Implementation Period||1,000|
|d||Coir based Industries and Handicraft Projects||1,100|
Agreements on Avoidance of Double Taxation
Relief from double taxation for foreign investors;
Sri Lanka has entered in to Double Taxation Avoidance Agreements with 44 countries to eliminate or mitigate the incidence of juridical double taxation and avoidance of fiscal evasion in the international trade (or transactions).
The Board of Investment of Sri Lanka, structured to function as the central facilitation point for investors, is also responsible for permitting Imports and Exports of projects under section 17 of the BOI Law as well as providing other investor related services. These facilities are provided by the Investor Services Department of the BOI.
Services Offered by the Investor Services Department
Processing and Approving Import / Export Documents , Examination of Import / Export Cargo, Issue of Certificates of Origin for Apparel and Textile products , Approval for Subcontracts, Transfers, Loans of raw material, Re-Import and Re-Export of Items, Recommendations to the Controller General of Immigration & Emigration for issue of expatriate visas, Indirect Export Web Submission, Other Investor related approvals.
Investor Service Centres
To provide the above-mentioned services, the BOI has Investor Service Centers located at;
Colombo Head Office, Katunayake, Biyagama, Koggala Export Processing Zone, Kandy Industrial Park.
After signing the agreement with the BOI, to obtain the relevant services from one of the above centres, the investor should first register with the respective Investor Service Centre.
Customs Declaration (CusDec)
Request for clearance of Import cargo has to be made on the form identified as CusDec (Customs Declaration/Customs form 53). This form is designed as CusDec I, which is, used when only one item is declared and CusDec II, if there is more than one item to be declared. For new investors, it is recommended to obtain the services of a clearing agent registered with the Association of Clearing and Forwarding Agents (ACFA) and who is familiar with BOI Import/Export procedures which would avoid delays in clearing cargo and payment of demurrages.
Procedure for Clearance of Import Cargo
An Investor who has signed an agreement under section 17 of the BOI Law, is eligible to import project related items approved by the Investment Department without Customs Import Duty (CID). However, the investor is required to pay other taxes liable under the customs tariff.
Free Trade Agreements
Indo-Sri Lanka Free Trade Agreement (ISFTA)
The Indo-Sri Lanka Free Trade Agreement (ISFTA), which was signed on 28th December 1998 and entered into force with effect from 1st March 2000.
Since the end of March 2003, Sri Lanka has received total duty free access to the vast Indian market under the ISFTA for more than 4,200 products (HS Codes at 6 digit level).
|Classification of Duty Concessions Schedules under Indo – Lanka FTA|
|Type of Duty Reduction||Sri Lanka’s Commitment*||India’s Commitment*|
|Negative List No Concession List)||1,220||198|
|Tariff Rate Quota (TRQ)|
| Vanaspathi, Bakery Shortening,
Margarine and Pepper
|Margin of Preference (MOP)|
|100% Duty Free List (Zero Duty List)||4,004||4,228|
* No. of items at six digit level
Rules of Origin (ROO)
- 35% Domestic Value Addition (DVA) (25% DVA if raw materials are imported from partner country)
- Change of Tariff Heading criteria at 4-digit level and
- A sufficient process
The focal point and the authority for issuing Indo – Lanka FTA Certificates of Origin is the Department of Commerce, Sri Lanka and Federation of Chamber of Commerce.
Pakistan – Sri Lanka Free Trade Agreement (PSFTA)
Sri Lanka’s second Free Trade Agreement (FTA) between Pakistan and Sri Lanka was finalized and was commenced on 12th June 2005. Since March 2009 Sri Lanka has duty free market access for more than 4,500 products. Sri Lanka has also completed all her phasing out commitments in November 2010.
Classification of Duty Concessions Schedules under Pakistan – Sri Lanka FTA
|Type of Duty Reduction
|Sri Lanka’s Commitment*||Pakistan’s Commitment*|
|Negative List (No Concession List)||695||498|
|Tariff Rate Quota (TRQ)|
|Basmati Rice and Potato||2||–|
Margin of Preference (MOP)
100% Duty Free List (Zero Duty List)
* No. of items at six digit level
Rules of Origin (ROO)
- 35% Domestic Value Addition (DVA) – 25% DVA if raw materials are imported from partner country
- Change of Tariff Heading criteria at 6-digit level and
- A sufficient process
The focal point and the authority for issuing Pakistan – Sri Lanka FTA Certificates of Origin is the Department of Commerce in Sri Lanka.
Sri Lanka – Singapore FTA
The Free Trade Agreement (FTA) between Sri Lanka and Singapore was signed on 23rd January 2018. The Sri Lanka-Singapore FTA (SLSFTA) is a landmark agreement as it is the first comprehensive agreement for Sri Lanka that includes investments and services beyond trade in goods. The Singapore-Sri Lanka FTA is part of a broader strategy of looking “East” to renew country’s trade relationships in the process of diversifying its markets towards Asia and focus on plugging into Asian supply chains.
It is expected that the protection to be given under SLSFTA to investors and to their investments will result in substantial increase in FDI utilizing the provisions of this agreement.
Industrial Labor Relations
Labour laws of the country are applicable to all enterprises, including BOI enterprises, and the Ministry and the Department of Labour are responsible for labour administration functions, including labour law enforcement and Industrial Relations.
The Board of Investment of Sri Lanka promotes and facilitates labour management co-operation and industrial harmony in the enterprises coming under its purview and towards that end, provides advisory services and guidance to employers and employees through its Industrial Relations Department. Officers from this department will offer advisory services and guidance to employers and employees on all aspects in the area of industrial relations. Enterprises should bring to the notice of the department any apprehended or existing disputes or problems faced by them in this area so that they could be attended to promptly with a view to speedy settlement by the appropriate authorities.
The Labour Standards and Employment Relations Manual issued by BOI lays down good Industrial Relations principles and practices and sets out the basic terms and conditions of employment to be observed by BOI enterprises operating both within and outside the Export Processing Zones of Sri Lanka.
All BOI enterprises are expected to observe the Industrial Relations principles and practices laid down in the Labour Standards and Employment Relations Manual, the provisions of the relevant labour laws and terms and conditions of employment no less favourable than the basic standards set out in this Manual. They are also required to maintain a healthy and harmonious industrial labour relations climate conducive for higher efficiency and productivity.
Services provided by the Industrial Relations Department
1) Provide Advisory Services
- Distribution of Labour Standard & Employment Relations Manual.
- Issuance of clarifications / opinions on IR related matters.
- Organizing discussion / meeting / workshops for sharing the knowledge.
2) Monitor the Compliance of Labour Standards by BOI Enterprises
- Conducting routine Labour inspection.
- Verifying the project status prior to granting special facilitates. eg: Visas for expatriates, green channel facility etc.
- Sharing information with liaison authorities.
- Investigation into complaint / grievances of employees.
3) Promote Social Dialogue
- Facilitate to form and operate the Employees’ Councils
- Harmonizing and mediating the trade union activities.
- Encouraging to implement ILO Core Labour Standards.
4) Facilitate to maintain productive labour force
- Facilitate to meet the manpower requirement through job placement centres. (Job Banks)
- Organizing the programme / workshop to educate the employees on positive thinking. / Industrial Safety and Health Services etc.,
- Encourage to offer special career development programme for the employees (Eg. Foreign training)
- Facilitate to resolve the industrial disputes speedily.
- Establishment of Day Care Centres in EPZs for the children of EPZ employees.
The BOI is also committed to promote the application of the principles undertaking the Global Compact and related International Labour Standards by the employers in the BOI enterprises, both within and outside Export Processing Zones. Accordingly, Labour Standards and Employment Relations in the BOI enterprises will be governed, inter alia, by the following policies and principles;
- Respecting the right of the workers to form and join trade unions of their own choosing.
- Respecting the right of the workers to bargain collectively through their trade unions, or in the absence of a trade union, through other organization or body consisting of their elected representatives in the workplace.
- Affording protection to workers’ representatives and trade union officers against any act prejudicial to them, including dismissal based on their status or activities as workers’ representatives.
- Eliminating forced or compulsory labour.
- Abolishing child labour.
- Eliminating discrimination in employment, occupation and remuneration against workers on such grounds as race, sex, religion, political opinion.
- Ensuring stability in employment.
- Providing safe and hygienic working conditions
- Establishing appropriate machinery for consultation and co-operation between elected representatives of workers and employers on matters of mutual concern.
- Establishing grievance procedures for the examination of workers’ grievance.
- Offering fair wages and benefits and conditions of employment to workers.
- Eliminating harsh and inhuman treatment of workers.
- Eliminating excessive working hours and overtime work.
- Affording appropriate facilitates to workers’ representatives in the undertaking to carry out their functions promptly and efficiently.
- Formulating effective communication policy within the workplace to promote rapid dissemination and exchange of information relating to various aspects of the undertaking and to the social conditions of the workers.
- Providing advisory services on labour and industrial relations matters to employers and employees and promoting and facilitating effective prevention and settlement of Industrial Disputes.
Sri Lanka’s Investment policy is geared towards the realization of national sustainable development goals and grounded in country’s overall development strategy. Investment policy priorities are based on a thorough analysis of the country’s comparative advantages and development challenges and opportunities. Its strategic priorities, include:
– Investment in specific economic activities, e.g. as an integral part of an industrial development strategy.
– Areas for mutual reinforcement of public and private investment (including a framework for public-private partnerships).
– Investment that makes a significant development contribution by creating decent work opportunities, enhancing sustainability, and/or by expanding and qualitatively improving productive capacity and international competitiveness.
In this context, the key legislations facilitating investments in Sri Lanka are;
- Board of Investment Law No. 4 of 1978
- Finance Act No. 12 of 2012 (Hub Operations)
- Inland Revenue Act No.24 of 2017
- Foreign Exchange Act No.12 of 2017
Board of Investment Law No. 4 of 1978
The Board of Investment Law No. 4 of 1978 and its amendments is the principal law applicable to investments in Sri Lanka. This law established the national investment promotion agency, the Board of Investment of Sri Lanka, which is structured to function as the ‘Central Facilitation point’ for investors and empowered to enter into agreements with investors providing incentives to attract investments.
Finance ACT No.12 of 2012 (Hub operations) as amended in 2013
This legislation was introduced to promote Sri Lanka as an emerging trading hub and facilitates related specific trading and services activities. Free Ports and Bonded Areas have been set up to create trade related infrastructure to facilitate Sri Lanka’s import and export of goods and services with freedom to carry out transactions in convertible foreign currency.
Inland Revenue Act No.24 of 2017
This legislation has simplified the taxation law in Sri Lanka while introducing new incentive regime for investors. While maintaining the standard corporate income tax rate at 28%, this law provides for a reduced rate of 14% for specific sectors such as SMEs, Exports of Goods and Services, IT, Education, Tourism and Agriculture. Enhanced investment allowance has been offered to investors for their fixed capital investment over and above the normal depreciation.
Summary of the investment incentives
|Location||Expenses incurred on Depreciable Assets*||Enhanced Capital Allowance||Extended Period for Deducting Unrelieved Losses|
|Northern Province||> US$ 3 Mn||200%||10|
|Other than Northern Province||> US$ 3 Mn and < = US$ 100 Mn||100%||10|
|> US$ 100 Mn||150%||10|
* Other than intangible assets (Class 5)
Classification of Depreciable Assets
Class 1 : computers and data handling equipment together with peripheral devices
Class 2 : buses and minibuses, goods vehicles; construction and earthmoving equipment, heavy general purpose or specialised trucks, trailers and trailer-mounted containers; plant and machinery used in manufacturing.
Class 3 : railroad cars, locomotives, and equipment; vessels, barges, tugs, and similar water transportation equipment; aircraft; specialised public utility plant, equipment, and machinery; office furniture, fixtures, and equipment; any depreciable asset not included in another class.
Class 4 : buildings, structures and similar works of a permanent nature
Class 5 : intangible assets, excluding goodwill – applicable only for normal depreciation
|Category||Expenses incurred on Assets or Shares||Enhanced Capital Allowance||Extended Period for Deducting Unrelieved Losses||Exemption from Dividends tax & Exemption of employment income from WHT|
|State owned company||> US$ 250 Mn||150%||10||x|
|> US$ 1,000 Mn||150%||25||P|
“state owned company” means any company, where fifty per centum or more of the shares are held by the Government and includes a company of which forty per centum or more of the shares held by the Government are acquired by a person for an amount not less than USD 250 million
|Location||Expenses incurred on Depreciable Assets*||Enhanced Capital Allowance||Extended Period for Deducting Unrelieved Losses|
|Northern Province||Up to US$ 3 Mn||200%||10|
|Other than Northern Province||Up to US$ 3 Mn||100%||10|
* (a) Class 1 : computers and data handling equipment together with peripheral devices and
Class 4 : buildings, structures and similar works of a permanent nature and
(b) Depreciable assets (other than intangible assets) comprising plant or machinery that are used to improve business processes or productivity and fixed to the business premises.
(after commencement of the Act)
|Business of Life Insurance||Reduced CIT rate of 14%||3 years|
– conducts a business which predominately consists of providing information technology services
– has at least 50 employees during the whole of the year
– report those employees in the statement that the company, as a withholding agent, is required to file under section 86
|Additional deduction equal to 35%
(of the total amount deducted for the year under the IR Act that represents payments made by the company which are to be included in calculating the taxable income of its employees)
* Not entitled for enhanced capital allowance
(established on or after October 1, 2017)
|CIT Rate at 0%||3 years|
(Which entered into a Standardized Power Purchase Agreement on or before November 10, 2016 with the Ceylon Electricity Board )
|Reduced CIT rate of 14%||3 years|
|Research and Development||Additional deduction equal to
100% of the total amount of research and development expenses
- Foreign Exchange Act No.12 of 2017
The above Foreign Exchange Act repeals the Exchange Control Act (Chapter 423) while introducing a liberal exchange regime for Sri Lanka. Foreign exchange controls have been greatly liberalized and investors are allowed to directly deal with the banks for their transactions unless Central Bank approval is specifically needed. Free flow of transfers are allowed through Inward Investment Accounts and through Outward Investment Accounts.
Exchange Control Laws Applicable for foreign Investments
In accordance with the Foreign Exchange Act No 12 of 2017, the Minister in charge has gazetted relevant regulations in the Extraordinary Gazette No 2045/56 dated 17-11-2017 with the Exchange Control Provisions applicable for foreign investments which read as follows;
A person resident outside Sri Lanka is permitted to Invest, acquire or hold all classes of shares or an entitlement of shares issued by companies incorporated in Sri Lanka (Subject to the exclusions & limitations as follows;
The permission hereby granted shall not apply in respect of shares of a company proposing to carry on any of the following businesses:
- Pawn broking
- Retail trade with a capital of less than Five Million US Dollars
- Coastal Fishing
(a) Foreign investments in the areas listed below will be approved only up to 40% of the stated capital of such company or if a special approval has been granted by the Board of Investment of Sri Lanka for a higher percentage of foreign investment in any company, only up to such higher percentage.
- Production of goods where Sri Lanka’s exports are subject to internationally determined quota restrictions
- Growing and primary processing of tea, rubber, coconut, cocoa, rice, sugar and spices
- Mining and primary processing of non-renewable national resources
- Timber based industries using local timber
- Deep Sea Fishing (as defined by the Ministry assigned the subject of Fisheries)
- Mass Communication
- Freight Forwarding
- Travel Agencies
- Shipping Agencies
(b) The permission shall apply in respect of shares in a company carrying on or proposing to carry on any of the businesses specified below only up to the percentage of the stated capital of the company, for which percentage either general or special approval has been granted by the Government of Sri Lanka or any legal or administrative authority set up for the approval of foreign investments in such businesses
- Air transportation;
- Coastal shipping (as defined by the Ministry assigned the subject of Shipping);
- Industrial enterprise in the Second Schedule of the Industrial Promotion Act, No. 46 of 1990, namely –
- any industry manufacturing arms, ammunitions, explosives, military vehicles and equipment aircraft and other military hardware;
- any industry manufacturing poisons, narcotics, alcohols, dangerous drugs and toxic, hazardous or carcinogenic materials; any industry producing currency, coins or security documents;
- Large scale mechanized mining of gems;
General Conditions for Permitted Investments
- Capital Investments shall be made through an “Inward Investment Account (IIA)”
- Income from such investments and proceeds of disposal shall be credited to IIA
- All income, proceeds on sale of the above investments transferred from a person who is non-national by way of inheritance may be repatriated through an Inward Investment Account opened by the beneficiary
- Resident entities involved with the capital transactions, including investee company, company secretaries and all intermediaries including stockbrokers units, trusts, mutual funds and financial institutions shall be responsible capital transactions in compliance with all requirements specified under the Schedule
- Commercial bank and the person engaged in capital transactions shall retain all information and documentary evidence in proof of the capital transactions engaged in permitted transactions under these regulation for a period of six years from each such transaction
- The documentary evidence on inflows or outflows of funds, disposal or acquisition of assets, receipts of income or returns on capital transactions and any other documentary evidence should prove the legality of such transactions substantially
- The commercial bank and the person engaged in capital transactions shall facilitate compliance with the provisions of this regulation by providing necessary documents at the time of such transactions
Key Target Sectors
|SECTOR||SUBSECTORS||Sri Lanka’s Strength|
|Manufacturing – High Value Added /High Tech||• automotive components, medical devices, pharmaceuticals, solar panels, Fabricated metal parts, Value added Minerals
|• Growing Global Demand with an opportunity to link to the Global Value Chains
• Strong market opportunity and economic impact potential for Sri Lanka.
• Precision and adaptable workforce
|Manufacturing – Apparel/High value-added||• Lingerie
• Smart textiles (wearable technology)
• Other potential high-value clothing items (especially niche products)
• Innovation & research
|• Proven track record and compelling value proposition
• Internationally competitive on metrics such as skills and education level; efficient and highly competitive port for apparel trade
• Growing demand from India (with FTA benefits) and beyond
|IT-Enabled Services||• IT software
|• Job creation track record and potential
• Strong existing cluster and value proposition
• Internationally competitive wage and real estate costs
• Recreational activities (theme parks)
• Adventure sports & leisure facilities
|• Strong market opportunity and economic impact potential for Sri Lanka.
• Strong Sri Lankan value proposition
• Internationally competitive on numerous metrics (natural & cultural assets; competitive infrastructure; rapid sector growth etc.)
|Food Processing||• Fish / seafood
• Fruit and vegetables
|• Strong value proposition (diverse selection of raw products; good domestic infrastructure; attractive local and regional market)
• Strong food processing potential compared to competitor markets in the region
|Logistics||• Entrepot trade
• Warehousing & storage
|• Competitive strength of regional location, water depths and shipping routes
• Strong potential as a Multi-country Consolidation (MCC) hub
• Improving infrastructure
• Geo strategic location with efficient port facilities
|Education||• Vocational and higher education||• Requirement of matching the skills with growing industry demand|
|Large Scale Infrastructure||• Mixed Development
• Industrial Zone Development
|• Growing demand for high- end apartments, office spaces and shopping centers with international standards|
Land (Restriction on Alienation) Act No.38 of 2014
The foreign investors are eligible to lease lands in Sri Lanka to establish their projects. A new land law was promulgated in 2014 which permitted lease of land for foreign investments and outright transfers will only be permitted when the foreign shareholding is less than 50%. The land lease period is subject to a maximum tenure of 99 years. Foreign investors are not liable pay any lease tax when leasing a land. However condominium properties can be purchased outright with no restrictions on nationality.
Land (Restriction on Alienation) Act No.38 of 2014
Salient features of the Act
- Outright Transfers
Acquisition of land by foreigners or foreign companies or Sri Lankan company with more than 50% foreign shareholding is prohibited subject to few exemptions.
The following table provides the restrictions (Article 2), exemptions (Article 3) to the law and some conditions that needs to be fulfilled in this regard.
|Article 2 (1)
The transfer of Title of any land situated in Sri Lanka, shall be prohibited to;
(a) a foreigner
(b) Sri Lankan company with 50% or above foreign shareholding
(c) a foreign company
|Article 3 (1)
(a) to Diplomatic Mission of another State or to an international, Multilateral or Bilateral Organization (DP Act)
(b) a condominium parcel
(c) transferred to a foreign investor in consequent to a Cabinet Decision prior to January 1, 2013 as per an agreement structured under tax regime prior to 01-01-2013 and has ensured compliance through inward remittances
(d) transferred by intestacy, gift or testamentary disposition to a next of kin (who is a foreigner) of the owner of such land
(e) to a dual citizen of Sri Lanka
(g) Transfer of a land to any bank with ³ 50% foreign shareholding at an auction or execution of a decree of court for recovery of loans
(h) Transfer of a land to any Finance Leasing Institution with ³ 50% foreign shareholding
i. where such land has been mortgaged
ii. to execute a lease or
iii. a decree of court to enforce the recovery of a loan
(i) any land, transferred to a company with ³ 50% foreign ownership from 01.01.2013 t0 29.10.2014 (certification date), if such company has been in active operation in Sri Lanka for a period not less than 10 consecutive years
|To allow transfer of land:
Article 2 (a)
· Less than 50% of foreign shareholding shall be maintained for a minimum period of consecutive 20 years from the date of such transfer.
Article 2 (b)
· When foreign shareholding of a company
– transfer of the land becomes null and void
– shareholding to be reduced to < 50% within
o 12 months – listed companies
o 6 months – other companies
|With consultation with the Minister of Land and prior written approval of the Cabinet
Article 3 (2)
– for identified SDP Projects engaged in; the banking, financial, insurance, maritime, aviation, advanced technology or infrastructure development project.
Article 3 (3)
– any foreign company engaged in international commercial operations and the land is purchased to locate or relocate its global or regional operations or to set up a branch office.
- Leasing of Lands to Foreigners
Article 5 A
Notwithstanding anything to the contrary in any of the provisions of this Act, the provisions relating to the Land Lease Tax shall not apply to a lease of any land—
(a) to a foreigner; or
(b) to a company incorporated in Sri Lanka under the Companies Act, where any foreign shareholding in such company, either direct or indirect, is fifty per cent or above; or
(c) to a foreign company, under and indenture of lease executed on or after January 8, 2017, and accordingly the Land
Lease Tax shall not be charged, levied or collected from any such person or company on or after such date” subject to a Maximum tenure of 99 years.
3) General Conditions
This section provides general rules applicable to lands transferred or leased under the new law and the interpretations.
Restriction on Mortgaging (Article 11)
Any land transferred or leased to a person or a company referred to in Article 2 (1) and 5 (1) of Land (Restrictions on Alienation) Act, after the date on which the certificate of the speaker is endorsed in respect of this Act (October 29, 2014) shall not be mortgaged or pledged to any licensed bank, for a period of 5 years from the date of execution of the transfer or lease.
- Lease / transfers prior to certification of Land (Restrictions on Alienation) Act
- Any transfer deed to a person or a company referred in section 2(1), executed prior to January 1, 2013 and pending registration in shall be registered subject to the provisions of repealed Part VI of Finance Act, No. 11 of 1963, notwithstanding the fact that it was repealed.
- Any Lease / transfer executed to a person or a company under section 2(1) or 5(1) of Land (Restrictions on Alienation) Act, from January 1, 2013 to October 29, 2014 shall be subject to the provisions of the said Act.
Liability to pay stamp duty & other fees Article 6 (4)
The Lessee shall be liable to pay applicable stamp duty under the Stamp Duty Act, No. 43 of 1982 and any other tax or charge payable in respect of any such transactions.
Land Reform Act shall apply (Article 12)
The provisions of the Land Reform Law, No. 1 of 1972, on the maximum extent of land that can be owned by any person, shall continue to apply in respect of any transfer of title or lease of a land exempted from the application of the provisions of this Act.
Valuation of Land (Article 13)
(a) State land – by the Government chief valuer; and
(b) Private land – by a licensed valuer.
and the total lease rental shall be calculated based on the above valuation.
Concessions for Development Projects (Article 16)
Where a State land is transferred or leased to a project approved by the Cabinet of Ministers as a Development Project to which freehold right or leasehold right of the State land to be transferred, such project shall be granted a deduction amounting to 25% of the land value or total lease rental, determined under section 13:
Provided such Development Project shall be implemented either by (a) a citizen of Sri Lanka; or (b) a company incorporated in Sri Lanka, where the Sri Lankan shareholding is 50% or above.
|Type of Tax||Tax Base||Applicable Tax Rate||Remarks|
|Applicable for Company|
|Corporate Income Tax (CIT)||Profits||Standard Rate 28%|
|Reduced Rate : 14%||With effect from 01.04.2018|
|Economic Service Charge (ESC)||Turnover||0.5%||Tax Liability
If the company is not paying income tax, then it is liable to pay ESC.
Rs. 12.5 million for any quarter commencing on or after 01.04.2017.
|Withholding Tax on Dividends (WHT)||Dividends distributed||14%|
|Value Added Tax (VAT)||Value of supply of goods or services||Standard Rate : 15%
Rs. 3 Mn. per quarter or Rs. 12 Mn, per annum
|Nation Building Tax (NBT)||Turnover||2%|
|Applicable for Imports|
|Customs Duty||CIF Value||Capital Goods : Exempted (During the Project Implementation Period)
Raw Materials : Exempted for export oriented companies
|Value Added Tax (VAT)||CIF Value*||15%
Applies to other than the exempted items.
Zero Rate for selected few items
Deferment facility for export oriented companies
|VAT exempted for companies located in Katunayake, Biyagama, Koggala, Kandy, Wathupitiwela, Malwatta & Mirigama EPZs
Rs. 3 Mn. per quarter or
Rs. 12 Mn, per annum
|Nation Building Tax (NBT)||CIF Value*||2%||Exempted for selected few machinery items
Raw material imported for processing and export is exempted from the payment of NBT.
|Port & Airport Development Levy (PAL)||CIF Value||7.5%
2% for few machinery items.
|Raw material imported for processing and export is exempted from the payment of PAL.|
|CESS (EDB Import Cess)||CIF Value*||Depends on the item|
|Excise Duty||CIF Value||Depends on the item||Applies on vehicles, liquor sugar tax on sweetened beverages, plastic resins & tobacco|
|Special Commodity Levy||CIF Value||Depends on the item|
|Economic Service Charge (ESC)||CIF Value*||Depends on the item||Applies on any article subject to Special Commodity Levy, gold, precious metals and motor vehicles|
* Tax base will be the main component when computing import levies as per the formula.