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Sri Lanka To Hike VAT To 15 Percent

by Lorys Charalambous, Tax-News.com, Cyprus

10 March 2016


Sri Lanka has announced a substantial four percent hike to the headline value-added tax rate, to establish a rate of 15 percent, rather than introducing a split-rate system.

The announcement, from the Prime Minister, Ranil Wickremesinghe, comes as a surprise after the nation's 2016 Budget included proposals to shakeup the structure of the VAT regime. The Budget included proposals to replace the eleven percent rate with three rates: a zero rate on exported goods and the provision of services for consideration in foreign currency outside of Sri Lanka; a 12.5 percent rate on the services sector; and an eight percent rate on the manufacturing sector and on imported goods. In addition, the VAT registration threshold was proposed to be increased to LKR12m (USD83,000).

Instead the Government has now announced that it will establish a single positive 15 percent headline VAT rate, rather than the two positive rates. In addition, Sri Lanka will also introduce a capital gains tax and abandon plans to introduce a concessionary rate of corporate income tax for some companies of 15 percent. Current building tax arrangements will be retained.

TAGS: VAT rates | tax | value added tax (VAT) | Sri Lanka | VAT cross-border transactions | manufacturing | services | VAT goods & services classification

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