Key Tax Proposals – Imposition of New Taxes
Surcharge Tax
It has been proposed to introduce a Surcharge Tax at the rate of 25% on individuals or companies, whose taxable income exceeds LKR 2,000 Mn for the year of assessment 2020/2021.
This proposal has been introduced as one-time tax charge to the taxpayers.
Social Security Contribution
It has been proposed to introduce a Social Security Contribution on annual liable turnover which exceeds LKR 120Mn, at the rate of 3%, w.e.f. 1st April 2022.
This has been introduced with the aim of rebuilding Sri Lankan economy affected by the Covid pandemic. However, the applicable tax rate announced during the budget speech on same was 2.5%, hence, it requires further clarity.
Special GST
The special GST which was proposed to be imposed in the last budget proposal in the year 2021 to be
implemented by making following sectors liable w.e.f. 1st January 2022.
• Telecommunication
• Motor Vehicle
• Cigarettes
• Liquor
• Betting and Gaming
Key Tax Proposals – Value Added Tax
Value Added Tax on Financial Services (VAT on FS)
It has been proposed to increase the VAT on FS rate from 15% to 18% w.e.f. 1st January 2022, up to 31st
December 2022.
New exemption on VAT
It has been proposed to exempt the importation or supply of medical equipment, machinery, apparatus,
accessories and parts thereof and hospital furniture, drugs and chemicals donated to the Government
hospitals or the Ministry of Health for the provision of health services to address the pandemic or public health emergency, approved by the Minister of Finance on the recommendation of the Secretary to the Minister of health by amending the item (xxxi) in paragraph (a) of Part (II) of the First Schedule of the VAT Act No. 14 of 2002 as amended.
Key Tax Proposals – Excise Duty
Excise Duty (Special Provisions) on Cigarettes
It has been proposed to increase the excise duties on cigarette and a gazette notification will be issued on
same.
Excise Duty on Liquor under Excise Ordinance
It has been proposed to increase the excise duties on liquor and a gazette notification will be issued on same.
Key Tax Proposals – Administration Provisions
- It has been proposed to establish a consolidated Unit at the Department of Inland Revenue (DIR) to strengthen and increase of revenue collection at the Large Taxpayer’s Unit (LTU) and Upper Corporate Unit (UCU) at the DIR.
- It has been proposed to introduce digitalized platforms to Sri Lanka Customs by introducing Single Window System and Streamline the issues in relation to the Revenue Administration Management Information System (RAMIS) of the DIR.
- Further, to expedite the implementation of the digitalized revenue platform of the Excise Department.
- Once the above digital platforms have been implemented and streamlined, it is proposed to enable the submission of digital invoices and documents as valid documents in tax filing, with the proper verification system in place.
- It has been proposed to simplify the process of obtaining the liquor license.
Full Budget Speech
- Budget Speech 2022 (English)
- Budget Speech 2022 (Annexures) – English
- Budget Speech 2022 (Sinhala)
- Budget Speech 2022 (Annexures) – Sinhala
Analysis by Tax Professional
