Sri Lanka to charge 10-pct capital gains tax, unit trusts to be taxed

ECONOMYNEXT – Sri Lanka will charge a 10 percent capital gains tax on investments other than listed shares, under a new inland revenue bill to be effective from April 2018.

The principle residence of a person, which has been owned for more than three years and in which a person has lived for more than two years, will be exempt. The cost of the investment would be the market value on September 2017.

Capital gains of below 50,000 rupees per transaction and 600,000 rupees a year would be exempt.

KPMG: Dividends paid by a resident company to resident person shall be a final payment and will not be a part of taxable income. A deemed dividend tax has been withdrawn.

As withholding tax will be charged on dividends at 14 percent (up from 10 percent), a profit remittance by a non-resident will be charged 14 percent (up from 10 percent), KPMG said.

Resident persons (other than senior citizens, which will be on regulations issued) will be charged a withholding tax of 5 percent on bank deposits and non-residents 14 percent. The withholding tax on corporate debt securities will be 5 percent for residents and 14 percent from non-residents.

An existing 10 percent withholding tax on government securities has been withdrawn.

Royalties will be charged a 14 percent withholding tax, management and technical fees will be charged 14 percent for non-residents only. Fees for other services will be charged 5 percent.

Unit Trusts will be taxed at 10 percent on investment income and up to 24-28 percent on other income.