ECONOMYNEXT: Sri Lanka will not abolish tax holidays already given by the Board of Investment (BOI), after a new income tax law comes into effect, Deputy Treasury Secretary S.R. Attygalle said.
“It has been agreed between the government and the BOI that they will stay,” Attygalle told a business forum organised by the Ceylon Chamber of Commerce.
Tax concessions given by the BOI, which are also extended through various provisions, have been a key source of tax erosion in the country.
Finance State Minister Eran Wickramaratne said the new law will give certainty but reduce the discretion given to the minister to give concessions.
He said in the case of the Strategic Development, which will be suspended, wide discretion was given to the minister to decide on concessions.
Wickramaratne said arrangements will be made to ensure that undertakings given in the case of the Hambantota port project is kept.
In place of tax holidays, double or triple depreciation is provided.
New investment will be allowed depreciation of up to 150 percent (capital allowances). In the case of the Northern Province, capital allowance of up to 200 percent will be given.
Information technology companies will be allowed to deduct the equivalent of 35 percent over the actual salary bill, if they do not claim capital allowances.