Key tax moves in Budget 2025

Tuesday, 18 February 2025 01:12 - - {{hitsCtrl.values.hits}}

Personal Income Tax

The monthly tax-free threshold will be increased from Rs. 100,000 to Rs. 150,000, increasing the annual tax-free allowance to Rs. 1.8 million.
The first band of Personal Income Tax (PIT) taxed at 6% will be expanded to Rs. 1 million. The AIT rate on interest income of 5% will be increased to 10% on those with monthly interest income exceeding Rs. 150,000.

Corporate Income Tax

Certain exports of services which are currently exempt from income tax will be subject to income tax at the rate of 15%.

VAT

The Simplified Value Added Tax (SVAT) system will be replaced by a risk-based refund system. The Commissioner General of Inland Revenue will specify the conditions to issue refunds through the Risk-based Refund Scheme.
Services provided through digital platforms will be subject to VAT and provisions will be introduced to the VAT law and regulations to be issued on registration, charging, collection, filing of returns etc.
Input tax on capital goods, such as machinery, equipment, or vehicles imported for projects where VAT at the time of import is deferred, will not be allowed as a deduction as input VAT.
It is mandatory for all VAT-registered persons to use Point of Sale (POS) machines.

VAT exemptions

Supply of goods and services by/to any business identified and approved as a “business of strategic importance” under the Colombo Port City law.
Import of packing materials for the use of packing of pharmaceuticals or ayurvedic medicines manufactured in Sri Lanka.
Yogurt and other dairy products

Stamp Duty

Stamp Duty on any instrument relating to the lease or hire of any property will be increased from 1% to 2% on the aggregate lease or hire payable for the entire term with effect from 1 March 2025.

Social Contribution Levy

The exemption for petrol, diesel, or kerosene will be available for wholesale and retail sale of such articles as well.
The exemption on “transportation of goods and passengers” will be expanded to include services provided in relation to international transportation by container terminal operators.
Any machinery or equipment imported or purchased locally by any institution which has entered into an agreement with the Ceylon Electricity Board (CEB) prior to 18 February 2025 for the purpose of generating electricity will be exempt. (Source: BDO Sri Lanka)

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