Removal of WHT on dividends to non-residents to boost foreign investments

Recent exemption of Withholding Tax (WHT) on dividend income received by foreigners has been welcomed by analysts.

They said that the move will encourage foreigners to invest in listed Lankan equities especially going forward as well as non-listed companies. 

Among sectors that will benefit from this move are ICT companies, agro farming, logistics, supply chain, and entrepot trade.

The Colombo stock market has seen a net foreign outflow of Rs. 42.5 billion year to date. Foreign Direct Investment (FDIs) envisaged this is around $ 1.5 billion.

The Government recently said Foreign Direct Investments (FDIs) in 2020 are expected to over $ 750 million, which is only $ 400 million less than what was achieved in 2019. At the start of the COVID-19 pandemic, FDIs were originally expected to be only around $ 300 million for 2020.

The Government said FDIs which slowed in the first half of the year, appear promising looking ahead particularly with the expected inflows to the Port City project and new manufacturing projects. 

The expected finalisation of the new legislation for the Port City and including it in 2021 Budget presentation slated for 17 November will result in the realisation of investment by those who have already completed due diligence in such investment. 

Other expected investments include import alternative industries as well as investments by international financial institutions.