Wealth tax on half-a-million houses at Rs. 200,000 to raise Rs. 100 b in 2026

Wednesday, 19 June 2024 00:40 - - {{hitsCtrl.values.hits}}

KPMG in its tax alert says clarity needed whether IRIT will be on lessor or lessee in case of rented residential property

The proposed wealth tax will be on over half-a-million houses at Rs. 200,000 per year if the Government were to raise the targeted figure of Rs. 100 billion in 2026, according to analysts who based their forecast from President Ranil Wickremesinghe and Finance Ministry pronouncements. The President in Parliament yesterday said 90% of the houses in the country will not be subject to the proposed Imputed Rental Income Tax (IRIT) effective from 1 April 2025.

He also said a person’s first house will not be taxed. The Finance Ministry in a statement on Sunday said the Government hopes to raise Rs. 100 billion or 0.4% of GDP via the new tax in 2026.

Analysts estimate there are over 5 million houses in Sri Lanka and if 90% won’t be covered, the tax net for the Government is only 500,000 units or half-a-million and a tax of Rs. 200,000 is required to raise the targeted Rs. 100 billion.

KPMG said imputed rental income is the deemed income that homeowners could earn if they rented out their homes.

As per the IMF report, the proposed Imputed Rental Income Tax (IRIT) is not a transaction tax and is imposed on individuals. “Clarity is needed whether IRIT will be on lessor or lessee in case of rented residential property,” said KPMG in a tax alert. “Where a company is the owner/lessor of a residential house, will IRIT be applicable?,” the KPMG questioned.

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