KPMG in Sri Lanka discusses the Budget 2018 proposals.
The National Budget for the year 2018 was presented in the Parliament on 09 November 2017. The Budget focused on achieving medium term goals in relation to FDI’s, per capita income, employment etc. It is significant to note that the tax proposals this year focused only on indirect taxes and import levies. Since a new Income Tax Act is being introduced with effect from 1st April 2018, no income tax proposals were incorporated in the Budget speech. Proposals related to Value Added Tax (VAT) and Nation Building Tax (NBT) will come into effect from 01 April 2018 as opposed to 01 January like in previous years and the proposals in relation to import levies came in to effect with effect from midnight of the Budget 2018 reading.
In relation to VAT, the VAT exemption on the sale of condominium property is proposed to be removed and will have an impact on the real estate sector. Further it was proposed to introduce a VAT refund scheme for the foreigners in airports and sea ports with effect from 01 May 2018.
It was proposed in the Budget that certain para tariffs applicable on the tariff lines which do not at present carry any Customs Duty (approximately 1,200 para tariffs) will be abolished within the next three years, in keeping with the policy of liberalizing and globalization.
Further a 1% tax is proposed to be introduced on the Online Travel Agents for the income accrued in Sri Lanka. However the collection mechanism of this tax is still under discussion.
It was also proposed to freely allow foreigners to purchase condominiums in Sri Lanka while earlier foreigners were allowed to purchase only from 3rd floor and above. Further restrictions that limit the land ownership rights of listed companies with foreign ownership will also be removed.
Further, in par with the global trend of discouraging sugar based beverages, a duty is proposed to be imposed on the sweetened beverages. A Carbon Tax also will be imposed on vehicles other than electric vehicles based on their engine capacity.