Sri Lanka’s President, Mahinda Rajapaksa, in his additional role as the Minister of Finance and Planning, presented Sri Lanka’s 2015 Budget on October 24, 2014. The Government plans to to stimulate the country’s further economic development through a variety of incentives. The headline tax cuts for next year include a cut to the maximum pay-as-you-earn personal income tax rate to 16 percent “to ease the burden of wage earning employees and professionals,” while the value added tax (VAT) rate would also be reduced to 11 percent from 12 percent.
It is proposed that the tax registration threshold for VAT and the National Building Tax will be hiked to LKR15m (USD114,600) per month “to create a tax- free environment for small business.” Small traders with a monthly turnover that is less than LKR50,000 will also be exempted from all levies imposed by local authorities.
Other measures are aimed at increasing tax compliance rates. To stop the growth in tax arrears, the Government will provide for a five-year credit at a reduced interest rate to enable taxpayers to pay their overdue tax and social security arrears upfront.
