On 10 November 2016, The Budget 2017 was presented to Parliament by the Minister of Finance Ravi Karunanayake. The main measures concerning corporate taxation are summarized below. Unless stated otherwise, the changes will take effect from 1 April 2017.

The key highlights of the tax proposals are following:

Corporate Income Tax – CIT rate is proposed to be modified to create a three tier structure of 14 percent, 28 percent and 40 percent. Income tax rate applicable on liquor, tobacco, betting and gaming, etc. will be continued at the rate of 40 percent. SMEs, exporters of goods and services, agricultural and education sector will be subjected to the lower rate of 14 percent. All others including banking, finance, manufacturing and trading will be subjected to 28 percent income tax. Income tax rate of 10 percent currently applicable on funds, dividends, treasury bills and bonds will be increased to 14 percent.

PAYE: Pay As You Earn tax rate will be revised in line with the personal income tax rates and all the exemptions applicable on various categories will be removed. Instead, the tax free threshold of Rs. 100,000 per month will be available for every employee on their employment income. The income from the secondary employment up to Rs. 50,000 per month will be liable for PAYE at 10 percent and if it is more than Rs. 50,000, the tax will be at the rate of 20 percent.

Capital Gain Tax: Capital Gain Tax will be introduced at a rate of 10 percent with effect from 1st April 2017.

Economic Service Charge: The ESC threshold will be reduced to Rs.12.5 million per quarter and the ESC will be charged at the point of customs on the importation of motor vehicles.

Financial Transactions Levy (FTL): the budget proposed to introduce a new levy called FTL as a contribution for social development at the rate of Rs. 5 per Rs.10,000 on the total cash transactions including easy cash by banks and other financial institutions. FTL will be treated as expense for income tax purpose.

Telecommunication Levy: Telecommunication Levy on internet services will be increased to 25 percent par with the other telecommunication services.

The budget proposed to introduce Excise Duty on the quantum of raw materials used for producing ethanol. Duty on imported ethanol will be increased and an Excise Duty of Rs. 25 per liter will be introduced on imported non-potable liquor.