266 BOI enterprises to lose tax holidays
Tax holidays for some 266 operating Board of Investment (BOI) enterprises in 12 export promotion zones in the island will soon end with the government deciding against granting extensions during the 2014 financial year, official sources said.
New legislation will be introduced in this month’s budget to bring these enterprises under the tax system, a senior official revealed adding that Sri Lanka can gain as much as 1.5 per cent of Gross Domestic Product (GDP) in revenue by limiting tax holidays and also cutting tax rates if the base is broadened.
A moratorium on tax holiday extensions is to be imposed on these BOI) enterprises whose tax holidays have already expired, he added.
A special tax for these enterprises from 2014 is under consideration, the senior official, speaking on condition of anonymity, told the Business Times.
Under the planned new rules, BOI enterprises whose tax holidays have expired would also not be permitted to continue commercial operations at the relevant zone
However if these companies are willing to bring in fresh investment to expand operations, such enterprises will be entitled to tax holiday extensions.
All Board of Investment (BOI) approved enterprises since 2002 have been paying dividend tax of 10 per cent though profits are tax free.
Duty free BOI companies also used to import capital goods and machinery subject to around 13 per cent tax including Port and Airport Levy. After the expiry of the tax exemption period, these companies will have to pay taxes under the Inland Revenue Act.
Provisions of the Act will apply for such companies; and the income tax concessions provided under BOI agreement will not be extended through supplementary agreements. The Act will be amended to provide such provisions, the official said.
The government will also make the listing of BOI companies in the stock market compulsory under a budget proposal with the aim of increasing market liquidity, he disclosed, without giving details.
The Securities and Exchange Commission (SEC) announced at a public forum last month that BOI companies worth over US$10 million would be encouraged to go public on a separate board of the Colombo Stock Exchange (CSE).
| Tax breaks for privately-run research labs
Tax incentives to private companies with their own research labs have been proposed for inclusion in Budget 2014 by Senior Minister Tissa Vitarana. The minister, who has been assigned the subject of scientific affairs, told reporters on Thursday that if the proposal is accepted, it would boost research on innovation of products for commercial use. While lamenting that only 0.2 per cent of Sri Lanka’s GDP value goes into research and development when the percentage is far greater in other similarly-placed countries, Prof. Vitarana said last year the government encouraged the private sector to use government labs for innovation and creativity offering tax benefits. “We now want to extend those concessions to privately-run labs (and this will tremendously help the knowledge economy),” he said. |