There are several types of corporate taxes in Sri Lanka, including CIT, VAT, NBT, WHT, and ESC. The tax rates and exemptions vary depending on the type of tax and the industry. Import duties range from 0% to 35%, while there are no export.
Types of Corporate Taxes
There are several types of corporate taxes in Sri Lanka. These include:
- Corporate Income Tax (CIT)
- Value Added Tax (VAT)
- Nation Building Tax (NBT)
- Withholding Tax (WHT)
- Economic Service Charge (ESC)
Corporate Income Tax (CIT)
CIT is the tax imposed on the income of companies and other corporate entities in Sri Lanka. The tax rate for CIT is currently 28%. However, certain industries are taxed at a lower rate. For example, the rate for the export of goods is 14%, and for certain banking and finance companies, it is 24%.
Value Added Tax (VAT)
VAT is a tax on the value added to goods and services at each stage of production and distribution. The VAT rate in Sri Lanka is 8%. However, certain goods and services are exempt from VAT or are subject to a reduced rate. For example, basic food items, health and education services, and certain agricultural and fishing products are exempt from VAT. The VAT system is administered by the Department of Inland Revenue.
Nation Building Tax (NBT)
NBT is a tax on the turnover of businesses in Sri Lanka. The tax rate for NBT is 2%. However, certain industries are taxed at a higher rate. For example, the rate for banks and finance companies is 4%. The NBT is administered by the Department of Inland Revenue.
Withholding Tax (WHT)
WHT is a tax that is withheld at the source from payments made to non-residents. The tax rate for WHT varies depending on the type of payment being made. For example, the rate for payments for technical services is 10%, while the rate for payments for royalties is 14%.
Economic Service Charge (ESC)
ESC is a tax on the turnover of certain specified businesses in Sri Lanka. The tax rate for ESC is 0.25% for companies engaged in trading, manufacturing, and service sectors, while the rate for banking and financial institutions is 0.5%. The ESC is administered by the Department of Inland Revenue.
GST or VAT
As mentioned above, Sri Lanka has a VAT system, which is administered by the Department of Inland Revenue. The VAT rate is 8%, and certain goods and services are exempt from VAT or are subject to a reduced rate.
Sales Tax
There is no separate sales tax in Sri Lanka. However, certain goods and services are subject to VAT, NBT, or other taxes.
Ranges for Import Duties
Import duties in Sri Lanka vary depending on the type of goods being imported. The import duty ranges from 0% to 35%. For example, basic food items are exempt from import duties, while luxury goods such as cars and electronics are subject to higher import duties.
Export Duties
There are no export duties in Sri Lanka.
Legislation and Dates
The Inland Revenue Act No. 24 of 2017 is the primary legislation governing corporate taxation in Sri Lanka. The Act was passed on 7th September 2017 and became effective from 1st April 2018.
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