RAMIS to revolutionize tax culture in Sri Lanka | Daily News

RAMIS to revolutionize tax culture in Sri Lanka

Participants of the tax seminar. Picture by Vipula Amarasinghe

The introduction of the Revenue Administration Management Information System (RAMIS) will revolutionize the tax culture in Sri Lanka, said KPMG Partner, Suresh Perera.

He said that the department of Inland Revenue will be implementing the scheme in two phases,

"Phase one has already commenced to implement six type of taxes including VAT, Corporate Income Tax and PAYE and phase two will commence in October 2016", Perera said.

"Tobacco, Liquor, Betting and Gaming industries would experience an effective tax rate of 37.5% due to applicability of surcharge of 25% on top of the proposed high Corporate Income Tax rate of 30%," he said.

He was speaking at the Turkiye Ceylon Business Chamber (TCBC) which was launched for the first time in Sri Lanka to enhance the transfer of industry expertise amongst the countries at Ramada Colombo.

He pointed out that Sri Lanka has a web of taxes consisting of direct taxes and indirect taxes including import levies and added distinctive insights on the current tax regime of Sri Lanka.The major indirect tax statute applicable in Sri Lanka is Value Added Tax (VAT). In 1998 Sri Lanka introduced the concept of taxing the value addition under the name Goods & Services Tax (GST). In 2002, the term "VAT" was adopted in Sri Lanka for taxing the value addition, the terminology used in the European Countries. Sri Lanka follows the invoice credit methodology in computing the value addition as used in almost all the countries.

Speaking further at the event Perera said that the value added tax (VAT) was extended to wholesale and retail in 2013 with the threshold of Rs 500 million per quarter which was reduced to Rs 250 million in 2014 and to Rs 100 million in 2015.

"There was a proposal in the recent budget to exempt wholesale and retail from VAT with effect from January1, 2016. However, the government decided not to implement these VAT budgetary proposals until the legislation is enacted, therefore, wholesale and retail continues to being subject to VAT as of today. However the "deemed VAT" in relation to wholesale & retails VAT has been removed with effect from 1 January 2016 as per the press notice,"he said.

"Sri Lanka is one of the unique countries who has successfully imposed VAT from 2003 on financial services using the Profit VAT methodology. The only other country to charge VAT on financial services is Brazil. China has proposed to adopt the 'profit VAT' concept from this year",he said.

He opined although initially the intention was to only tax the value addition, Sri Lanka now follows a hybrid system in that it taxes the value addition and turnover. Nation Building Tax(NBT) which was introduced in 2009 levies 2% on turnover. The increasing of NBT rate 4% proposed in the budget to effective from January 1, 2016 has not been implemented,"he said.

"As per the budget proposal, once the income tax proposals are legislated it would apply to the Year of Assessment 2016/17," said Perera.

He further pointed out that the standard Corporate Income Tax rate would go down to 15% from the currently applicable 28%.

He also pointed out that the individual Income Tax rate applicable from Y/A 2016/17 once the Budget Proposals legislated would be at flat rate of 15% with an annual tax free allowance of Rs 2.4mn. "The Corporate Income Tax prior to 2011 was at 35% and there after it resulted in Sri Lanka to becoming a very low income tax levying jurisdiction", he said.

Principal of Tax and Regulatory, Perera also added that the budget Proposals contains half tax holidays as opposed to full tax holidays in areas such as building housing facilities for elderly persons and government officers, seed and planting materials, drip irrigation, investment in lagging regions.

Perera explained that transfer pricing rules are being imposed in Sri Lanka and that when filing the 2015/16 Return of Income that a certification in relation to transfer pricing has to be attached if not the Return of Income may be stamped as "incomplete".

He further emphasized that the Department of Inland Revenue (DIR) has issued a press notice to say that Share Transaction Levy applicable on trading of listed company shares, Land Lease Tax applicable on foreigners and Construction Industry Guarantee Fund Levy will be abolished with effect from 01 January 2016 repealing legislation to this effect should follow.

"Also a gazette has been published to eliminate Stamp Duty on Share Certificate and it applies to both private and public companies", he added. 


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