Sri Lanka Increases Taxes on Imported Vehicles

25th April 2011, www.lankabusinessonline.com

Sri Lanka has raised import duties on several categories of petrol-engined cars and three wheelers with steeper increases seen in larger hybrid vehicles, which had exceptionally low taxes earlier, officials said.

A senior Treasury official said there were revisions on several categories of vehicles.

On petrol cars with standard engines with capacities below 1,000 cubic centimeters the effective total tax rate will go up from the current 95 percent to 120 percent.

Between 1000 to 1,600 cc the effective rate will go up from 119 to 128 percent. On three wheelers the effective rate will go up from 38 percent to 50 percent.

On hybrid cars with engines below 2,000 cubic centimeters total duties will go up from 38 percent close to 50 percent.

Deputy director general of customs Ajantha Dias said an excise duty was raised by 8.0 percent on small hybrids but it will take up the total duties by a larger amount when added together.

On hybrids between 2,000 to 3000 cc duty will go up close to 75 percent and above 3,000 cc to 100 percent.

At the current rates even the large hybrids are taxed at a lower rate than smaller petrol cars.

Related Info :

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• Sri Lanka Vehicle Tax Slash Lauded by Motor Industry. SUVs to Come Down by Rs4mn. Car Prices too Come Down

• Sri Lanka Removes Duty on Electric & Hybrid Cars

Sri Lanka Reduces Taxes Payable by companies & Individuals to Give Effect to 2011 Budget Proposals

09th March 2011, www.lankabusinessonline.com

Sri Lanka's cabinet of ministers has approved changes to several laws reducing taxes paid by companies and individuals to give effect to proposals in the government's 2011 budget, a statement said.

"With the introduction of these changes, the number of taxes payable by a person will get reduced, resulting in a simplification of a tax system while also improving the effectiveness of the tax administration," it said.

"The overall reform oriented tax rate revisions are expected to give an impetus to investment through tax savings."

The statement said the Cabinet approved amendments to 15 bills covering finance, tax and investment-related laws to be submitted to parliament.

Related Info :

• Cabinet Decision taken on 08.03.2011 (Subject to Confirmation at the next Meeting)

Sri Lanka to Levy $20 a Bed on Colombo Five Star Hotels to Control Under Pricing

22nd November 2010, www.island.lk

The government is planning to introduce a US$ 20 levy per bed on all five star hotels in Colombo in a bid to deter under pricing.

President Mahinda Rajapaksa delivering the 2011 Budget in Parliament yesterday said earnings from tourism showed a moderate increase despite the strong revival in arrivals. "This is largely because the industry as a whole is underpriced," he said.

The government would charge the US$ 20 levy per room where the rate is below US$ 125 per night from next January.

The government proposes to reduce income tax on all tourism related businesses from 15 percent to 12 percent.

Sri Lanka's First Full Post-War Budget Cuts Corporate Tax

22nd November 2010, www.lbo.lk

Sri Lanka has cut a series of taxes on banks in a bid to increase banking activities, but raised a tax on stock trading, President Mahinda Rajapaksa said presenting the budget for 2011 in parliament.

A debit tax on withdrawals from banks would be lifted and a so-called financial value added tax would be cut from 20 to 12 percent, Rajapaksa said.

Rajapaksa said a 0.2 percent tax on stock trading will be raised to 0.3 percent because there were no capital gains taxes.

Withholding tax on earnings of mutual funds would be the same as Treasury bills, he said. Interest on T-bills are now at 10 percent.

Unit trusts would be freed from economic service charges and foreigners would be allowed to buy them.

Re-insurance would be freed from value added tax.

Sri Lanka will cut corporate income taxes from 35 to 28 percent except for tobacco, alcohol and casinos.

At present companies and non-governmental organizations are taxed at rates around 30 percent, 33.3 percent and 35 percent, the budget speech said.

But income taxes on tobacco, alcohol and casinos will be raised to 40 percent.

A manufacturer exporting under a Sri Lankan brand name will be taxed at 10 percent, down from an earlier 15 percent.

Corporate tax on financial institutions has been cut from 35 to 28 percent. Another income tax like tax of 20 percent (financial VAT) has been cut to 8.0 percent.

But the firms will have to put in the equivalent of 8.0 percent of financial value added tax to a an investment account with Sri Lanka's central bank for three years.

The money has to be used by the banks to give to "grant long term loans at a lower rate of interest" the budget speech said. The interest from such loans are to be free of income tax.

A tax exemption for charities engage in education has been removed, while charities engaged in environmental protection activities.
Firms in fisheries and making seed or planting material have been exempted from income tax for five years.

Start-up companies which invest between 5,000 to 10 million US dollars in sectors to be specified, will get a blanket five year tax holiday.

Unit trusts and mutual funds invested in listed debt or equity will be free from income tax.

Sri Lanka Ports Authority, Ceylon Electricity Board, National Water Supply and Drainage Board, Ceylon Petroleum Corporation have been exempted from income tax and two state firms Sri Lankan and Mihin Lanka have been exempted from income tax.

In many countries, state energy monopolies and ports authorities are sources of large volumes of income tax. Both the Sri Lanka Ports Authority and Ceylon Electricity Board was a large contributor to income taxes at one time.

The budget said the firm will have to pay a 25 percent dividend to the Treasury.

Many of these institutions now run losses, and are sustained with Treasury handouts charged from taxes on the people. Sri Lanka has high rates of taxes on basic foods.

Current tax incentives given under the Board of Investment laws would be revised.

Related Info:
BUDGET-WRAP -President presents development-oriented budget 2011 - TIMES Online (sundaytimes.lk)

Sri Lanka Luxury Car Sales Up

04th October 2010, www.dailynews.lk, By Charumini de Silva

The luxury car segment recorded significant higher sales after the duty reduction on imported vehicles.

After the duty reduction the market has improved considerably and all segments showed an increase in sales, Prestige Automobile (Pvt) Ltd., Chairman/Managing Director, Heinz A. Reuter told Daily News Business.

He said the luxury segment recorded significant higher sales. “All key players in this luxury segment show improved sales due to a demand for latest models, which was one of the reasons that we introduced the new BMW 5 Series. It is regarded as the benchmark in its class.” The demand for luxury cars is increasing as expected after the duty reduction. Many potential customers delayed their purchase decisions due to a prohibitive duty which was among the highest in the world.

The leading luxury brands available in Sri Lanka are offering vehicles in the range of Rs 10 million and Rs 16 million. “The majority of the sales in the luxury segment are corporate sales, but there are cash sales and financing too. The prices have become competitive where in this range consumers can now buy the best cars in the world,” Reuter said.

Related Info:
Sri Lanka Car Imports Double after Duty Break

Sri Lanka Customs Tariff Calculator by HS Code

Download : Sri Lanka_Customs_Tariff_Calculator.xls

Sri Lanka Car Imports Double after Duty Break

06th August 2010, www.dailynews.lk

The Department of Motor Vehicles yesterday said import of cars has seen a dramatic increase with the reduction of vehicle import duty. According to Department statistics, 5,762 cars were registered by the Department last year while the Department has registered more than 4,079 cars upto August 1 this year.

The number of vehicle imports also rose last month when compared to the figures in the corresponding period last year. The Department registered 17,636 vehicles in July last year while this figure rose to 33,421 in July this year. Over 17,000 motorcycles were imported last month and the total number of vehicle imports up to August 1, 2010 exceeded 185,000, sources said.

Related Info:
Sri Lanka Vehicle Tax Slash Lauded by Motor Industry. SUVs to Come Down by Rs4mn. Car Prices too Come Down

Sri Lanka Vehicle Tax Slash Lauded by Motor Industry. SUVs to Come Down by Rs4mn. Car Prices too Come Down

02nd June 2010, www.thebottomline.lk, By Santhush Fernando

The local automobile industry, badly hit hitherto by the global financial crisis and exorbitantly high domestic tax regime, is expected to see a drastic drop in vehicle prices after Treasury slashed excise duty on vehicles yesterday.

Almost all vehicle importers whom The Bottom Line spoke to were very positive over the tariff revision, but majority opined that they were in the dark regarding the exact net duty levels applicable. (Pl see below JKSB Comment with item-wise chart of new duty/tax).

“It’s very difficult to tell precisely. However, this will give a badly needed boost to the automobile industry. At a glance, the price drop of cars may range from Rs.300,000 to Rs.1 million. Sports Utility Vehicles (SUVs) could anticipate a drastic decline up to Rs.4 million, while double cabs could come down by Rs.1.5 to 2 million, roughly,” President of Ceylon Motor Traders’ Association (CMTA), Zeeniya Rasheed said.

Unconfirmed sources say that the excise duty applicable to vehicles with an engine capacity below 1,000cc has come down to 7 from 34%. Vehicles with the capacity between 1,000 to 1,600cc would see excise duty drop from 44 to 17% while luxury vehicle categories would be subject to 64%, instead of the current 27%.

Fifteen percent surcharge, which is also applicable on electrical appliances imports, has also been scrapped.

“It’s really difficult to ascertain the exact formula as there’s cascading structure with one tax touching another tax. Nobody knows until we get confirmed through a ‘Cusdec’ (Customs declaration). It’s very complicated,” an automobile industry source said.

At present vehicle imports are subject to six ‘fixed’ taxes – Ports Authority Levy (PAL) of 5%, surcharge of 15%, Nation Building Tax (NBT) of 3%, Social Responsibility Levy (SRL) of 1.5%, Road and Infrastructure Development Levy (RIDL) of 2.5%, Value Added Tax (VAT) of 20% and three ‘varying’ taxes – Customs Import Duty (CID), Cess, and Excise Duty.

Speaking to The Bottom Line, Chairman United Motors PLC, Ranjith Fernando, said that the tariff revision would be a relief to both importers and buyers, alike.

“It’s certainly a welcoming move. The prices of cars will come down drastically. As many importers refrained from bringing large stocks and kept minimum stocks,” he said.

According Fernando, currently a Pajero was subject to between 300 to 400% total compound tax, depending on engine capacity and type of fuel.

The new tariff is likely to have an impact on locally-assembled vehicles.

“As it is there’s a huge price differential between imported and locally-assembled vehicles. However, with this tariff cut prices of the latter will also have to come down,” he added.

General Manager – Sales and Marketing, Associated Motorways (Pvt) Ltd., Shivantha de Zoysa said that they were yet to ascertain the full impact of the tariff revision.

“There are nine different types of sub-duties, while the government had introduced the tariff cut on excise duty. Currently, petrol vehicles with an engine capacity below 1,000cc are subject to a total net duty of 187%, on its CIF (Cost Insurance & Freight),” he pointed out.

According to de Zoysa, prior to the duty revision, a total net tariff of 217% was applicable for petrol vehicles with an engine capacity between 1,000 to 1,600cc, while vehicle categories from 1,600 to 2,000cc and above 2,000cc were subject to total net duty of 290 and 299%, respectively.

The number of brand new vehicles registered in 2009 was a mere 7,437 when compared with 25,325 registered in 2008, which was a massive drop of 70.63%. Government tax revenue, in contrast to Rs.17.4 billion earned in 2007, dropped to Rs.11.06 billion in 2008 and to Rs.3.25 billion in 2009.

Vehicles registrations expected to increase
In an Equity Research Report, releases by Bartleet Mallory Stockbrokers (Pvt) Ltd, says it expects vehicle registrations in 2010E and 2011E to increase.

“New vehicle registrations over the first four months of 2010 amounted 95,929, indicating an upward movement. Vehicle registrations could see an immediate improvement in 2010 with the economy gaining traction coupled with low interest rate,” it stated.

“In addition, tax reforms could further benefit vehicle imports, in our view,” the report noted.

Related Information:
A Comment by JKSB with Item-wise Chart of New Duty/Tax - Details of key tariff revisions pertaining to motor vehicles and consumer electronics

Download : Sri Lanka_Customs_Tariff_Calculator.xls

Sri Lanka Customs Tariff Calculator by HS Code

Sri Lanka Slashes Excise Duty on Vehicles, Taxes Taken Out on Electronic Items

01st June 2010, www.dailymirror.lk

Sri Lanka has slashed an import excise duty on vehicles by 50 percent amid a pick up in economy and demand for vehicles, lifted a general 15 percent surcharge on all imports and slashed duties on electronic items, an official said.

With effect from today a car such as an Indian made Maruti which had attracted excise duties of up to 183 percent of its value will now be charged a duty of 90 percent, Sri Lanka's director general of fiscal policy S R Attygala said.

Cars attracted over 300 in excise duties, import duties, value added taxes, port and airport development levies and national security levies.

The government expects more revenue from car imports which plummeted last year amid high taxes. Attygala said with a pick up in the economy there was a demand for vehicles including the tourist industry.

The government has also lifted 15 percent surcharge on all imported items. Several import duty bands had also been adjusted.

Current bands of 0, 6, 16, and 28, have been revised to 0, 05, 15 and 30.

But Attygala said with the removal of the 15 percent surcharge there was a reduction even in the 30 percent band as earlier a 33 percent was paid with the surcharge.

Meanwhile taxes on items such as watches and camera's have been brought down to 10 percent to encourage retail trade especially targeting foreigners, he said.

Sri Lanka is expecting a surge in tourist arrivals and in many East Asian nations including Thailand and Singapore attract visitors simply for shopping.