The Hon. (Dr.) Harshana Suriyapperuma - Deputy Minister of Finance and Planning

¶ 01 Hon. Speaker, the Inland Revenue (Amendment) Bill relates to the provisions made in the Budget. It encapsulates the limited changes to be implemented from 01 April 2025. I will address several misconceptions, especially relating to service export taxation and IT exports.

¶ 02 There is a misconception that the present Government imposed a 15 per cent tax; in fact, the previous Government agreed under the IMF framework to a 30 per cent corporate tax and up to 36 per cent for individuals, which would have applied to service exporters. The current Government negotiated and reduced the rate applicable to service exporters to 15 per cent — a 50 per cent reduction from 30 per cent.

¶ 03 Further benefits: - Double Tax Treaties: Where tax is paid abroad on service export income, Sri Lanka grants foreign tax credit. If 20 per cent is withheld abroad, no further tax is payable here; if 12 per cent is withheld abroad, only 3 per cent is payable here up to the 15 per cent cap. - Tax base is net profit, not gross receipts: allowable business expenses (equipment, internet, electricity, rent, etc.) are deductible per IRD rules; tax applies to profits, not total inflows. - Cap at 15 per cent: Even at higher income slabs, service export tax does not exceed 15 per cent. - Cash flow: No withholding at bank receipt like WHT; quarterly self-assessment at end of quarter improves cash flow; year-end true-up applies.

¶ 04 Fairness: Other foreign exchange earning workers (e.g., garment sector) face up to 36 per cent personal tax; the capped 15 per cent for service exporters is equitable within overall fiscal consolidation.

¶ 05 Beyond this Bill: - Withholding Tax rates increased from 5 to 10 per cent in certain cases, with simplified digital declarations to exempt low-income depositors (monthly income below Rs. 150,000). Systems are in place across ~5,000 branches for uploads to IRD to avoid undue WHT for eligible persons, including controls against splitting deposits to multiply thresholds. - “Sin” sectors: liquor, tobacco, betting and gaming — top rate increased from 40 to 45 per cent. - Personal Income Tax relief: the tax-free threshold increased from Rs. 100,000 to Rs. 150,000 per month; slab progression adjusted to provide further relief.

¶ 06 This Bill aligns with simplification, efficiency, and revenue needs while protecting growth sectors. Thank you.