Any business commenced in areas other than Colombo and Gampaha (Main Districts In and around Colombo – CAPITAL OF SRI LANKA)
The value of fixed assets and the working capital are considered as the investment in an Enterprise.
The BOI can grant the following concessions to the investors:
i) Tax concessions – this is an exemption from the provision of the Inland Revenue Act for a special period with regard to payment of tax on income and profits derived from the approved activity of the enterprise. This exemption can be either a total exemption i.e. Tax Holiday or a concessionary exemption with a reduced rate of applicable corporate income tax rate, which is granted normally after a tax holiday period.
ii) Duty free imports - BOI is empowered to exempt Customs duty on the value of (i) imported raw material and (ii) Capital Goods under the following circumstances.
a) Import of Capital Goods is exempted In the case of an export oriented enterprise during the lifetime of the enterprise. In the case of non – export oriented enterprise, exemption is only during the enterprise establishment/ implementation period.
b) Duty free imports of raw materials Import of raw materials is exempted an enterprise which exports more than 80% of its production (for manufacturing enterprise) or 70% of its production (for agricultural enterprise) conditions under the BOI Regulations.
Export Oriented Enterprise can be categorized under 3 main headings
a) Manufacturing enterprises
An enterprise that engages in the production or manufacture of goods for export including deemed
Exports of not less than 80% of its output.
b) Services Enterprises
Export Oriented Services includes:
Garment washing and finishing plants; embroidery services, ship repairing and ship breaking,
Textile dyeing and finishing plant, textile printing, testing of fabric, computer aided designs
For garment and other industries, bunkering services; production of films, air cargo services,
International passenger services, repairing of containers, and vacuum packing of garments.
To be eligible for tax incentive scheme, 70% of its turnover should be convertible foreign
Currency.
c) Agriculture enterprises
An enterprise that engages in agriculture and/or agro processing with exports of not less
Than 70% of its production.
Non export oriented enterprise –
A enterprise that caters to the domestic market which does not fall into the category Mentioned (a) to (c) above (under the heading of Export Oriented enterprise)
a) EXPORT OF GOODS
- Direct Exports – supply to an overseas buyer resident abroad for foreign currency payment
- Indirect Exports – supply to a direct exporter or an export trading house both approved.Under the BOI Law, for convertible foreign currency payments.
- Deemed Exports – means the production or manufacture and supply by any persons or Partnership of any commodities (other than black tea in bulk, crepe, rubber, sheet rubber,
Scrap rubber, latex and fresh coconuts) to any exporter of such goods without further
Production or manufacture by such exporter or the production or manufacture and supply
Of any goods to any exporter for the production, manufacture or packaging for export
Of any commodity which is a non traditional product.
b) LOCAL SALE BY AN EXPORT ORIENTED ENTERPRISE
An export oriented BOI enterprise which enjoys facilities under Section 17 of the BOI Law
Will be permitted for local sales for a limited percentage subject to the payment of all
Applicable duties and charges in order to maintain a level playing field for the local industries.
c) ADDITIONAL INFORMATION
Liability of Other Taxes by BOI Section 17 Companies
i) Value added tax (VAT)
A tax on domestic consumption of goods imported to Sri Lanka and services supplied
In Sri Lanka are subject to the VAT under different rates.
Zero rate |
0% |
| Standard rate |
12% |
| Luxury Rate |
20% |
ii) Economic Service Charge (ESC)
ESC will be charged from individuals, partnerships, enterprises (including BOI) body
Of persons and corporations who has aggregate liable turnover for the quarter
Rs. 7.5 Mn or more under following rates.
When exempt from Income Tax
(Including BOI) |
0.25% |
| From the business of
Distributor |
0.1% |
| Taxes at concessional rates
In 5th Schedule of the
Income Tax Act |
0.5% |
| Primary conversion of any
Tea, rubber and coconut
Plantation |
0.5% |
| Buying and selling |
0.5% |
| When Income Tax at
Normal rates |
1% |
iii) Ports and Airport Development Levy (PAL)
Every article originating from Sri Lanka and imported into Sri Lanka is subject to PAL
At 2.5% on its CIF value for customs purposes.
Imports for processing and re-export or imports to be used for manufacture of goods
For export are excluded from scope of PAL
iv) Dividends
Dividends are subject to a withholding tax of 10% of the gross dividend.
Imports for processing and re-export or imports to be used for manufacture of goods for export are excluded from scope of PAL
AGN
INTERNATIONAL
