• Service: Tax, Global Indirect Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/6/2014

Sri Lanka - Tax incentives for investors in budget 2014 

February 6: The Sri Lankan government’s 2014 budget was presented in late November 2013.

One of the proposed measures would provide a tax exemption for amounts in a redistribution of offshore dividend income, provided the company makes the redistribution within one month from the dividend’s receipt. Currently, this exemption is restricted to dividend income received from a resident company.

Other 2014 budget provisions of interest to foreign investors would:

  • Grant an income tax holiday and other exemptions to companies that relocate any international or regional headquarters into Sri Lanka
  • Impose tax on employment income received by a professional at a maximum rate of 16%
  • Extend a concessionary rate of 12% to profits derived on the supply of certain services to exporters of goods or services and foreign principals, provided certain criteria are met
  • Extend the cut-off date for the concessionary tax rate for shares listed on the Colombo Stock Exchange (proposed in last year's budget) from 1 April 2014 to 1 April 2017
  • Impose tax on services related to the shipping industry at par with export income at a rate of 12%
  • Accelerate to April 2014 (from April 2015) the time limit for qualifying payment relief for investments made to expand an existing business
  • Restrict the three-year exemption for companies engaged in R&D activities to investments made before April 2014
  • Allow a deduction for costs incurred for skills development for trainees in the shipping industry, to a limit of 10% of income tax payable
  • Allow a deduction for the cost of acquiring intellectual property related to international brands
  • Exempt dividends received by a shareholder representing a redistribution of offshore dividend income, provided certain criteria are met
  • Enact this year the property transfer tax (leasing of land by a foreign investor is to be made liable to a 15% “upfront” tax)

Read a January 2014 report prepared by the KPMG member firm in Sri Lanka: Sri Lanka – Highlights of budget 2014

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now