President Anura Kumara Dissanayake revealed significant changes to tax policies, including an increase in the Withholding Tax from 5% to 10% and a reduction of the tax on service exports from 30% to 15%. The announcements were made during a special address in Parliament today (18).
Withholding Tax Revisions
The President highlighted the impact of the revised Withholding Tax on deposit interest earnings. While deposits earning interest below Rs. 150,000 per month are generally tax-exempt, the increased Withholding Tax could apply even to amounts below this threshold.
To address concerns, the government plans to establish a new division within the Inland Revenue Department. Citizens who believe their bank accounts should be exempt can present their tax status to avoid being subjected to the tax. Pensioners and individuals with incomes below the Rs. 150,000 tax threshold or paying an income tax rate lower than 10% will have the opportunity to apply for exemptions or lower rates.
Reduction of Tax on Service Exports
As part of the third review of the International Monetary Fund (IMF) Extended Fund Facility, the government agreed to cut the tax on service exports from 30% to 15%, providing relief to businesses in the sector.
Removal of VAT on Milk and Yogurt
In a move aimed at improving child nutrition, the President announced that Value-Added Tax (VAT) would be removed from local fresh milk and yogurt products. This measure is expected to make these essential food items more affordable for families.
These tax adjustments reflect the government’s efforts to balance fiscal requirements with public welfare while addressing economic challenges.
