The 2021 Budget unveiled yesterday by the Government had several capital market specific support measures apart from overall benefit “development and investor-friendly” features.
To promote the listing of local companies with the Colombo Stock Exchange, Prime Minister and Finance Minister Mahinda Rajapaksa proposed a 50% tax concession for the years 2021/2022 for such companies that are listed before 31 December 2021, and to maintain a corporate tax rate of 14% for the subsequent three years.
Another measure is including investment in listed shares up to Rs. 100,000 per month among deductible expenditures in the calculation of personal income tax.
In order to promote investments in the housing market through the Sri Lanka Real Estate Investment Trust (SLREIT) regulated by the Securities and Exchange Commission, Rajapaksa proposed to exempt such investments from capital gains tax and dividends free from income tax, and to reduce the stamp duty up to 0.75%.
Prime Minister also proposed the simplification of taxes on Capital Gains, where such taxes will be calculated based on the sale price of a property or the assessed value of a property whichever is higher. He proposed to exempt the tax on dividends of foreign companies for three years if such dividends are reinvested on expansion of their businesses or in the money or stock market or in Sri Lanka International sovereign bonds.
Among measures to boost foreign investments dividends paid by a resident company to any non-resident person, exempted from Income Tax with effect from 1 January as well as dividends from and gains on the realisation of shares in a non-resident company where derived by any person with respect to a substantial participation in the non-resident company with effect from 1 January.
On instances when the commercial banks in Sri Lanka purchase Sri Lanka International sovereign bonds subject to a minimum of $ 100 million, Prime Minister proposed to suspend the risk weighted provisioning under Central Bank Regulations for three years and to free the profits on capital and interest income of this investments from taxes.