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IMPORTANT DEFINITIONS AND CLARIFICATIONS

1) Investment  

Defined as the total project cost, funded by equity and debt. Net working capital financing should not exceed 3 months. Cost of land should not exceed 25% in the case of property development.

 

2) Large Scale Projects

Any project with an investment exceeding Rs. 500mn shall qualify for incentives under the "Large Scale Projects" category, subject to the BOI being satisfied that a substantial manufacturing process or value addition is being undertaken.

Unless specifically stated, the tax holiday is effective from the commencement of commercial operation by the enterprise. In the case of investments undertaken in two tier hospitals, the 10-year tax holiday is reckoned from the year of assessment in which the enterprise commences to make a profit.

3) Tax Holiday

Unless specifically stated, the tax holiday is effective from the commencement of commercial operation by the enterprise. In the case of investments undertaken in two tier hospitals, the 10-year tax holiday is reckoned from the year of assessment in which the enterprise commences to make a profit.

Dividends declared out of tax exempt profits during the tax holiday and one year thereafter will be exempt from income tax in the hands of shareholders.

4) Dividends

Dividends declared out of tax exempt profits during the tax holiday and one year thereafter will be exempt from income tax in the hands of shareholders.

A supply to an overseas consumer or sale to a direct exporter located in Sri Lanka (usually BOI approved) is considered an export for the purpose of conferring BOI incentives to an eligible company

Project related inputs (input restrictions)

5) Exports A supply to an overseas consumer or sale to a direct exporter located in Sri Lanka (usually BOI approved) is considered an export for the purpose of conferring BOI incentives to an eligible company
6)Customs Duty on Local Sales

In respect of the sale of all finished products in Sri Lanka referred to under the BOI Regulations, customs duty is payable under section 10 of the Customs Ordinance, on the value of raw materials imported into Sri Lanka

7) Income Tax on Expatriates Expatriates' income will be taxed at a concessionary rate of 15% for 5 years. In the case of "flagship" projects, where the total investment is greater than Rs. 2500 mn, the concessionary tax rate will be applicable for the duration of the tax holiday
8) Exchange Control Act Any company which enters into an agreement with the BOI and is export oriented (exports 90% of output in the case of manufacturing projects and 70% of output for services projects) or undertakes to invest a minimum of Rs. 500 mn would be exempt from the application of the Exchange Control Act.

Source: Board of Investments (BOI) - Sri Lanka


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