Sri Lanka country report

Economic Overview

After developing by 3.3% in 2018, the country’s financial development eased back down to an expected 2.3% in 2019, generally because of the fallout of the psychological militant assaults of April, which killed 250 individuals and caused a decrease of around 40% in traveler appearances in the second 50% of the year. 

Private and public utilization likewise declined marginally; be that as it may, such negative impacts ought to be temporary. As per the refreshed IMF gauges from fourteenth April 2020, because of the flare-up of the COVID-19, GDP development is required to tumble to – 0.5% in 2020 and get to 4.2% in 2021, subject to the post-pandemic worldwide economic recovery.

Tax revenues were lower than expected due to weak collection of excise taxes from motor vehicles, petroleum products and import taxes, together with slow growth.

Main sectors of industry

Sri Lanka’s mineral-extraction ventures incorporate mining of gemstones and graphite; exhuming of sea shore sands containing ilmenite and monazite. 

Among the ventures that flourished under the progression approaches was the travel industry, which, notwithstanding, remains exceptionally delicate to political shakiness. The development of the travel industry, alongside the enormous irrigation system and housing projects attempted since 1978, have contributed significantly to the development of the development business. 

Banking and the issue of currency are constrained by the Central Bank of Sri Lanka. 

Changes in agribusiness and industry achieved a decrease in the overall significance of manor items among the fares and of food products among the imports. This, nonetheless, has not decreased the unfriendly equilibrium in unfamiliar exchange from which the economy keeps on torment. 

Street and rail transport represents an overwhelmingly huge portion of the development of individuals and wares inside Sri Lanka. In rail transport the public authority holds a syndication.

Taxation in Sri Lanka

Resident companies and public corporations are liable for CIT on their worldwide taxable income. 

The standard corporate tax is 28%. Tax rates of 14% and 40% apply to profits from specific businesses. 

Gains from the transfer of capital assets used in business are liable to tax as a trading profit, while gains from the transfer of investment assets are taxed as capital gains at the rate of 10%. 

Income arising on global branches of a resident company in Sri Lanka would be liable to income tax here, while a foreign tax credit equivalent to the foreign tax paid in relation to that foreign source of income may be claimed. 

Dividend income is subject to withholding tax at 14% at the time of payment and same is considered as a final tax. 

Investing in Sri Lanka

FDI inflows to Sri Lanka have expanded consistently as of late determined before the finish of the contention and financial recuperation. Notwithstanding, as indicated by UNCTAD’s World Investment Report 2020, inflows to Sri Lanka have diminished from the record level of USD 1.6 billion out of 2018 to USD 758 million out of 2019. FDI stock surpasses USD 13 billion of every 2019. Foundation, especially posts and correspondence, ingested a critical part of inflows to the country. Assembling, IT, the travel industry and foundation recorded the most elevated development rates.

 Developing rivalry between China (in the energy area) and India (in broadcast communications) is coming to fruition and at present profiting the Sri Lankan economy. China, Hong Kong, India and Singapore were the country’s biggest financial backers in 2018. 

The public authority anticipates that FDI should dramatically multiply to USD 4 billion by 2022. As per the most recent information delivered by the public Central Bank, FDIs into Sri Lanka during the initial eight months of 2019 declined by 65% to USD 501 million, from USD 1.42 billion.