Monday, November 22, 2010

Sri Lanka cuts bank taxes, hikes tax on stock trading

Nov 22, 2010 (LBO) - Sri Lanka has cut a series of taxes on banks in a bid to increase banking activities, but raised a tax on stock trading, President Mahinda Rajapaksa said presenting the budget for 2011 in parliament.

A debit tax on withdrawals from banks would be lifted and a so-called financial value added tax would be cut from 20 to 12 percent, Rajapaksa said.

Income tax on banks would be cut to 28 from 35 percent.

Rajapaksa said a 0.2 percent tax on stock trading will be raised to 0.3 percent because there were no capital gains taxes.

Withholding tax on earnings of mutual funds would be the same as Treasury bills, he said. Interest on T-bills are now at 10 percent.

Unit trusts would be freed from economic service charges and foreigners would be allowed to buy them.

Income earned by unit trusts from listed stocks and bonds would be free from income tax.
Re-insurance would be freed from value added tax.

Withholding tax on interest from corporate debt will be the same as Treasury bills. T-bills now have a withholding tax of 10 percent.

To encourage share issues, cost of up to 1.0 percent of an initial public offering would be made a deductible expense for tax purposes.

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