Tax Section

Personal Taxation

• Relief for medical and health insurance premium from net income, effective from 1 January 2013 as follows:

• Increase of 50% in respect of taxable fringe benefits for cars as follows:

• Exemption from filing quarterly statements under the Current Payment System by self employed individuals deriving annual income of less than Rs4m
• Exemption from income tax on interest received on debentures quoted on the stock exchange
• Exemption of severance allowance will cover negotiated compensation under Section 24 of the Employment Rights Act as determined by the Court, effective 1 February 2009
• Exemption from income tax of “lump sum received as commutation of pension and retiring allowance” up to a limit of Rs1.5m, effective 1 September 2012
• Extension of tax amnesty schemes for voluntary declaration and speedy recovery of tax arrears from January to September 2013  

Corporate Taxation

• Tax-free status for global funds which do not require relief under the double tax treaty network
• Introduction of accelerated annual allowances in respect of expenditure made on manufacturing and “green technology” equipment during fiscal years 2013 and 2014
• Suspension of Alternative Minimum Tax (AMT) for manufacturing companies and hotels during fiscal years 2013 and 2014 to allow impact of new accelerated annual allowance measures
• Exemption from submission of quarterly statements under Advance Payment System (APS) for companies with an annual turnover not exceeding Rs4m
• Extension of Tax Deduction at Source (TDS) to include services provided by laboratory technicians
• Increase of the TDS rate on interest payable to a non-resident from 10% to 15%
• TDS provisions applicable to public sector agencies in respect of project contracts and procurement of goods and services amended as follows
  • No TDS withheld on payment less than Rs 500
  • Application of TDS on payment of royalties
  • TDS not applicable on air travel services and where there is continuity of service (e.g telephone and postal services)
• Extension of solidarity levy applicable to providers of telephony service for an additional year
• Special levy on banks maintained for another two years
• CSR contribution of up to 20% more than the statutory obligation can be spent in any given year but limited to 2 consecutive years. Any excess CSR contribution to be offset in 5 equal consecutive annual instalments against future CSR liability
• Carry forward of up to 20% of CSR fund not yet contributed instead of remitting same to the MRA

Value Added Tax

Registration

• Increase in annual turnover threshold  for compulsory VAT registration from Rs 2m to Rs 4m

Entertainment and Shopping

• Refund of VAT on purchase of fittings, equipment and furniture to high street retail shops and restaurants within 7 days of claim made 
• Revamping of the current VAT refund system  to encourage the development of shopping by visitors at the port and airport.
  

VAT refund for agro-industry and fisheries

• Extension of the full VAT refund for agricultural and fisheries sector up to year 2013 on the following: 
  • spare parts for agricultural machinery and equipment; 
  • weed mats
  • plastic mulch
  • post-harvest equipment
  • dryers for agricultural products
  • weight scales
  • refractometer
  • industrial type chill room/cold room
  • straw and fodder bailers
  • honey extractor
  • tyres used for tractors
• Extension of full VAT refund on equipment to producer cooperatives in agro-industry and fisheries sector
  

Abolition of VAT on:

• Infant cereals not containing milk
• Colostomy bags and urine bags
• Entrance fees to cinemas, concert and shows
• Royalty on importation of film

Other Taxes

• Exemption of Customs duty and VAT on the first Rs 2,000 of imported goods by post and courier services  
• Abolition of:
  • 15% customs duty on sinks, wash-basins, baths, bidets ,toilets, flushing cisterns and mechanism, and television sets of over 82 cm; and
  • 30% customs duty on sanitary towels (pads) and tampons and jute bags
• Increase of excise duty on cigarettes and cigars by 12% 
• Increase of excise duty on alcoholic drinks from  5 to 15%
• Abolition of excise duty on the following:
  • motorcycles cylinder capacity from 126 to 200cc;
  • “classic or vintage” motor cars manufactured before 1970
• Reduction of registration duty and annual road tax to Rs 1,000 each on “classic or vintage” cars
• Reduction of excise duty on all electric cars to 25%
• Application of 15% concessionary rate of excise duty on the first Rs 1.5m import value on a motor vehicle of a returning resident
• Imposition of excise duty of 2 cents on soft drinks and sugar, imported or produced locally, effective as from 1 January 2013
• Abolition of levy of Rs 1.5 charged by CWA on each litre of locally produced soft drinks and bottled water
•  Exemption of the Land Conversion Tax on the following: 
  1. construction of buildings for technical and vocational training;
  2. setting up of manufacturing company as certified by BOI; 
  3. power stations for renewable energy; and
  4. golf courses.
• Increase in registration duty exemption for first time buyers of built- up residential property of value from Rs 1.5m to Rs 4m.