Agricultural income generated, specially by small scale entrepreneurs in the cultivation of any agricultural produce such as tea, spices, coconut, rubber, paddy, fruits, vegetables, etc, are to be exempted from income taxation for a period of 5 years.
In order to promote the agricultural production in the country for exports and consumption purposes the Government has decided to provide a five year tax exemption to the agricultural based small and medium industry.
In addition the annual income tax rate on processing industries using local agricultural commodities is to be reduced from 28 per cent to 14 per cent.
Further, as a measure to ease the serious hardships to small holder business operations, it has been proposed to raise the threshold for the application of ESC Economic Service Charge from Rs. 12.5 million per quarter to Rs.50 million per quarter.
The relief measures have been introduced on the instructions of the President and the Minister of Finance and Economic Affairs and are aimed at providing highest priority to agricultural development.
Accordingly the Government is of the view that every effort should be made to make use of the 2018 /19 Maha cultivation season as a new beginning.
Therefore, Agricultural income generated specially by the small scale entrepreneurs in the cultivation of any agricultural produce such as tea, spices, coconut, rubber, paddy, fruits, vegetables, etc, to be exempted from income taxation for a period of 5 years.
With the introduction of several changes to the tax system by the previous government, Sri Lanka’s business community particularly the small and medium entrepreneurs those engaged in professional and other services and agricultural activities have been confronted with complex taxation and heavy tax burden.
In addition to the imposition of high income taxes on wage income and other remuneration, interest and rent incomes, tax burden has also increased through high tax rates and reduction in tax free thresholds for the implementation of Value Added Tax (VAT), Nation Building Tax (NBT) Economic Services Charge (ESC), withholding taxes, etc. People are looking for a simple, broad based, low tax rates, a transparent tax system and a simplified tax administration.
Such a system of taxation is important to provide an environment conducive for doing domestic business in the SME sector, professional and other services and agricultural activities. While formulating a simple tax system takes some time, Mahinda Rajapakse, Minister of Finance and Economic Affairs, proposes at this stage to introduce some specific measures towards providing incentives that will enable SMEs and small sector business activities to revive rapidly.