Sri Lanka gives tax breaks to US$220mn sugar refinery

Apr 23, 2014 (LBO) – Sri Lanka has given a 10 year tax holiday to a 220 million US dollar sugar refinery by the Hambantota port including tax free salaries for 50 expatriate staff.

Lanka Sugar Refinery Company (Pvt) Ltd, will import raw sugar for refining to the local and foreign markets, a notice published under Sri Lanka’s Strategic Investments Project Act said.

It will be at an industrial zone by the Hambantota port in Sri Lanka’s South which has attracted several large investments.

Earlier reports said India’s Shree Renuka Sugars will be build a 220 million Us dollar sugar refinery there.

The sugar refinery will get a 10 year tax holiday from the first year of making profits or two years after commercial production. Tax on dividends will also be exempt for 10 years.

It will not pay withholding tax on interest paid on foreign loans or technical fees paid to consultants.

Value added tax will be exempted on project related capital goods and construction goods and local purchases of related capital goods. Nation building tax will also be exempt.

Import duty will be exempt for capital goods, except for items in a ‘negative list’ the report said. But those in a negative list will be exempt when they are not available in locally in time or in sufficient quantity.

The exemptions will not apply to personal effects of personnel of the company.

But 50 expatriate staff will be exempt from pay-as-you-earn (PAYE) tax which is an advance collection on income tax.

The exemptions of PAYE tax to employees of large projects is a recent development and has been given to dozens of expatriate workers in several other projects coming under the strategic investment act.

It comes soon after the current administration ended a decades-long practice of only taxing the salaries of private sector workers, which was hailed a move towards broader tax justice in the country.

Sri Lanka has experienced labour markeet tightness in several areas and analysts say more foreign workers may be needed in the future.