Sri Lanka offers tax break for forex income

Apr 06, 2009 (LBO) – Sri Lanka has given an amnesty for individuals and businesses that deposit foreign exchange in banks in the next two year years, as the country grapples with a severe balance of payments crisis. Advertisements placed in weekend newspapers by the island’s central bank and finance ministry said the tax waiver would start from April 01, 2009 and would be in effect till March 11, 2011.

“All profits and income earned in foreign currency by any resident company, individual or partnership in Sri Lanka, from services rendered in or outside Sri Lanka, to any person partnership outside Sri Lanka will be exempted from income tax…,” the notice said.

The money has to be deposited in a bank.

Sri Lanka has lost more than two thirds of the country’s foreign reserves since the central bank began to defend a dollar peg by sterilizing reserve outflows from last September.

The island has negotiated a bailout from the International Monetary Fund, and the drawdown of the first tranche is expected in the last week of April if Sri Lanka completes a number of ‘prior actions’ including ending the defence of a dollar peg.