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Policy Changes over the years​

Year Policy Changes
1941 Excess Profits Duty came into operation
1948 Profits Tax was introduced replacing Excess Profits Duty
1950 Signed the first Double Tax Relief Treaty by Ceylon with UK
1958 Kaldor Commission Proposals
  • Taxation of Capital gains
  • Imposing Wealth Tax
  • Expenditure Tax
  • Gifts Tax

Named the Department as Department of Inland Revenue
1961 Introduction of surcharge on income tax,
National Development Tax, Rice Subsidy Tax,
Surtax, a Tax on Registration of Business and Professions and a Sales Tax (Last for 2 days only)
1963 Establishment of first Regional Office in Jaffna.
Introduction of Business Turnover Tax under Finance Act 11 of 1963.
1964 The first tax amnesty
1971 Compulsory Savings Levy came into operation
PAYE scheme was introduced.
Capital Levy was introduced
1972 Introduction of the Self Assessment Scheme.
1974 The Department of Inland Revenue was re-structured.
Inland Revenue Service was established
1979 Enactment of fist Inland Revenue Ac t,No 28 of 1979
Introduced current year basis taxation (79/80)
1983 Introduction of Rehabilitation Levy
1985 Abolished Estate Duty and Gifts Tax
1986 Introduction of Withholding Tax on interest
1988 Implementation of the "Imputation System" of Company Taxation.
Imposition of Betting and Gaming Levy.
1991 Devolution of Turnover Tax on whole sale and retail to Provincial Councils.
1992 Introduction of Withholding Tax on Specified Fees.
Commenced Automation at the Department of Inland Revenue
Introduce National Security Levy (NSL)
1998 Introduction of Goods and Services Tax (in place of Turnover Tax) from 01.01.1998 - threshold for registration Rs. 500,000 per Quarter or 1,800,000 per annum at 12.5%
2000 Inland Revenue Act No.38 of 2000
2002
  • Introduction of Value Added Tax –(by abolishing Goods and Services Tax and National Securities Levy) – threshold for registration Rs. 500,000 per Quarter or 1,800,000 per annum and charged under 3 types of ratio – Zero, 10% and 20% goods specified in the schedules
  • Abolished Stamp Duty and introduced Debits Tax
2003 VAT on financial Services was introduced on the book profit of banks and financial institutions.
2004
  • Economic Service Charge was introduced by finance Act No 11 of 2004
  • Standard VAT ratio changed to 15% from 01.01.2004 and basic rate was Imposed on several essential goods at 5% with effect from 19.11.2004
2005
  • Introduced Share Transaction Levy at the rate of 0.2% of tax payable by every buyer and seller.
  • Introduced Social Responsibility Levy at 0.25% of Tax payable
  • NGO Tax – 3% of amount received at 30%
  • Luxury VAT ratio changed twice. From 01.01.2005 to 01.08.2005 18% and From 02.08.2005 – 20%
  • Issuance of privilege cards to good tax payers was commenced from 02.11.2005
2006
  • Inland Revenue Act No.10 of 2006
  • Economic Service Charge Act No.13 of 2006 – with effect from the quarter commencing on April 1, 2006 ESC imposed under this Act
  • SRL was increased to 1% w .e .f. 2006/07
  • Two new principles incorporated into income tax Act for transfer pricing and thin capitalization
  • Stamp Duty was reintroduced
2007
  • 15% of deemed dividend tax was imposed on Companies which had distributed the dividend less than 25% of its distributable profit
  • 10% of partnership tax imposed on partnerships which have divisible Profit more than Rs.600,000
  • Allowable input tax credit for VAT for any taxable period was restricted to 85%of output declared from 01.01.2007
  • VAT withholding Tax introduced - 1/3rd of VAT payable to any contractor or supplier by any Government agencies
  • Introduction of Optional VAT whose value of supply was between 1.8Million and 2.5Million per annun.
2008 SRL ratio was increased to 1.5% from 01.04.2008 and withdrawn it on Personal income tax
2009
  • Introduction of Nation Building Tax (NBT) – Rate 1% from 01.02.2009 and from 01.05.2009 increased to 3%
  • Standard VAT ratio reduced to 12% and basic rate was removed
  • Registration limit for VAT was increased to Rs.650,000 per quarter or Rs.2.5 million per year
  • Optional VAT limit for registration was increased to Rs.3 Million
2011
  • Tax appeal Commission was formed commencing from 01.04.2011
  • Individual tax free allowance increased to Rs. 500,000
  • Introduction of SVAT scheme w.e.f 01.04.2011
  • Rate of share Transaction Levy was increased to 0.3% w.e.f.01.01.2011
  • 20% of VAT Rate was reduced to 12%  w.e.f 23.11.2011 and VAT
  • On financial rate also reduced to 12% from 01.01.2011
  • Restriction of 85% of output for claiming input VAT has been removed
  • NBT rate was reduced to 2% and extended to charge on wholesale and Retail businesses
  • Threshold for ESC registration was increased to Rs.25 Million per quarter
  • Abolition of Debits Tax from 01.04.2011
  • Abolition of Withholding Tax on Specified Fees, and Commercial Rents (01.04.2011)
  • Abolition of VAT Advance Payments (January 1,2011)
  • Abolition of Social Responsibility Levy (SRL) (01.04.2011 in relation to income tax)
  • Abolition of Regional Infrastructures Development Levy (RIDL)(January 1, 2011)
  • Abolition of Turnover Tax (TT) collected by the Provincial Councils (01.01.2011)
2012
  • Threshold on ESC was increased to Rs. 50M per quarter and made liable to who have no taxable income
  • Betting and gaming levy rate was increased and 5% levy on gross collection was introduced with a requirement of registration
2013
  • Registration Threshold on Value added Tax and Nation Building Tax was increased to Rs. 12 million per annum
  • Introduction of VAT on wholesale and retail trade, and liable threshold for registration was not less than Rs.500Mn (including exempt supplies) for any consecutive 3 months in an year
  • The threshold in relation to partnership tax was increased to Rs.1000,000
2014
  • Maximum rate of income tax applicable on employment income of Qualified professionals 16%
  • Liable threshold for registration of wholesale and retail trade reduced to Rs.250 Million
2015
  • Threshold on Value added Tax and Nation Building Tax was increased to Rs. 15 million per annum and Rate of VAT reduced to 11%
  • Liable threshold for registration of wholesale and retail business reduced to Rs.100 Million
  • Fixed qualifying payment for employees was increased up to Rs. 250,000
  • Maximum income tax rate applicable to employment income for every employee was limited to 16%
  • Annual levy payable under the Betting and Gaming Levy Act increased to 10%
  • Introduction of Casino entry fee of US$100 per person
  • Imposition of Excise (Special Provision) Import or Manufacture of Liquor, Cigarettes and Custom Duty on Motor Vehicles in lieu of VAT and NBT
  • Super Gain Tax was introduced as one off payment, for any individual, company or group of company who has earned profits over Rs. 2,000 million in the tax year 2013/2014 will be liable to pay 25% of their profit.​​​​​​​
Last updated: 28-04-2016