Budget 2019: Revised vehicle taxes only on LCs opened after March 6

Finance Minister Mangala Samaraweera says that the taxes on import of motor vehicles proposed by the 2019 Budget will be implemented only on letters of credit (LCs) opened after March 06, 2019.

Responding to a question regarding the date of imposition of the luxury tax, during a press briefing in Colombo today (13), the minister said that the vehicle taxes introduced in the budget will only apply to LCs opened on March 06 or after.

He stated that various rumours are being spread claiming that the taxes will also be imposed on LCs opened before that date, but pointed out that this is not true.

He said it came into effect from midnight on the date on which the budget was presented to the Parliament and that it will not affect any LCs opened before that date.

He also spoke on the primary changes on vehicle taxes with the imposition of a luxury tax on very high-end vehicles. “By high-end we have defined it as CIF import value of above Rs 3.5 million,” he said.

He said that in 2018 there was an influx of vehicles into the economy resulting on pressures on the exchange rate as well. In response the Central Bank announced a 200% cash margin for LCs in September 28 to restrict vehicle imports.

“But as I announced in Parliament, this restriction has been lifted since last Friday. Things are back to normal,” the finance minister said.

The Central Bank has removed and in order to prevent a similar surge in vehicle imports we have made a slight adjustment to the tax rates of non-luxury vehicles as well, he said.

“The effective tax rate, tax import value for such non-luxury vehicles will remain largely unchanged.” He said that the prices of some of the smaller vehicles and electric vehicles have actually come down.

As for the NBT of 3.5%, he said that this applies only to payments for goods or services outside Sri Lanka.

He said those who purchase goods using their credit cards from local online retail shops will not be subjected to this tax while purchasing goods and services from foreign online stores such as Amazon will be subjected to this NBT.

Furthermore he said that the NBT of 3.5% will replace the existing stamp duty of 2.5%.

On the budget proposal regarding condominiums subject to VAT, he said that the exemptions are for sales and purchase agreements signed before April 2019.

But the agreements need to be in a legal notarized form, he said.