The document summarizes key points from Sri Lanka's 2015 national budget that were announced in October 2014. Some of the major highlights included introducing a 12% interest rate for deposits held by senior citizens at state banks, reducing income tax rates for individuals and corporations, increasing tax thresholds for VAT and NBT, providing tax concessions for manufacturing and exports, and increasing subsidies for agriculture. The budget aims to boost economic growth through these proposed tax reforms and incentives for various industries while also using fiscal measures to support vulnerable groups like senior citizens and pensioners.

1. Economic Capsule
October 2014
Research & Development Unit

2. C O N T E N T S
BANKING SECTOR NEWS 
 Commercial Bank Sweeps the Board at Brand Excellence 2014
 Commercial Bank Slashes Interest Rates on Home Loans
 Branch Openings
ECONOMIC & BUSINESS NEWS 
 Doing Business 2015
 Budget 2015 Highlights

3. Condominium Industry
Banking News
in Sri Lanka
October, 2014
Research & Development Unit

4. < Research & Development Unit >
Commercial Bank Sweeps the Board at
Brand Excellence 2014
• Commercial Bank won the coveted ‘Service
Brand of the Year’ and three other accolades
at the 2014 SLIM Brand Excellence Awards to
become the bank that won the most awards
at this prestigious event conducted by the Sri
Lanka Institute of Marketing.
• Commercial Bank took the Golds in the
‘Service Brand’ category and in the ‘Best New
Entrant’ category for its ‘Anagi’ Savings
Account for Women, as well as the Silver in
the ‘Best Local Brand’ and the Bronze in the
‘CSR Brand of the Year’ categories in a
dominant showing at this annual gala.

5. < Research & Development Unit >
Commercial Bank Slashes
Interest Rates on Home Loans
The Commercial Bank of Ceylon has announced
further reductions in interest rates applicable to the
Bank’s Home Loans along with fast-tracked approvals
and discounts from selected suppliers of materials
and fittings.
• Floating Rate 9.5 %
• Fixed Rate
Up to 10 yrs 10.5 %
Above 10 yrs 12.0 %
Revised Rates

6. < Research & Development Unit >
Branch Openings
Commercial Bank 239 @ Urubokka

7. Economic Condominium & Business
Industry
in Sri Lanka
News
October, 2014
Research & Development Unit

8. < Research & Development Unit >
Doing Business 2015
***Last year's rankings are adjusted. They are
based on 10 topics and reflect data corrections.

9. Budget 2015
Highlights
Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit

10. < Research & Development Unit >
Summary of the Budget (2009-2015)
2013 % of GDP 2014 % of GDP 2015 Budget % of GDP
Rs Billion
Total Revenue & Grants 1,204 13.9 1,422 14.4 1,689 14.9
Total Revenue 1,188 13.7 1,394 14.1 1,654 14.6
Tax Revenue 1,188 1,394 1,654
Non-Tax Revenue 132 149 174
Provincial Councils Tax Sharing and Devolved Revenue 51 56 64
Grants 16 28 35
Total Expenditure 1,720 19.8 1,922 19.4 2,210 19.5
Recurrent 1,256 1,386 1,525
Public Investment 481 553 696
Other (17) (17) (11)
Budget Surplus (+)/deficit(-) (516) (5.9) (500) (5.0) (521) (4.6)
Total Financing 516 500 521
Total Foreign Financing 80 260 251
Total Domestic Financing 436 240 270

11. Budget Highlights 2015
Banking Sector
Concessions for accounts maintained by senior citizens
•Offer a 12% annual interest rate for deposits of pensioners and elders, who
maintain their deposits in State Banks.
•In order to enable State Banks to pay this interest rate on such deposits, it is propose to issue Rs. 30 bn
worth of Government Bonds at 12 % to subsidize the elderly.
•CBSL has permitted Finance Companies to pay 11 % interest on such deposits.
•To exempt Statutory Reserve Requirement (SRR) on individual deposits maintained by elderly people in
all Licensed Commercial Banks (LCBs).
•Interest income of deposits held by elders exempted from tax.
•Withholding tax (WHT) on interest reduced from 8% to 2.5% w.e.f. 1 Jan 2015.
< Research & Development Unit >

12. Budget Highlights 2015
Banking Sector Impact
• At present 1 year LCB FD rate stands between ~4% - 6% with a 1% upward adjustment for senior citizens.
• If 12% annual interest rate is granted for deposits of pensioners and elders, it is expected to increase the disposable
income of the elderly population of the country who largely depend on deposit interest income as a major source of
income.
• This proposal is likely to be applicable only to senior citizens who already maintain accounts with GoSL banks and
thus there will not be a flight of deposits to GoSL banks from the private sector banks.
• However, if the interpretation of the proposal is not applicable only to senior citizens who already maintain accounts
but applicable also to new senior citizen accounts opened with GoSL owned banks, there could be a flight of deposits
from private sector banks to GoSL owned banks whilst also resulting in higher overall market interest rates in the
near term.
• CBSL has permitted Non-Bank Finance Institutions (NBFIs) to pay 11% on deposits of pensioners and elders. This is
one percentage point lesser than what is going to be offered by state banks for such deposits. However, usually the
NBFIs offer a higher rate for deposits compared to banks since NBFIs charge a higher interest rate for lending.
• The setting of the interest rate at 12% for such deposits at state banks may lead one to question the validity of the
official inflation rate which is very much lesser than 12% (CCPI: AA: 4.2% and YoY 3.5%).
< Research & Development Unit >

13. Budget Highlights 2015
Banking Sector
Concessions for pensioners
• To grant a loan of Rs. 50,000 each, to at least 100,000 retirees from public services to
develop their own backyard economies and for them to generate self-employment income in
addition to their pension income. Such loans could be drawn from bank branches from which
they draw their monthly pension without securities.
• An amount between Rs. 5,000 and Rs. 250,000 not exceeding a maximum of 50 % of the
savings in Banks by pensioners associations, senior citizen clubs and death relief societies, to
be used to give small loans to them at a low rate of interest .
Other
• To provide Rs. 10 bn capital to strengthen the Bank of Ceylon.
• In order to provide greater security to deposit holders of the banks, deposit insurance to
increase by 50 %.
< Research & Development Unit >

14. Budget Highlights 2015
Motor Vehicles and Transport
• Impose Excise Special Provision Tax on motor vehicle imports, in lieu of all multiple taxes at
the point of import.
• Customs based taxes on all electric cars will be reduced to 25%
• Import 500 small buses to expand rural transport services
• In order to strengthen the bus fleet of Sri Lanka Transport Board (SLTB) with 2,000 buses, a
public investment of Rs.1bn has been provided to SLTB
• Duty concessions to import new buses, engines and gearboxes for any buses that have
operated at least for five years
Tobacco and Alcohol
• With immediate effect, in lieu of VAT and Nation Building Tax (NBT)
− Excise Duty will be charged on manufacture of liquor
− Customs Duty & Cess will be charged on import of liquor
− Excise Duty will be charged on manufacture of cigarettes
< Research & Development Unit >

15. Budget Highlights 2015
Exports
• Reduce import taxes of packaging material required for exports w.e.f 01 Apr 2014
• High level of Cess on primary commodity exports and is expected implement with
effect immediately
• A pension scheme is proposed for the employees in the apparel industry from 2015
Dairy
• Raise the guaranteed liquid milk price from Rs.50 to Rs.60 per litre
• Reduce the price of locally produced milk powder by Rs.100 per kg
• Reduce the price of yoghurt by Rs.5 per yoghurt
• Cess of Rs.150 per kg on imported milk powder and the Cess on imported butter,
yoghurt and dairy products to be maintained
< Research & Development Unit >

16. Budget Highlights 2015
Agriculture
• Rubber: Increase Cess on all raw rubber imports by 33%. Guaranteed price of
Rs.300.0 per kg for rubber suppliers w.e.f 01 Nov 2014
• Sugar: Extend concessionary tax rate of 12% to the local sugar industry
• Allocate Rs. 5bn to modernise select sugar manufacturing plants and increase the
farm gate price of sugar cane to Rs.4,500 per MT
• Tea & Coconut: Increase subsidies for tea small holders’ and coconut replantation.
• Paddy: Continue the fertilizer subsidy of Rs.350.5 per kg for paddy cultivation.
Increase guaranteed paddy price to Rs.34-40 per kg
SME
• Proposals seek to increase the turnover threshold for SME to Rs. 750mn from the
present ceiling of Rs. 500mn. Persons who come within this category are entitled to
pay tax at a lower tax rate of 12%.
< Research & Development Unit >

17. < Research & Development Unit >
Budget Highlights 2015
Concessions for the Manufacturing Sector
• 50% reduction in the tax rate on profits from any manufacturing
business (other than liquor or tobacco) for the period of 5 years
(up to a max. of Rs.500mn), if the following conditions are satisfied;
− Business is expanded to areas outside Western Province.
− Investment in depreciable fixed assets more than Rs.300mn.
− Investment is made within the period 1 April 2015 to 1 April 2017
− Presently liable to tax at 28%.
• 50% reduction in tax rate on profits from a manufacturing business (other than liquor or tobacco) for
the period of 7 years provided the following conditions are satisfied;
− Register with IRD on or before 31 December 2015
− Investment exceeding Rs.500mn within specified time frame
• Concession by way of a 10% reduction of the corporate tax rate on tax profits from the sale of
manufactured products in the local market, by any local manufacturer who has commenced the
business during the 1970’s and is engaged in imports substitution.

18. Concessions for Gem & Jewellery Sector
• A duty waiver of 50% on importation of gold via foreign currency accounts
Concessions for New Investment
• Proposed concessions to a new undertaking that makes a minimum Investment of USD
2mn.
− Accelerated depreciation allowance for investment in depreciable assets.
− Exemption from dividend tax for 5 years.
− 50% income tax discount for 3 years.
< Research & Development Unit >
Budget Highlights 2015
Concessions to Sri Lankan Migrant Workers
• High income earning Sri Lankans working abroad will be granted concessionary duty
permits on the importation of a motor vehicle equal to 60% of foreign exchange
remitted to the banks in SL.

19. Budget Highlights 2015
Concessions on Interest Income
Individuals & Charitable Institutions :
• Interest Income accruing to any individual/charitable institution is to be subject to
withholding tax at 2.5%.This withholding tax will serve as a final tax.
• As per the prevailing law interest income is liable to tax dependent on income level at
scale rates up to 8%.
Concessions on Employee Income (PAYEE Tax)
• Employment income accruing to a person is to be taxed at a maximum rate of 16%
(presently employment income is liable to tax at scale rates, with the maximum rate
being 24%)
< Research & Development Unit >

20. Budget Highlights 2015
Value Added Tax (VAT)
• The present rate of 12% will be reduced to 11%
• The present threshold of Rs. 12mn p.a. will be increased to Rs 15mn p.a.
• Wholesale & Retail Sector: The current applicable threshold of Rs. 250 mn per
quarter of value of supplies is reduced to Rs. 100 mn per quarter
Nation Building Tax (NBT)
• The threshold will be increased to Rs.3.75 mn per quarter (Rs.15 mn p.a.). (The current threshold is
< Research & Development Unit >
Rs. 3 mn per quarter)
Betting and Gaming Levy
• Increase of the tax rate on gross collection from the business of bookmaker or
business of gaming to 10% (Present rate is 5%)
• Levy a US$100 per person entrance fee to premises where casino entertainment
activities take place

21. Other Miscellaneous Taxes
• It has been proposed to exempt all the levies imposed by Local Authorities on
businesses with monthly turnover less than Rs.50,000
Recovery of Tax in Arrears
• A special refinance facility scheme which is repayable within five years will be
provided by all banks at 6% interest rate to facilitate the settlement of arrears in
tax/EPF/ETF up to 31 Dec 2010 (settlements to be concluded within six months)
EPF Contribution
• Employer’s minimum EPF contribution increased by 2% to 14% so that each employee
will have 22 % savings from their salaries.
< Research & Development Unit >
Budget Highlights 2015

22. Effective Dates of Proposed Amendments
Effective Date Type of Tax
1st April 2015  Income Tax
1st January 2015
< Research & Development Unit >
 Value Added Tax
 Betting & Gaming levy Act
 Nation Building Tax
Immediate effect
 Cess
 Ports & Airports Levy
 Excise (Special ) Duty
 Customs Duty
 Special Commodity Levy
Sources:
Budget Speech 2015, KPMG, CT CLSA &
Asia Securities Research

23. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the
information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise,
suffered in consequence of using such information for whatever purpose.