WORLD TRADE G/SCM/N/3/LKA
17January 1997
ORGANIZATION(97-0150)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
NOTIFICATIONS PURSUANT TOARTICLE XVI.1 OFTHE GATT 1994
AND ARTICLE 25OFTHE AGREEMENT ONSUBSIDIES AND
COUNTERVAILING MEASURES
SRILANKA
Thefollowing communication, dated 22October 1996, hasbeenreceived fromthePermanent
Mission ofSriLanka.
_______________
Ihavethehonour toforward herewith theinformation furnished bytheSriLanka Export
Development Board (SLEDB) andtheBoard ofInvestment ofSriLanka (BOI) withregard tothe
subsidies being granted fornotification under Article 25.2 oftheAgreement onSubsidies and
Countervailing Measures.
Please notethattheEDB andtheBOIhaveinformed usthattheyarepresently tabulating the
details ofallprogrammes ofsubsidies being granted including therelevant statistical datareferred to
under thisnotification. Thisinformation willbeforwarded toyouassoonasitisreceived.G/SCM/N/3/LKA
Page2
1. Titleofsubsidy programme
Investment Incentives.
2. Period
From 1995 to1997.
3. Purpose ofsubsidy
Toencourage investments.
4. Authority
Theincentives aregiven through theBoard ofInvestment ofSriLanka, which wasconstituted
under anActofParliament.
5. Form ofsubsidy
Revenue foregone (taxholidays, concessionary taxes, import dutyexemptions).
6. Towhom andhowthesubsidy isprovided
Thelocal andforeign investors whowould invest inallsectors oftheeconomy withfew
exemptions willbeeligible toreceive thesubsidy, which isarevenue foregone. Thequalification
criteria andthenature ofincentives aregiven inAnnex No.I.
7. Subsidy perunit
Since theincentives arebudgetary outlays andwould varyonthelevelofinvestment, itisnot
possible toquantify theamounts. However, statistics forthepastwillbesubmitted induecourse.
8. Duration ofsubsidy
AsperAnnex I.
9. Statistical data
Tobesubmitted induecourse.G/SCM/N/3/LKA
Page3ANNEX I
Export Oriented Projects
Qualifying criteria Incentives
Minimum
export
requirement
(%of
turnover)Minimum
project costin
RsMinimum
employment
requiredFulltax
holidayConcessionary
taxperiod of
15%Import duty
exemptionExemption
from turnover
taxonimportsExemption
from turnover
taxonsalesExchange
control
exemptionConcessionary
taxfor
expatriates at
15%
Direct and
indirect export of
manufactured
goods90% 12.5million Nominimum
employment
requirementNo 20years Yes Yes Yes Yes 5years
Direct and
indirect export of
services70% Nominimum
investment
requiredNominimum
employment
requirementNo 20years Yes No No Yes 5years
Direct and
indirect export of
manufactured
goods using
advanced
technology90% 50million 50persons 5years 15years after
taxholidayYes Yes Yes Yes 5years
Direct and
indirect export of
services using
advanced
technology70% Nominimum
investment
required25persons 5years 15years after
taxholidayYes Yes,if
approved by
theFiscal
Incentives
CommitteeNo Yes 5years
Shiprepair and
shipbreaking70% 10million 25persons 5years 15years after
taxholidayYes Yes No Yes 5years
Agricultural
projects ++90% Local investors
Rs2.5million;
foreign
investors
Rs7.5million50persons for
processing
activities only5years 15years after
taxholidayYes Yes Yes Yes 5years
Dairy livestock
development ++90% 10million 50persons for
processing
activities only5years 15years after
taxholidayYes Yes Yes Yes 5yearsG/SCM/N/3/LKA
Page4Qualifying criteria Incentives
Minimum
export
requirement
(%of
turnover)Minimum
project costin
RsMinimum
employment
requiredFulltax
holidayConcessionary
taxperiod of
15%Import duty
exemptionExemption
from turnover
taxonimportsExemption
from turnover
taxonsalesExchange
control
exemptionConcessionary
taxfor
expatriates at
15%
Large scale
projects90% 500-1,499
million100persons
(formfgonly)10years 10years after
taxholidayYes Yes Yes Yes 5years
90% 1,500-2,499
million100persons
(formfgonly)12years 8years after
taxholidayYes Yes Yes Yes 5years
90% 2,500-4,999
million100persons
(formfgonly)15years 5years after
taxholidayYes Yes Yes Yes 15years
90% 5,000 million 100persons 20years No Yes Yes Yes Yes ..years
Non-Export Oriented Projects
Qualifying Criteria Incentives
Minimum
project costin
Rs.Minimum
employment
requiredFulltax
holidayConcessionary
taxperiod at
15%Import duty
exemptionExemption from
turnover taxon
importsExemption from
turnover taxon
salesExchange
control
exemptionConcessionary tax
forexpatriates at
15%
Small scale
infrastructure
housing (min. 100
units) power50million Nominimum
employment
requirementNo 7years During project
implementation
periodNo No No 5years
Small scale
infrastructure ***125-499
millionNominimum
employment
requirementNo 7to10years
depending on
investmentDuring project
implementation
periodNo No No 5years
Tourism
Recreation
Leisure10million Nominimum
employment
requirementNo 15years During project
implementation
periodNo No No 5years
Agriculture/
fisheries ++Local 2.5
million
Foreign Rs7.5
million50persons for
processing activities
only5years No During project
implementationNo No No 5yearsG/SCM/N/3/LKA
Page5Qualifying Criteria Incentives
Minimum
project costin
Rs.Minimum
employment
requiredFulltax
holidayConcessionary
taxperiod at
15%Import duty
exemptionExemption from
turnover taxon
importsExemption from
turnover taxon
salesExchange
control
exemptionConcessionary tax
forexpatriates at
15%
Dairy livestock
development ++10million 50persons for
processing activities
only5years No During project
implementation
periodNo No No 5years
Training institutes No Minimum of100
persons tobetrainedNo 10years During project
implementation
periodNo No No 5years
Large scale projects 500-1,499
million100persons formfg
only10years No During project
implementation
periodDuring project
implementation
periodNo Yes 5years
1,500-2,499
million100persons formfg
only12years No During project
implementation
periodDuring project
implementation
periodNo Yes 5years
2,500-4,999
million100persons formfg
only15years No During project
implementation
periodDuring project
implementation
periodNo Yes 15years
5,000 million 100persons formfg
only20years No During project
implementation
periodDuring project
implementation
periodNo Yes 20yearsG/SCM/N/3/LKA
Page6
Assistance toExporters
1. Titleofsubsidy programme
EDB assistance WITH equity participation andfinancial incentives asperAnnex II.
2. Period
From 1995 to1997.
3. Purpose ofsubsidy
Tohelpexport oriented ventures tomobilize necessary funds from financial institute.
4. Authority
Export Development Board Act.
5. Form ofsubsidy
Loans, grants andequity participation.
6. Towhom andhowthesubsidy isprovided
Todirect, indirect, andpotential exporters. Subsidy isprovided forexporters depending on
theirrequirement ofeachproject withamaximum limitofRs1million perproject.
7. Subsidy perunit
Rs1million perproject.
8. Duration ofsubsidy
Commencing from 1990.
9. Statistical data
Notavailable.G/SCM/N/3/LKA
Page7
Assistance toExporters
1. Titleofsubsidy programme
Fiscal Incentives asperAnnex II.
2. Period
From 1995 to1997.
3. Purpose ofsubsidy
Encouraging export ventures andinvestors.
4. Authority
Department ofInland Revenue.
5. Form ofsubsidy
Taxconcession.
6. Towhom andhowthesubsidy isprovided
Todirect exporters ofnon-traditional products.
7. Subsidy perunit
Cannot quantify asonlyprofit making companies enjoy thefacility.
8. Duration ofsubsidy
For20years commencing from 01.04.1995.
9. Statistical data
Most exporters donotenjoy highprofit andtherefore difficult toquantify thetrade effect of
thesubsidy.G/SCM/N/3/LKA
Page8
ANNEX II
Date: 21/10/96
Subsidy programme Period
covered by
the
notificationPolicy
objectivesBackground &
authority for
thesubsidyForm ofsubsidy
1.FISCAL INCENTIVES
1.1Concessionary taxrate
of15% forexporters. 1995-1997 Encouraging
export ventures
andnew
investorsDept. of
Inland
RevenueTaxconcession
1.2Five yeartaxholiday
fornewinvestments
utilizing advanced
technology.1995-1997 Toencourage
companies to
improve
productivity by
introducing new
technology.Dept. of
Inland
RevenueTaxexemptions
onprofits
1.3Five yeartaxholiday
forcompanies engaged in
agricultural activities other
thancultivation ofnon-
plantation agriculture.1995-1997 Toencourage
investment in
non-plantation
agricultureDept. of
Inland
RevenueTaxexemption on
profits
1.4Taxexemption of
profits arising from:
(a)Gems &jewellery
(b)Entrepot trade.1995-1997 Encouraging
investorsDept. of
Inland
RevenueTaxexemption on
export profits
1.5Concessionary taxrate
ondividends.1995-1997 Toexpand the
investment
opportunities of
export oriented
companies by
encouraging
share holders.Dept. of
Inland
RevenueTaxconcession
1.6Turnover tax
exemption onexports.1995-1997 Give relief to
exporters on
domestic tax
burden.Dept. of
Inland
RevenueTaxconcession
1.7Exemption offiscal
levies (export duty&
turnover tax)oninputs.1995-1997 Give
opportunities to
exporters to
purchase raw
materials at
international
prices.Dept. of
CustomsDuty concessionG/SCM/N/3/LKA
Page9
Subsidy programme Period
covered by
the
notificationPolicy
objectivesBackground &
authority for
thesubsidyForm ofsubsidy
1.8Exemption offiscal
levies onimported capital
goods.1995-1997 Encourage
exporter to
adopt new
technologies.Dept. of
CustomsDuty concession
2.EDB ASSISTANCE
2.1Equity participation. 1995-1997 Tohelpexport
oriented
ventures to
mobilize
necessary funds
from financial
institutions.SriLanka
Export
Development
Board
(SLEDB)Redeemable
preference
shares, ordinary
shares oramix
ofbothshares.
2.2Assistance for
pioneering export projects.1995-1997 Tosupport
investment in
products &
services ofa
pioneering
nature.SLEDB (a)Equity
participation in
theform of
preference shares
carrying a
reduced coupon
rate.
(b)Part
reimbursement of
specified
development
expenditure by
theEDB.
2.3Assistance for
manufacturing &
processing exporters.1995-1997 Toincrease
export capability
andexport
volume inthe
short term.SLEDB Loan
2.4Financial assistance to
small scale export oriented
manufacturers &
processors.1995-1997 Toassist small
scale projects to
develop as
viable export
ventures.SLEDB Loan
2.5Working capital loans
forsmall scale exporters
whoparticipate inEDB
sponsored trade fairsand
exhibitions.1995-1997 Toassist small
andmedium
exporters to
process export
orders received
asaresult of
their
participation in
trade fairs.SLEDB LoanG/SCM/N/3/LKA
Page10
Subsidy programme Period
covered by
the
notificationPolicy
objectivesBackground &
authority for
thesubsidyForm ofsubsidy
2.6Assistance to
financially ailing projects.1995-1997 Toprovide
assistance to
revive export
oriented
projects.SLEDB Loan
2.7Assistance forthe
establishment ofdiamond
cutting projects.1995-1997 Tofacilitate the
establishment of
newdiamond
cutting units by
providing
financial
assistance.SLEDB Loan
2.8Assistance tothe
handloom sector.1995-1997 Toincrease the
export ofthis
rural based
product.SLEDB Grant
2.9Assistance tothegem
&jewellery sector.1995-1997 Todevelop the
supply capability
ofthesector.SLEDB Loan
2.10 Assistance tothehi-
techelectronic sector.1995-1997 Toencourage
andassist
exporters ofhi-
techproducts.SLEDB Grant intheform
of
reimbursement.
2.11 Assistance scheme
formanufacturing
exporters ofrubber
products.1995-1997 Toencourage
theexport of
rubber invalue
added form.SLEDB Rebate
2.12 Assistance tosupport
thefruit&vegetable and
flower/foliage sectors.1995-1997 Toencourage
exporters and
investors to
undertake
commercial
production to
linkupwith
small producers
andincrease
productivity and
standard of
living ofsmall
producers.SLEDB LoanG/SCM/N/3/LKA
Page11
Subsidy programme Period
covered by
the
notificationPolicy
objectivesBackground &
authority for
thesubsidyForm ofsubsidy
2.13 Assistance forvalue
addition tospices, essential
oils,cashews, herbs,
papain, oilsandpulses.1995-1997 Toprovide part
ofthecapital
required for
exporters/
producers to
grow and
process products
forexport in
value added
form.SLEDB Loan
2.14 Assistance to
small/medium scale
producers toincrease the
supply offinished coir
products forexports.1995-1997 Toassist
exporters to
increase their
supplies ofhigh
quality
exportable coir
products.SLEDB Loan
2.15 Assistance to
exporters toopen their own
offices/sales outlets
overseas.1995-1997 Toundertake
export
promotional/
marketing
efforts more
effectively.SLEDB Loan
2.16 Assistance to
exporters/manufacturers
forestablishing aquality
assurance system
conforming totheISO
9000 series ofstandards.1995-1997 Toencourage
exporters/
manufacturers to
establish quality
assurance
systems intheir
companies
conforming to
theISO9000
standards.SLEDB Loan
2.17 Assistance to
participate inEDB
sponsored trade fairs.1995-1997 Toassist
exporters to
promote their
products in
overseas
markets.SLEDB Grant
2.18 Assistance for
exporterss ownmarketing
efforts overseas.1995-1997 Toassist
exporters on
their own
initiative to
promote Sri
Lankan
products.SLEDB GrantG/SCM/N/3/LKA
Page12
Subsidy programme Period
covered by
the
notificationPolicy
objectivesBackground &
authority for
thesubsidyForm ofsubsidy
2.19 Grant scheme for
non-quota garment
factories setupunder "200
Garment Factory
Programme".1995-1997 Topromote
investment in
theremote areas
ofthecountry.SLEDB Grant
Towhom &howthe
subsidy isprovidedSubsidy perunit Duration ofthe
subsidyTrade effects ofthe
subsidy
Todirect/indirect exporters
ofnon-traditional products
Services/concessionary tax
onprofits.Cannot quantify.
Only profit making
companies enjoy the
facility.For20years
commencing from
01.04.1995.Most exporters donot
enjoy highprofits.
Todirect/indirect exporters
andother companies.Cannot quantify. For5years
commencing from
firstyearof
assessment inwhich
thebusiness operatesOnly profit making
companies enjoy this
facility introduced in
1995.
Todirect/indirect exporters
andother companies.Exemption from
income taxfor
5years onprofits.5years taxholiday
forfirms which
commenced business
onorafter 17.10.83.Only profit making
companies areenjoying
thisfacility.
Direct exporters. Cannot quantify. Lifetime ofthe
project.Only profit making
companies enjoy this
facility.
Direct/indirect exporters.
Alldividends declared byan
enterprise outofprofits
taxed atalowratewillbe
taxed inthehands ofthe
share holders atthesame
taxrates.Cannot quantify. For20years
commencing from
01.04.85.Only profit making
companies enjoy this
facility.
Toexporters
Toexemption atthepoint of
export.Cannot quantify. Until further notice. Relief toexporters.
Todirect/indirect exporters.
Duty &TTconcession
through 3alternative
schemes.968applications
were approved in
1995. Total
concessions:
Rs1billion approx.Until further notice. Exporters were ableto
purchase inputs at
international price.G/SCM/N/3/LKA
Page13
Towhom &howthe
subsidy isprovidedSubsidy perunit Duration ofthe
subsidyTrade effects ofthe
subsidy
Toexporters import duty&
TTconcessions 50%
exemption if50-90% is
exported. 100% exemption
ifmore than90% of
production isexported.1,523 applications
were approved.
Total concessions
Rs400million
approx.Until further notice. Enable toimprove
productivity through
newtechnology. Most
exporters donot
benefit astheydonot
export more than50%
ofproduction.
Direct, indirect andpotential
exporters. Depending on
therequirements ofeach
project carrying aninterest
rateof15% perannum and
willnotexceed 30% ofthe
paidupcapital inthe
project. Maximum
assistance perproject is
Rs1million.Maximum value of
shares:
Rs1million per
project in1995.
3projects were
assisted in1995.
EDB contribution
Rs5.5million.Commenced in1981. Minimal.
Direct/indirect/potential
exporters. Total assistance
available under thescheme
issubjected toamaximum
ofRs1million or50% of
thesponsor 'sequity
contribution totheproject,
whichever islower.Maximum
assistance:
Rs200,000 for
pioneering idea
status and
Rs1million
pioneering status.
Number ofprojects
approved in1995 -
3.Total value of
equity Rs5.5
million.Commenced in1981
foraperiod of3
years.Minimal.
Direct/indirect/potential
exporters. TheEDB
contribution limited toa
maximum ofRs1million to
atleast 50% ofthecostper
project. Therateofinterest
isvariable andispresently
fixed at10%.In1995, 9projects
were assisted. Total
value ofloans
Rs7,214,750.Commenced in1981. Minimal.
Direct/indirect potential
exporters. Assistance bythe
EDB willnotexceed
Rs250,000 or80% ofthe
additional investment. The
rateofinterest isvariable
andispresently fixed at6%.Maximum loan
amount Rs250,000
perproject. In
1995, 3projects
were assisted. Total
value ofloans
Rs938,000.Commenced in1984. Minimal.G/SCM/N/3/LKA
Page14
Towhom &howthe
subsidy isprovidedSubsidy perunit Duration ofthe
subsidyTrade effects ofthe
subsidy
Direct/indirect potential
small &medium scale
exporters. Uptoa
maximum ofRs0.5million
onacasebycasebasis to
execute orders received.Maximum loan
amount
Rs0.5million per
project. Number of
projects approved in
1995 -10.Total
value ofloans
Rs4.7million.Commenced in1982. Minimal.
Direct indirect exporters up
toamaximum of
Rs0.5million perproject at
10% interest rate.Maximum loan
amount
Rs0.5million per
project. Number of
projects approved in
1995 -01.Total
value ofloan
Rs0.02 million.Commenced in1993. Minimal.
Direct/indirect exporters.
Thecontribution byEDB
willbelimited toa
maximum of3%ofthe
projected turnover inthe3rd
yearofcommercial
operations. Therateof
interest applicable is10%.Noassistance was
given in1995.Commenced on
20.08.1987.Zero effect.
Exporters/indirect exporters.
Compensatory payment of
20% ofthef.o.b. value of
exports effected from
01.01.81 to31.12.86.Noofcompanies
assisted in1995 -
28.Total assistance
-Rs8.7million.Commenced on
1January 1981.Minimal.
Small &medium scale
exporters. Aloannot
exceeding Rs0.3million for
silversmiths, Rs1.0million
forgoldsmiths for
technology development and
training.Noassistance was
given in1995.Commenced in
August 1992.Zero effect.
Direct exporters. A
maximum of3%ofthe
f.o.b. value oftheannual
exports orRs30million
(whichever islower) during
thefirstyearofcommercial
operation. Year after
quantum ofassistance will
belimited to3%ofthe
incremental exports.Noassistance was
given in1995.Foraperiod of
5years commencing
from 01.04.94.Zero effect.G/SCM/N/3/LKA
Page15
Towhom &howthe
subsidy isprovidedSubsidy perunit Duration ofthe
subsidyTrade effects ofthe
subsidy
Direct exporters. Arebate
from thefunds collected
from theexcess of50cents
perkg.ofexports ofraw
rubber.Thepayment based
onthevolume of
rawrubber used by
exporters forthe
particular period.
Total payment in
1995
Rs31.3 million.Commenced in1993. Minimal.
Exporters/indirect exporters.
Maximum ofRs1.5million
percompany topurchase
agricultural inputs -contract
growers Rs5000 per0.5ha,
perNumber ofprojects
approved in1995 -
14.Total loan
amount paid
Rs14.4 million.Commenced in1994. Minimal.
Direct/indirect exporters.
Assistance todefray 50% of
theproduct development and
adaptation forthepurpose of
value addition. Maximum
amount ofloanis
Rs0.85 million.2projects were
offered
Rs3million.Commenced 1994. Minimal.
Direct/Indirect exporters.
Assistance willbegiven for
quality improvement, skill
development etc.3exporters were
assisted with
Rs3.30 million.Commenced 1995. Minimal.
Exporters. Assistance is
limited to55% ofthe
expenditure incurred forthe
firstyear. Maximum loan
amount isRs3.75 million.1company was
assisted with
Rs2.6million.Minimal.
Direct/indirect exporters.
Assistance:
ofthecostincurred
subject toamaximum of
Rs0.1million perenterprise
(large exporters). 75% of
thecostincurred subject to
Rs0.15 perenterprise
(SMEs). Payment willbe
made onareimbursement
basis.Noassistance was
given in1995.Commenced in1994. Zero effect.
Exporters/potential
exporters. Byprovision of
stallspace andassistance for
airfreight ofsamples.14trade
fairs/exhibitions
were organized in
1995. Total EDB
assistance:
Rs97.9 million.Minimal.