brand logo

CSE requests extension on tax concessions 

05 Dec 2021

  • Budget 2021 grants 50% tax concession to companies that go public
  • 34 companies went public so far
  • Concession expires on 31 December
  • CSE awaits response from Finance Ministry
  • IRD says extension unlikely due to revenue drop
    By Imesh Ranasinghe  With more and more companies announcing initial public offerings (IPOs) at the Colombo Stock Exchange (CSE), an extension of the 50% tax concession announced in the Budget 2021 for companies that go public is being sought by the CSE, The Sunday Morning Business learns.  An official of the CSE told us that they had submitted a request to the Ministry of Finance regarding the extension of the deadline, and were waiting for a response. The Budget 2021 proposed a 50% tax concession for the years 2021/2022 for companies that get listed in the CSE before 31 December 2021, and to maintain a corporate tax rate of 14% for the subsequent three years of these opting entities. Following this, more and more private companies started to go public in the recent months and as of 31 October 2021, 34 companies had gone public, with a turnover of Rs. 109.6 billion in 2021, as we reported two weeks ago. Accordingly, the 34 listings consisted of 13 IPO debentures raising Rs. 76.4 billion, four IPO equities of Rs. 7.5 billion, two private placements worth Rs. 2.5 billion, 13 rights issues valued at Rs. 23.2 billion, and two introductions. “Encouraging businesses to go public is a good move; it creates transparency in terms of tax collection, as the earnings of the companies are disclosed. On the other hand, when shares trade, they have a different collection point, so it’s twofold,” the official said. However, speaking to us, Inland Revenue Department (IRD) Commissioner General H.M.W.C.Bandara​ ​​​said that it’s unlikely that this deadline will be extended. When inquired about a possible loss of tax revenue through companies to the IRD, he said the amount could not be forecast until the deadline is over. The CSE told us last week that only Myland Developments Ltd. was in the pipeline for an equity IPO this month so far. All attempts to get a response from the Treasury on the matter were futile. Meanwhile, the CSE also passed the 11,000 ASPI mark in November for the first time in history, and the encouragement given by the Government resulted in the CSE passing a record market capitalisation of Rs. 5 trillion last Tuesday (30 November), while a year ago the market capitalisation was at Rs. 2.72 trillion. Relaxed tax policies, improved processes established by the Securities and Exchange Commission (SEC) and the CSE in listing applications, the establishment of an Empower Board for SMEs, and awareness drives from the SEC and CSE to debunk myths on the opportunities relating to listing (regional awareness drives and social media campaigns) and on international and national recognition that listed companies achieve, were among the reasons for the increased number of listings in 2021, the CSE told us last week. 


More News..