Unit Trust taxes clarified by Treasury
The Treasury is recently learnt to have provided some clarity on the recent tax incentives or the lack of it to the unit trust (UT) industry, industry officials say.
“We were ‘verbally’ informed that if the UT pays taxes, the unit holders don’t need to pay again,” Dilshan Wirasekara, CEO First Capital Holdings PLC told the Business Times. He added the nuts and bolts of the Inland Revenue Act interpretation will be issued in an operational manual by the Treasury. “This was told to us by Treasury officials in early April.”
Since the inception of unit trusts in Sri Lanka, the Government has been granting some tax concessions to promote the industry. Through the 2012 Budget proposals the profits and income from redemption of units were exempted from income tax in the hands of the investors. This assisted the industry to collect funds from corporate investors who could enjoy a tax benefit of 18 per cent when investing in unit trust funds. In the recent budget proposals, such benefits to corporate investors were removed.
This had resulted in an outflow of funds from the industry and exerted pressure on the unit trust management companies since last year.
Unit trusts provide investors opportunities to invest in markets like treasury bills, bonds, commercial paper, etc which most may not have access to. In spite of the benefits available to retail investors, the industry remains small and under-penetrated with assets of Rs. 100 billion (versus bank assets of over Rs. 8 trillion), an analyst added.