Sri Lanka Imposes 50% Tax on Vehicle Imports to Protect Foreign Exchange

Sri Lanka has introduced a temporary 50% increase in import taxes for imported vehicles to protect its foreign exchange reserves and reduce pressure on its economy. The tax applies to all types of vehicles, including cars, buses, hybrids, electric vehicles, ambulances, and motorhomes, regardless of their engine size or age. This measure will be in effect for three months.

The new rule does not apply to vehicles imported under Letters of Credit opened by May 15, which are exempt from the surcharge. Sri Lanka had previously relaxed its strict vehicle import restrictions after imposing a near-total ban during last year’s economic crisis. The crisis caused severe foreign currency shortages, high inflation, and fuel shortages.

The government hopes this move will reduce demand for imported vehicles and help stabilize the country’s external sector as part of its IMF-backed recovery plan. However, some industry groups have expressed concern that the tax could increase vehicle prices by at least 1.5 million Sri Lankan rupees, making them less affordable for consumers. Despite these concerns, former minister Ali Sabry has praised the decision, calling it a smart way to protect the economy during global instability.