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Tax Guide

Sri Lanka Tax Highlights

Authoritative statutory guidelines, Inland Revenue Act provisions, progressive tax slabs, and essential e-government portal directories.

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Personal Income Tax (2025) Corporate Income Tax (30%) VAT (18%) & SSCL (2.5%) Withholding Tax (WHT/AIT) Capital Gains Tax Official E-Services Directory
Topic 01

Personal Income Tax (PIT) & APIT (w.e.f. April 1, 2025)

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Under the progressive reforms to the Inland Revenue Act No. 24 of 2017, effective April 1, 2025, the tax-free personal relief threshold for resident individuals has been enhanced from Rs. 1,200,000 to Rs. 1,800,000 per Year of Assessment (equivalent to Rs. 150,000 per month).

Revised Progressive Tax Slabs (Effective 01/04/2025):
Annual Taxable Band Monthly Equivalent Tax Rate Max Tax in Slab (Rs.)
First Rs. 1,800,000 First Rs. 150,000 0% (Relief) Rs. 0
Next Rs. 1,000,000 Next Rs. 83,333 6% Rs. 60,000
Next Rs. 500,000 Next Rs. 41,667 18% Rs. 90,000
Next Rs. 500,000 Next Rs. 41,667 20% Rs. 100,000
Next Rs. 500,000 Next Rs. 41,667 24% Rs. 120,000
Next Rs. 500,000 Next Rs. 41,667 30% Rs. 150,000
Balance exceeding Rs. 4,800,000 total Balance exceeding Rs. 400,000/mo 36% Remaining balance
Key APIT Compliance Highlights:
  • Mandatory Employer Withholding: Employers must deduct Advance Personal Income Tax (APIT) at source for all employees earning above Rs. 150,000 per month.
  • TIN Registration: Mandatory Taxpayer Identification Number (TIN) required for all residents aged 18+ and for opening bank accounts, motor vehicle registrations, and land titles.
  • Remittance Deadline: APIT must be remitted to the IRD by the 15th of the subsequent month.
  • Annual Statement: Employer Annual APIT schedule due by 30th April via the RAMIS portal.
Topic 02

Corporate Income Tax (CIT) & Compliance

Resident and non-resident companies carrying on business in Sri Lanka are subject to corporate income tax on taxable profits generated from Sri Lankan sources.

30%
Standard Corporate Rate

Applies to general business entities, manufacturing, services, construction, and IT companies.

15%
Service Export Income

Applicable for service export companies, freelancers & qualified foreign currency remitted service gains.

40%
Sin Industries

Applicable to betting and gaming, manufacture and sale of liquor, and tobacco products.

15% Concessionary Tax Rate Provisions Not Applicable for Goods Exports
Applicability Criteria for Service Export Companies & Freelancers:

The 15% concessionary rate is applicable for service export companies and freelancers / service income generated from foreign currency remitted through banking systems.
Statutory Limitation: This 15% rate is NOT applicable for Goods export companies.

Inland Revenue Act Statutory Definition: “Applicable only for Gains and profits earned or derived from any service rendered in or outside Sri Lanka to any person to be utilized outside Sri Lanka, where the payment for such services is received in foreign currency and remitted through a bank to Sri Lanka and Gains and profits earned or derived from any foreign source where such gains and profits are earned or derived in foreign currency and remitted through a bank to Sri Lanka”
Mandatory Corporate Filing Calendar:

Estimated tax must be paid in four equal quarterly installments on 15th August, 15th November, 15th February, and 15th May. Audited financial statements accompanied by the comprehensive Income Tax Return (Form CIT) must be lodged on or before 30th November following the end of the Year of Assessment.

Topic 03

Value Added Tax (VAT - 18%) & Social Security Contribution Levy (SSCL - 2.5%)

VAT
Value Added Tax (18%)
  • Statutory Rate: Standard 18% charged on the supply of goods and services in Sri Lanka, and importation of goods.
  • Registration Threshold: Mandatory registration for any person/business whose taxable supplies exceed Rs. 60,000,000 per annum (or Rs. 15,000,000 per quarter).
  • Input Tax Credit: Registered persons can claim input tax incurred on purchases supported by valid tax invoices, subject to IRD verification.
  • Filing Schedule: Monthly payment due by the 20th of the following month; quarterly return filing due on the last day of the month following the end of the quarter.
SSCL
Social Security Contribution Levy (2.5%)
  • Statutory Rate: 2.5% levied on turnover, payable in addition to VAT.
  • Registration Threshold: Mandatory for turnover exceeding Rs. 36,000,000 per annum (Rs. 9,000,000 per quarter). Wholesale distributors threshold: Rs. 90,000,000 per annum.
  • Calculation Bases:
    • Importers / Service Providers: 100% turnover @ 2.5%
    • Manufacturers: 85% of turnover @ 2.5% (= 2.125% effective)
    • Wholesale/Retail Traders: 50% of turnover @ 2.5% (= 1.25% effective)
    • Wholesale Distributors: 25% of turnover @ 2.5% (= 0.625% effective)
  • Payment & Filing: Monthly payment due on or before the 20th of the subsequent month. Quarterly SSCL return filing due by the 20th of the month following the end of the quarter (April 20, Jul 20, Oct 20, Jan 20).
Topic 04

Withholding Tax (WHT) & Advance Income Tax (AIT) Rates

Payers are mandated by law to withhold taxes at specified rates upon making qualifying disbursements:

Nature of Payment Statutory Threshold Withholding Rate Tax Nature
Rent Payments (Buildings / Land) Exceeding Rs. 100,000 per month (or Rs. 1,200,000/yr) 10% Advance Income Tax (Deductible credit against final liability)
Professional Services (Legal, accounting, medical, engineering, software) Exceeding Rs. 100,000 per month (or Rs. 1,200,000/yr) 5% Advance Income Tax (Claimable with WHT certificate)
Dividend Payments All dividend distributions by resident companies 15% Final tax for individual non-residents; advance credit for residents
Interest on Bank Deposits All interest paid to residents / non-residents 5% Advance tax for resident; final tax for non-resident
Payments to Non-Residents (Royalties, technical fees, service fees) All payments without treaty relief 14% / 15% Subject to Double Tax Avoidance Agreements (DTAA)
Topic 05

Capital Gains Tax (CGT) Framework

Capital Gains Tax is levied on the realization of investment assets (such as real estate, unlisted shares, and property rights).

  • Individuals & Partnerships: Fixed rate of 15% on the net capital gain.
  • Companies & Corporate Bodies: Taxed at the standard corporate income tax rate (30%).
  • Computation: Consideration received minus the cost base (acquisition cost + improvements adjusted for market value as of September 30, 2017).
  • Filing Deadline: Return and payment must be submitted within one month of the date of realization.
Key Exemptions from Capital Gains:
  • ✓ Realization of listed shares traded on the Colombo Stock Exchange (CSE).
  • ✓ Principal place of residence owned continuously for at least 3 years before disposal (subject to statutory conditions).
  • ✓ Depreciable assets used in business (captured under balancing charge / business income).

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