Tax Highlights
Stay informed about the latest tax regulations in Sri Lanka. This section provides a concise overview of individual income tax, corporate tax, capital gains tax, withholding tax, VAT, and Social Security Contribution Levy, ensuring you are well-prepared for compliance and planning.
- HOME
- TAX HIGHLIGHTS
Tax Highlights in Sri Lanka
Understanding Key Tax Regulations Effective from 1st April 2025
Individual income tax
W.e.f 1st April 2025, tax free allowance will be Rs. 1,800,000/- per annum (Rs. 150,000/- per month). Remaining income will be taxed as follows;
- First Rs. 1,000,000/- p.a after tax free threshold – 6%
- Next 500,000/- p.a – 18%
- Next 500,000/- p.a – 20%
- Next 500,000/- p.a – 24%
- Next 500,000/- p.a- 30%
- Remaining income – 36%
Capital Gain Tax
W.e.f 1st April 2025, capital gain tax on individuals and partnerships will be taxed at 15% while corporates will be taxed at 30%
Corporate Income Tax
Corporates will be continued to tax at 30% except for export oriented companies w.e.f 1st April 2025
Withholding Tax
If a withholding agent is making a rent payment of Rs. 100,000/- or more per month to a person, 10% shall be deducted and remitted to the department of Inland Revenue. This deduction will be a tax credit for the recipient.
If a withholding agent is making a professional payment of Rs. 100,000/- or more per month to an individual, 5% shall be deducted and remitted to the department of Inland Revenue. This deduction will be a tax credit for the recipient.
Withholding tax deduction on deposits is subject to withholding tax and this is not a final tax in the hand of a resident person. For Non-residents it is considered as a final tax.
Dividends are subject to a 15% of Withholding tax and it is considered as a final tax.
Value Added Tax
If the turnover of the person exceeds Rs. 60,000,000/- per annum, it is mandatory to register for VAT and pay 18% on taxable turnover. Input VAT credits could be claimed.
Social Security Contribution Levy
This tax is liable for a person who exceeds turnover of Rs. 60,000,000/- per annum and standard rate will be 2.5% and for a trader it will be taxed at 1.25% on taxable turnover and for a manufacturer it is 2.125%.