Sri Lanka: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Residents are taxed on their worldwide income. Married couples are assessed and taxed separately.
INCOME TAX
Income is classified as follows in Sri Lanka:
- Income from any trade, business, profession or vocation
- Income from employment
- Net annual value of land and improvements occupied by or on behalf of the owner
- Net annual value of land and improvements occupied rent-free or at rent less than the net annual value
- Dividends, interest, or discounts
- Charges or annuity
- Rent, royalty, or premium
Taxable income is computed by deducting allowable expenditure, qualifying payments, and personal allowances from the gross income. Taxable income is then taxed at progressive rates.
INCOME TAX |
|
| TAXABLE INCOME, LKR (US$) | |
| Up to 300,000 (US$2,694) | nil |
| 300,000 – 600,000 (US$5,388) | 5% on band over US$2,694 |
| 600,000 – 800,000 (US$7,185) | 10% on band over US$5,388 |
| 800,000 – 1,000,000 (US$8,981) | 15% on band over US$7,185 |
| 1,000,000 – 1,200,000 (US$10,777) | 20% on band over US$8,981 |
| 1,200,000 – 1,400,000 (US$12,573) | 25% on band over US$10,777 |
| 1,400,000 – 1,900,000 (US$17,063) | 30% on band over US$12,573 |
| Over 1,900,000 (US$17,063) | 35% on all income over US$17,063 |
| Source: Global Property Guide | |
Resident individuals can deduct the following when computing for the taxable income:
- Premiums on life insurance policies and medical insurance policies: limited to the lower of LKR25,000 (US$225) or one third of assessable income
- Investment of at least LKR500,000 (US$4,490) in a venture capital company: limited to the lower of 50% of the investment or one third of assessable income
- Contributions to provident funds and pension funds: limited to the lower of LKR25,000 (US$225) or one third of assessable income
- Donation made to approved charities: limited to the lower of LKR25,000 (US$225) or one third of assessable income
- Expenditure incurred in the construction or purchase of a house or the capital repayment of the approved housing loan: limited to the lower of LKR25,000 (US$225) or one third of assessable income
RENTAL INCOME
Rental income is taxed at progressive rates. Rates paid by the owners or the estimated annual rental value of the property as assessed by the local governments are deductible to arrive at the assessable income. Then, a standard deduction of 25% of the assessable income is given to all taxpayers earning rental or leasing income to account for income-generating expenses.
CAPITAL GAINS
Capital Gains Tax (CGT) was abolished in April 2002.
Sri Lanka - more data and information
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