Income tax in Sri Lanka
Taxation Researcher | January 15, 2021
INDIVIDUAL TAXATION
Residents are taxed on their worldwide income. Married couples are assessed and taxed separately.
The tax year is from 01 April of the current year to 31 March of the succeeding year. The tax year 2018-2019 is from 01 April 2018 to 31 March 2019. The tax year 2019-2020 is from 01 April 2019 to 31 March 2020.
INCOME TAX
Income is classified as follows in Sri Lanka: (1) income from any trade, business, profession or vocation, (2) income from employment, (3) net annual value of land and improvements occupied by or on behalf of the owner, (4) net annual value of land and improvements occupied rent-free or at rent less than the net annual value, (5) dividends, interest, or discounts, (6) charges or annuity, and (7) rent, royalty, or premium, and (8) other income.
Taxable income is computed by deducting allowable expenditure, qualifying payments, and personal allowances from the gross income.
Income from employment is taxed at progressive rates.
INCOME TAX 2018-2020 |
|
| TAXABLE INCOME, LKR (US$) | TAX RATE |
| Up to 3,000,000 (US$20,690) | 6% |
| 3,000,000 – 6,000,000 (US$41,379) | 12% on band over US$20,690 |
| Over 6,000,000 (US$841,379) | 18% on band over US$41,379 |
| Source: Global Property Guide | |
INCOME TAX 2017 - 2018 OTHER INCOME FROM EMPLOYMENT AND PROFESSION |
|
| TAXABLE INCOME, LKR (US$) | |
| Up to 600,000 (US$4,138) | 4% |
| 600,000 - 1,200,000 (US$8,276) | 8% on band over US$4,138 |
1,200,000 - 1,800,000 (US$12,414) |
12% on band over US$8,276 |
| 1,800,000 - 2,400,000 (US$16,552) | 16% on band over US$12,414 |
| 2,400,000 - 3,000,000 (US$20,690) | 20%on band over US$16,552 |
| Over 3,000,000 (US$20,690) | 24% on all income over US$20,690 |
| Source: Global Property Guide | |
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.
Subject to certain conditions, rental income earned from residential properties is exempt from taxation for five years from construction.
CAPITAL GAINS
Capital Gains Tax (CGT) was abolished in April 2002.
Stamp Duty on Sale of Property
Stamp duty is levied on transfer of property. The applicable duty rates are set by the provincial and central governments.
PROPERTY TAXATION
There are no property taxes in Sri Lanka.
CORPORATE TAXATION
INCOME TAX
Income and capital gains earned by companies are generally subject to corporate income tax at a flat rate of 18%. Income-generating expenses are deductible when calculating taxable income.