Tax Information

Employee Benefits:
Benefit Value for Tax Purpose
  • Motor Vehicle- One vehicle provided or allowance paid up to Rs.50,000/- will be exempt.
  • House Employment income < Rs. 150,000/- p.m. Lower of actual rent or Rs. 120,000/- p.a.
  • Employment income >Rs. 150,000/- p.m. Lower of actual rent or Rs. 180,000/- p.a.
  • Telephone 50% of the actual cost
  • Other benefits at actual cost Shares under employee share option plan – Market value at allotment.
Qualifying Payments:
Deduction from Assessable Income
  • Donation to Government.
  • Donation in money to approved charity that provides Institutionalcare for the sick and needy.
  • Expenditure on community development projects.
  • Investment in high tech plant or machinery in expansion of anexisting enterprise - Minimum investment Rs. 50M made up to 1st April 2015.
  • Housing loan repayment by professionals up to Rs. 600,000.
  • Cost of acquisition or merger of any bank or finance Company(if not deductible expense).
Qualifying Payments Limited to
  • Donations to approved charity & insurance - 1/3 of Assessableincome or Rs. 75,000/- , whichever is lower for individuals.
  • Expenditure on community development project:
    - Company - Rs. 10M
    - Others - Rs. 1M
  • Employment income of a citizen or resident up to Rs. 250,000/- inexcess of Rs. 500,000/-.
  • Official emoluments of a non-citizen and non-resident as does notexceed Rs.100,000/- for any year of Assessment.
  • Expansions of an existing enterprise - 25% of investment
Tax - Free Allowance - Rs. 500,000/- Income (Rs.), Tax Cumulative Income (Rs.),Rate, Tax (Rs.)& Cumulative Tax:

On the first 500,000, 1,000,000, 4%,20,000,20,000
On the next 500,000, 1,500,000 8%, 40,000,60,000
-do- 500,000, 2,000,000 12% 60,000,120,000
-do- 500,000, 2,500,000 16% 80,000,200,000
-do- 1,000,000, 3,500,000 20% 200,000, 400,000
Balance 24% For Professional: Income @ 4% & 8% are same, Next 12 Mn @ 12%, Next 10Mn 14% & Balance @ 16%

Concession & Exemption
  • Resident person earning in foreign currency by rendering any services topersons outside Sri Lanka, other than commission or discount - Exempt
  • Foreign dividends, interest or royalty remitted in foreign Currency- Exempt
  • Profits from employment earned outside Sri Lanka remitted through abank by a resident citizen - Exempt
  • Profits in foreign currency by procuring goods from one country exporting to another country - Exempt
  • Profits from investment in corporate debt security issued by the UDA, quoted securities and in municipal bond - Exempt
  • Profit from sales of textile, leather products, footwear or bags Bymanufacturers in foreign currency to a buyer whose Headquartersare established in Sri Lanka (Sec 13) - Exempt
  • Profits from any agricultural seeds or planting materials and Theirprimary processing and fishing undertaking - Exempt (5Y)
  • Profit from cultivation of renewable energy crops - Exempt (10Y)
  • Investment of Rs.300Mn for expansion in existing manufacturing undertakings outside the Western Province (up to a maximum tax payable of Rs.500Mn) and excess at 28% - 14%
  • Investment of > Rs.500Mn in manufacturing undertakings - 50% of tax
  • Investment not less than Rs.2,500Mn in selected activities Exempt (6-12Y)
  • Pilots and identified professional employees paid out of foreign income in foreign currency (maximum) - 16%
  • Profits from agricultural tourism and construction industry, qualified exports and deemed exports - 12%
  • Profits from any services to an exporter of goods/services – 12%
  • Profit from any agricultural undertaking (Sec 16) - 10%
  • Profit from any poultry farming - 10%
  • Profit of new branches of commercial banks dedicated to development banking - 24%
  • Profit from research and development activity
    - Company - 20%
    - Others (maximum) - 16%
  • Manufacturer Value Added Tea joint venture with exporters – 12%
  • Handloom industry & health care services - 12%
  • Educational services, supply of labour, and software devp’t – 10%
  • Profit from operation of mini hydro power and other alternate energy source - 12%
  • Employment income (maximum) - 16%
  • Employment income - normal rates
  • Employment income Sec 17 BOI undertaking during the tax Holidayperiod under Sec 17 A or 16 D for 5 persons. - Exempt
  • Entertainers and artists - 12%
  • Sri Lankan holding dual citizenship or obtained PR status foreign income during the stay in Sri Lanka. - Exempt
Terminal Benefits
  • Gratuity, ETF, etc., if the period of contribution of service:
    is < 20 years or is > 20 years
    First Rs. 2,000,000,Rs. 5,000,000- Nil
    Next Rs.1,000,000, Rs.1,000,000 - 5%
    Balance - - 10%                 10%
  • Compensation for loss of employment maximum rate 16%
  • Compensation paid under Voluntary Retirement Scheme (VRS) up to Rs. 2Mn with conditions - Exempt
  • Government benefits and provident fund – Exempt
  • A holding, subsidiary or an associate of a group of companies 28%
  • Stand-alone companies
    (a) Excluding manufacturers and service providers:
    Taxable Income > Rs.5 Mn 28%
    Taxable Income < Rs.5 Mn 12%
    (b) Undertakings engaged in manufacture or provision of any service:
    Turnover > Rs.750 Mn - 28%
    Turnover < Rs.750 Mn - 12%
  • Provident funds & charities - 10%
  • Company listed after 1.4.2013, with 20% of shares to public tax rate will be reduced by 50% - 3 Years
  • Profits and income earned in foreign currency for any service rendered in or outside Sri Lanka to a person outside Sri Lanka other than discount, commission or similar payments - Exempt
  • Remittance out of profit - non-resident companies - 10%
  • Clubs and associations, undertaking for operation and Maintenanceof facilities for storage, local software development or supplyof labour - 10%
  • Profit attributable to transshipment agency fee received in Foreigncurrency by shipping agency - 12%
  • Interest income of charities applied for children homes, homes for elders and disabled - Exempt
  • Deemed dividend on the excess profit of 1/3 of the distributable profit less dividend distributed -15%
  • Profit or income from manufacture or import of liquor or tobacco products (From 2016.2017 Betting & Gaming )- 40%
  • Venture capital companies & petroleum exploration - 12%
  • Export or deemed export with 65% value additions of Sri Lankan brand name - 10%
  • Unit Trust Management Companies - 10%
  • On corporate debt interest - 10%
  • On interest - Individuals and charitable institutions - 2.5%
  • On interest - Companies - 10%
  • On royalties paid outside Sri Lanka - 15% (or the rate applicable under Double Tax Treaty)
  • Royalties paid in Sri Lanka * - 10% (For royalty, if exceed Rs. 50,000 p.m or Rs. 500,000 p.a.)
  • Dividends (or the rate applicable under the DTT) - 10%
  • Reward payments by Government to informant & others - 10%
  • Payment of shares of fine, etc. by the Government - 10%
  • Payment of lottery prizes, betting & gaming when payment is more than Rs. 500,000 - 10%
  • Management fee * - 5%
  • WHT will not be applicable to any person or partnership paying ESC

  • Building (constructed) - 10%
  • Plant & machinery:
    - General - 33 1/3%
    - Technology upgrading or new - 50%
    - Energy efficiency - 50%
    - Power generation out of an alternative source - 100%
    - Stock Broker Company for upgrading IT - 100%
    - 60% or more turnover from export - 50%
  • Information technology equipment & software - 25 %
  • Software developed in Sri Lanka - 100%
  • Commercial vehicles & office furniture - 20%
  • Bridges, railways, reservoirs, electricity or water distribution& toll roads - 6 2/3%
  • Scientific industrial & agricultural research through any institution - 300%
  • Losses on leasing business only against leasing business profit andlosses on life insurance only against life insurance profit.
  • Other losses - limited to 35% of the total statutory income
On divisible profit in excess of Rs. 1,000,000/- - 8%

Threshold - Rs. 50 Mnper qtr.
ESC rate - 0.25%
Retail Sale of Petroleum goods
Maximum Payable 30 Mn per Qtr
Carried forward 4 years
Rs.12.5 Mn per Qtr. 0.5%
10% of Turnover @ 0.5%, if
turnover is above 50Mn p.qtr
No ceiling
Carried forward 2 years
Rs.50Mn per Qtr 0.5%

Up to 2015/2016: Payable only if income tax has not been paid on trade profit in theprevious year due to the profits being exempt or due to losses.

From 2016/2017: All are liable, when the above turnover reach

ESC paid in advance at Customs on CIF value:

From 01.04.2016 - Articles liable to Special Commodity levy under Act

From 24.11.2016 - Gold& other precious metals

From 01.04.2017 - Motor Vehicles

The above said ESC advance can be set-off against to ESC liability.


Threshold & Rate 2015/2016
Taxable supplies Rs. 3.75Mn p.qtr. , 11%
1st April to 1st May, 2016 Rs. 3.75Mn p.qtr.,11%
2nd May to 11th July, 2016 Rs.3 Mnp.qtr, 15%
12th July to 31st Oct, 2016 Rs.3.75Mn p. Qtr, 11%
From 1st Nov, 2017 onwards Rs.3Mn p.Qtr, 15%

Liability arises to Wholesale and retail traders
Up to 01.05.2017 -(local buying and selling) - Rs. 100Mn p.qtr.
From 02.05.2017 rs.12.5Mn p. Qtr.

VAT for Direct exports of goods & specified services - Zero
2015.2016 2016.2017

Threshold - Rs. 3.75Mn p.qtr.
As per VAT threshold Hotels, educational service, supply of labour& locally produce agricultural products (a) - Rs. 25Mn. p.a up to 01.05.2016. This threshold is available only to (a) from 02.05.2016
NBT rate - 2%
Retail & wholesale business liable for NBT on 50% of the turnover
Distributors liable for NBT on 25% of the turnover.
Other than above (manufacturing & Services) on 100% TO.

Share transaction levy - buyer as well as the seller via stock change - 0.3% from 01.04.2016 onwards

TAX DATA- 2018/ 2019 onward

Income Tax Act No. 24 of 2017 is implemented from 01st April, 2018 onward:
Sources of Income for Income Tax
  • Employment
  • Business
  • Investment
  • Other Sources

Income from employment of an individual should be accounted for income tax purpose on cash basis. Deductions are not allowed in ascertaining employment income

When a Employee gets more than Rs. 100,000/- per month, then, the Employers should deduct PAYE on monthly basis and send it to IRD. No Incom Tax for Employment Income for less than Rs.1,200,000/-.

If an Employee has any other Sources of Income and the total Taxable Income is above Rs.500,000/-, then he /she has to open in Income Tax File.

More details are available at our offices


Business includes a trade, profession (Doctors, Lawyers etc).

Main deductions (Business / Investment)

01.Expenses relevant with the production of income shall be allowed

02.Capital expenses shall not be allowed expense. capital nature shall include the an expense that benefits over 12 months

03.Interest expense that is incurred for the Production of income or incurred for the purchase of asset, which contributes for the production of income in the year of assessment shall be allowed

04.Cost of sales shall be allowed. The values of Closing Stocks are lower of cost or market value.

05.Repairs or improvements on depreciable assets, whether they are of a capital nature or not, are

06.Deductible, If Building – 5% on WRV & for others 20% % on WRV and the excess at the end shall be added to the depreciation basis of the asset year

07.Research & Dev. Expenses and agricultural startup expenses are deductible, whether they are of a capital nature or not

08.Capital Allowances shall be deductible as per 2nd (Enhanced C.A) or 4th (Normal C.A) Schedules of this Act as below:

  • Enhanced Capital Allowances

    This is given in addition to the normal Capital Allowance as per 4th Schedule, if

    -Invest in the depreciable assets in other than Northern province between 3M$ - 100 m $ - 100%
    -Investment exceeds 100m$ - 150%
    -Investment in Northern province above 3m$ - 200%

    A) Expenses incurred by a Person on assets or shares of a state own company exceeds 250m$ - 150% The above can be claimed in that year or in a later year
  • 4th Schedule - Capital Allowance on Depreciable Assets:
    - Building - 20 Years ( 5%)
    - Intangible assets other than Goodwill – Actual useful time or 20 years (5%)
    - Others - 5 years (20%)

09.Business or Investment Losses shall be deductible from any income and also can carry forward to 06 years. But, If the loss was taxed at lower rate or exempt business, accordingly, it shall be deductible.


Investment Income includes the income earned from the Assets or Properties. Ex: Rental income from Building

Assessable Income (AI)

Resident - the person's income from employment, business, investment or other source for that year, wherever the source arises
Non-resident - person's income from the employment, business, investment or other source for that year, to the extent that the income arises in or is derived from a source in Sri Lanka

Taxable Income (TI)

Taxable Income is calculated, when deducting the following Qualifying Payments & Reliefs (5th Schedule to this Act) from the Assessable Income

Qualifying Payments & reliefs:
Qualifying Payments

The qualifying payments referred to in section 52 shall be as follows

  • donation made by an individual or entity in money to an approved charitable institution Subject to a maximum of – In the case of an individual,
    1/3rd of the taxable income of the individual or Rs.75, 000 whichever is less;
    In the case of an entity, 1/5th of the taxable income of the entity or Rs.500, 000 whichever is less
  • donation made by an individual or entity in money or otherwise to the following:-
    - The Government
    - A local authority;
    - Any Higher Education Institution
    - Buddhist and Pali University of Sri Lanka or any Higher Educational Institution
    - A fund established by the Government;
    - A fund established by a local authority and approved by the Minister;
    - Sevana Fund
    - A fund established by a Provincial Council and approved by the Minister;
    - Api Wenuwen Api Fund
    - National Kidney Fund
    - profits remitted to the President’s Fund


1. A relief up to Rs 500,000/- is given to the resident (except trustee, receiver, executor or liquidator) or Non- resident with Sri Lankan Citizen. But, this relief is not given, if a Person is having only (Capital) gain from the realization of investment assets.
2. An Employee, another 700,000/- per year
3. If individual, 25% of the Rental Income
4. A Senior Citizen who is getting interest income up to 1,500,000/-
5. Individual or Partners getting foreign currency for the services rendered in or outside Sri Lanka up to Rs.15,000,000

Different Income Tax Rates (1st Schedule to this Act)
  • Tax for Individuals (Resident and non-resident):
    -First 600,000/- @ 4%
    -2nd 600,000/- @ 8%
    -3rd 600,000/- @ 12%
    -4th 600,000/- @ 16%
    -5th 600,000/- @ 20%
    - Balance @ 24%
  • (Capital) Gain from the realization of assets – 10%
  • Income from Employment on Pension, retiring gratuity, compensation for loss of Office etc :
    - If Employment is < 20 Years
    < Rs. 2,000,000 – no tax
    Rs.2, 000,000 < Rs.3, 000,000 @ 5%
    Above Rs. 3,000,000 @ 10%
    - If Employment is > 20 Years
    < Rs.5, 000,000 - no tax
    Rs. 5,000,000 < Rs. 6,000,000 @ 5%
    Above Rs. 6,000,000 @ 10%
  • Business income of betting, Gaming & Gambling, Liquor or tobacco – 40%

  • Partnership shall not be liable to pay income tax for the business income
  • Partnership is liable to pay income tax for a gain from the realization of Investment at 10%

  • Small & Medium Enterprise (SME)–14% (means “a person other than professionals service provider as individual or Partnership, does not have an associates companies and turnover is less than 500 Million)
  • Exporting of goods & services - 14%
  • Agriculture Business - 14%
  • Educational services - 14%
  • Information Technology services - 14%
  • Promotion of Tourism - 14%
  • Batting, Gaming & Gambling, Liquor & tobacco - 40%
  • For others 28%
  • Gains from realization of investment assets 10%
Trust 24%

3.Capital gain tax (CGT)
  • CGT is charged on the gains arise from realization of investment assets.
  • Investment assets means capital asset held as part of an investment.
  • It excludes,
    -Principal place of residence (owned continuously for 3 years and lived in for 2 years)
    -Trading stock
    -Depreciable assets
    -Asset utilized was not in any manner connected to the business
    -Gain below Rs. 50,000 is exempt to resident individual
  • Calculation
    -Gain/Loss =
       Consideration received (Sec.38)
       Less- Cost of an asset/liability (Sec.37)
  • Tax rate - 10%
More details can be available at our offices

Deductions rules in Income
General deductions (for Persons)
  • No deductions for Employment Income
  • The followings shall not be allowed for computing person’s Income.
    -Domestic expenses
    -Tax payable under the Act
    -Payments for breach of any govt law
    -Expenditure of exempts income or Expenditure of income for which final WHT is paid
    -Retirement contributions
    -Dividend of a Company
    -Entertainment expenses
    -Provisions (Bad Debts etc..
    -Amount incurred for lotteries or gambling taxes or levied of IRD.
  • A WHT deducted by a Person, should be paid to IRD, before claiming it.
  • No deduction shall be allowed except as expressly permitted by this Act.
  • When more than 1 deductions apply, the most specific deductions shall be applied