Resident individuals are subject to income tax on their worldwide income. Non-resident individuals are taxed only on their Sri Lanka-source income.
Personal income tax rates
Tax rates commencing from 1 January 2020 are as follows:
|Taxable income (LKR)||Tax rate (%)||Cumulative tax on the taxable income equal to the higher of the range (LKR)|
|3 million||6 million||12||540,000|
|6 million||and above||18|
Concessionary tax rates
Concessionary tax rates apply to sums paid to an employee on cessation of employment when the scheme is uniformly applicable to all employees by way of compensation, commuted pension, retirement gratuity, and contributions to the Employees Trust Fund. Accumulated employers' contribution to an approved or regulated provident fund, when withdrawn, is exempt from tax.
Tax rates on retirement benefits, effective from 1 January 2020, are as follows:
|Retirement benefit||Tax rate (%)|
|On the first LKR 10 million||Nil|
|On the next LKR 10 million||6|
|On the balance||12|
Withholding tax (WHT) rates
WHT on payments to resident persons has been removed with effect from 1 January 2020.
|Income||Paid to person outside Sri Lanka (%) (1)|
|Interest or discount paid by banks and financial institutions to resident and non-resident persons (WHT will not apply to interest or discount paid to any person on security or Treasury bond or Treasury bill). Interest income up to LKR 250,000 per month shall be exempted from the WHT, with effect from 1 January 2020.||5|
|Royalty and annuity||14|
|Prescribed service fees (2)||-|
|Service feesand insurance premium||14|
|Income||Paid to person in Sri Lanka (%)||Paid to person outside Sri Lanka (%)|
|Winnings from from a lottery if exceeds LKR 500,000||14||14|
|Winnings from gambling reward betting||14||14|
- Lower treaty rate applies with respect to countries with which Sri Lanka has entered into double taxation treaties (DTTs) when the treaty rate is lower than the statutory rate. When the treaty rate is higher than the statutory rate, then the statutory rate is applicable.
- Prescribed service fees include the payments made to resident individuals:
- for teaching, lecturing, examining, invigilating, or supervising an examination
- as a commission or brokerage to a resident insurance, sales, or canvasing agent
- in relation to the supply of any article on a contract basis through tender or quotation
- for any service of construction work, security service, janitorial service, consultation work of any kind, organising of events, catering, designers, dress makers, tour guidance, entertainment, agency functions, or any similar services or connected work where such services are provided under an agreement or otherwise
- for any management service, or
- for any type of vocational services provided as an independent service provider.