Sri Lanka

Overview

Last reviewed - 17 February 2020

Sri Lanka is an island nation in South Asia, surrounded by the Indian Ocean, Bay of Bengal, and the Gulf of Mannar. It is divided into nine provinces and 25 districts, with Sri Jayewardenepura-Kotte as the capital city and Colombo being the largest city. The official languages of Sri Lanka are Sinhala and Tamil, and the currency is the Sri Lankan rupee (LKR).

The island was named Sri Lanka in 1972 after it attained republic status. Sri Lanka is an indigenous name meaning the 'resplendent island'. Sri Lanka has been known from ancient times to several civilisations of the world by a variety of names. The etymology of Sri Lanka stretches back to historical times. The Greeks called her 'Taprobane', the Arabs named her 'Serendib', and the old colonial powers of Portugal, Dutch, and Britain called her 'Ceilão', 'Zeylan', and 'Ceylon' respectively.

Early Sri Lanka was primarily agricultural. As settlements shifted to the dry zone of the country, an elaborate system of irrigation by means of artificial lakes and canals was constructed by the kings of the day. By then, Buddhism had been introduced to the island. Religion and culture flourished under the patronage of the ancient kings of Sri Lanka. Settlements gradually moved southwards across the island mainly due to the threat of invasions from Southern India. Trade began to assume importance in the economy. Early trade centred on spices and precious stones, and soon attracted Arab, Persian, and Chinese merchants.

The first Europeans to arrive were the Portuguese, who took control of the western coastal plains in the 16th century. They also introduced Christianity to the island. The Portuguese were ousted by the Dutch, who introduced the Roman Dutch legal principles that continue to apply in the island to this day. The British finally took control of the Maritime Provinces from the Dutch in 1796. The British assumed control of the whole island when the last remaining local kingdom in Kandy was annexed in 1815.

Coffee was introduced as a plantation crop, and this was later replaced by tea in the hilly regions. Rubber was planted in lower elevations. Railways and roads were built, and an economic and social infrastructure came into being. The economy developed around plantations.

The foundation of a strong democracy was laid in the 1930s. Sri Lanka achieved independence from the British in 1948. From the status of a dominion, she became a republic in 1972, opting to stay within the Commonwealth.

During the post-independence period, Sri Lanka has developed into a welfare state whose standards of education literacy stand at 92.5%. Health wise, life expectancy for Sri Lankan woman is estimated to be 77.28 years, while 73.08 years for males. Furthermore, nutrition is among the best in the developing world. The United Nations Development Programme (UNDP) and United Nations International Children's Emergency Fund (UNICEF) rate Sri Lanka as one of the best among developing countries on the Human Development Index (HDI).

Agriculture is a significant economic activity in Sri Lanka. A substantial part of employment and export earnings originate from agriculture. The main crops are paddy, tea rubber, and coconut.

In the last decade, the government in Sri Lanka has pursued policies of industrialisation as a means of achieving growth, creating employment, and diversifying an economy that was based on crop exports.

The Board of Investment of Sri Lanka (BOI) is the statutory body charged with the responsibility of promoting and approving foreign and domestic investment in the country. It plays a key role in the implementation of Sri Lanka’s export-oriented industrialisation strategy. Textile and garments have become important industrial products after the development of export processing zones.

Tourism also plays an increasingly significant role in the economy.

PwC Sri Lanka operates from its principle office in Colombo, the commercial capital of Sri Lanka, and also overlooks the operations in Malé, the capital of the Republic of Maldives. With over 380 employees and 14 partners and directors, we act as advisers to various sector enterprises and the government on Assurance, Finance Tax Advisory, and Technology Advisory matters.

Quick rates and dates

Corporate income tax (CIT) rates
Headline CIT rate (%) 28
Corporate income tax (CIT) due dates
CIT return due date Within eight months from the end of the year of assessment.
CIT final payment due date 15 May immediately following the end of the tax year.
CIT estimated payment due dates Four instalments, on or before 15 August, 15 November, and 15 February of the tax year and 15 May immediately following the end of the tax year.
Personal income tax (PIT) rates
Headline PIT rate (%) 18
Personal income tax (PIT) due dates
PIT return due date 30 November immediately following the end of that year of assessment.
PIT final payment due date 30 September immediately following the end of that year of assessment.
PIT estimated payment due dates PAYE monthly for emoluments.
Individuals other than employees are required to pay tax in instalments on or before 15 August, 15 November, 15 February of the tax year, and 15 May immediately following its end.
Value-added tax (VAT) rates
Standard VAT rate (%) 8
Withholding tax (WHT) rates
WHT rates (%) (Div/Int/Roy) 14 / 14 / 14
Capital gains tax (CGT) rates
Corporate capital gains tax rate (%) 10
Individual capital gains tax rate (%) 10
Net wealth/worth tax rates
Headline net wealth/worth tax rate (%) NA
Inheritance and gift tax rates
Inheritance tax rate (%) NA
Gift tax rate (%) NA

NA stands for Not Applicable (i.e. the territory does not have the indicated tax or requirement)

NP stands for Not Provided (i.e. the information is not currently provided in this chart)

All information in this chart is up to date as of the 'Last reviewed' date on the corresponding territory Overview page. This chart has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this chart, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.