Sri Lanka

Corporate - Branch income

Last reviewed - 02 August 2023

Foreign companies are permitted to register branches as an 'overseas company' in Sri Lanka under local company law, where the business carried on conforms to the stipulations made under the Foreign Exchange Act, No. 12 of 2017.

An overseas company registered under the Companies Act may also carry on in Sri Lanka any non-commercial, non-trading, or non-industrial activities, such as the activities undertaken or carried on by a liaison office, representative office, regional office, or other similar office, provided such activities do not directly or indirectly provide any income to the company.

In addition to paying the standard CIT, a branch of a non-resident company is also subject to the 14% remittance tax on remittance of its after-tax profits to its foreign head office (it was at 10% prior to 1 April 2018).

The Sri Lanka-source income of foreign companies from a local ‘place of business’ is taxed at the CIT rate. However, under most DTTs that Sri Lanka has entered into, the income of a project carried out will not be liable for CIT if its duration is less than the period specified in the treaty concerned.

Further approval granted up to year of assessment 2017/18 under the Inland Revenue Act No. 10 of 2006 for ascertainment of profits of a project as a percentage of receivables can be continued from year of assessment 2018/19 until the project is completed.