Sri Lanka

Corporate - Significant developments

Last reviewed - 28 June 2021

New tax proposals made for income tax under the Inland Revenue ( Amendment) Act No 10 of 2021 to the Inland Revenue Act No. 24 of 2017.

The proposed amendments are set out below:

  • Income from agro farming without subjecting such produce to any process shall be exempted from income tax with effect from 1 April 2019.
  • Amounts received by any religious institution by way of grants and donations shall be exempted from income tax with effect from 1 January 2020.
  • Income earned from any service rendered to any person to be utilised outside Sri Lanka, if the payments for such services are received in foreign currency through a bank, shall be exempted from income tax with effect from 1 January 2020.
  • Income from information technology and enabling services shall be exempted from income tax with effect from 1 January 2020.
  • Any income earned by any non-resident person on sovereign bonds denominated in foreign or local currency is exempt from income tax with effect from 1 April 2018.
  • Interest or discount paid or allowed to any person on sovereign bonds denominated in foreign currency is exempt from income tax with effect from 1 April 2018.
  • Amounts derived by any non-resident person from laboratory services or standards certification services will be exempt from income tax with effect from 1 January 2020.   
  • Dividends paid by a resident company to any non-resident person will be exempt from income tax with effect from 1 January 2020.
  • Interest paid on loans obtained from any person outside Sri Lanka is exempt from income tax with effect from 1 April 2018.
  • Interest income earned on moneys lying to one's credit in foreign currency accounts approved by the Central Bank of Sri Lanka will be exempted from income tax with effect from 1 January 2020.
  • Corporate income tax (CIT) rates will be revised with effect from 1 January 2020 as follows:
    • Small and medium enterprises (SMEs): 14%
    • Exports, tourism, education, and healthcare: 14%
    • Construction and agro processing dividends received from a resident company: 14%
    • Manufacturing: 18%
    • Liquor, tobacco, betting, and gaming: 40%
    • Trading, banking finance, insurance, etc.: 24%