Resident companies and public corporations are liable for CIT on their worldwide taxable income. Further, a friendly society, building society, pension fund, provident fund, retirement fund, superannuation fund, or similar fund or society are also deemed a company. A partnership in which at least 20 partners have limited liability for the debts of the partnership is also treated as a company. Similarly, a unit trust or a mutual fund that does not conduct an eligible investment business is also treated as a company, and in all such cases corporate tax is applicable. Non-resident companies are liable for CIT in respect of any business, investment, or other source to the extent that the income arises in or is derived from a source in Sri Lanka.
|Income / Institution||CIT rate (%)|
|2018/19 and 2019/20||2020/21|
|Small and medium enterprises (SMEs) that conduct business in Sri Lanka, which do not have an associate that is an entity, and with an annual turnover less than 500 million Sri Lankan rupees (LKR)||14||14|
|Predominantly conducting of a business of exporting goods and services (exports includes specified undertakings)*||14||14|
|Predominantly conducting of a business of an agricultural business||14||-|
|Companies predominantly providing educational services||14||14|
|Companies predominantly engaged in an undertaking for the promotion of tourism||14||14|
|Companies predominantly providing information technology services||14||-|
|Business consisting of betting and gaming, liquor, and tobacco||40||40|
|Profits and income from business other than stated above (including unit trusts and mutual funds)||28||-|
|Trading, banking, finance, insurance, etc .||28||24|
|Gains from the realisation of investment assets||10||10|
* With effect from 1 January 2020, the 'predominantly' concept will be removed. 'Specified undertaking' means an undertaking that is engaged in:
- Entrepôt trade involving import, minor processing, and re-export.
- Offshore business where goods can be procured from one country or manufactured in one country and shipped to another country without bringing the same into Sri Lanka.
- Providing front-end services to clients abroad.
- Headquarters operations of leading buyers for management of financial supply chain and billing operations.
- Logistic services, such as bonded warehouse or multi-country consolidation in Sri Lanka.
- Transhipment operations.
- Freight forwarding.
- Supply of services to any exporter of goods or services or to any foreign principal of such exporter directly, being services which could be treated as essentially related to the manufacture of such goods or provision of such services exported by such exporter either directly or through any export trading house, including any service provided by an agent of a ship operator to such agent’s foreign principal, and the payment for such services are made by such exporter or foreign principal to such person in Sri Lanka in foreign currency.
- Production or manufacture and supply to an exporter of non-traditional goods.
- The performance of any service of ship repair, ship breaking repair, and refurbishment of marine cargo containers, provision of computer software, computer programmes, computer systems or recording computer data, or such other services as may be specified by the Minister by notice published in the Gazette, for payment in foreign currency.
- Sale for foreign currency of any gem or jewellery, being a sale made in Sri Lanka by any person authorised by the Central Bank of Sri Lanka to accept payment for such sale in foreign currency.
A dividend tax is payable at 14% (prior to 1 April 2018, it was at 10%) on the gross dividends distributed by a resident company, other than such dividends distributed out of any dividend received from another resident company. Any dividend distributed prior to 1 April 2019 out of dividends from which withholding tax (WHT) has been deducted at 10% prior to 1 April 2018 will not be subject to dividend tax under the new Inland Revenue Act No. 24 of 2017.
Dividends paid by a resident company to any non-resident person will be exempted from income tax with effect from 1 January 2020.
No WHT will be applicable on dividends distributed to shareholders with effect from 1 January 2020.
Where profits of a non-resident company are remitted in a tax year, a remittance tax of 14% of the remittances is payable (prior to 1 April 2018, it was at 10%).
Local income taxes
There is no local or provincial income tax applicable to corporates in Sri Lanka.