Sri Lanka

Corporate - Withholding taxes

Last reviewed - 17 February 2020

Resident companies are required to withhold tax at 14% on interest, discount, charge, natural resource payment, rent, royalty, premium or retirement payment, or pay amounts as winnings from a lottery, reward, betting, or gambling, and where the payment or allocation has a source in Sri Lanka.

Every bank and financial institution is required to withhold income tax at 5% on the amount of any interest paid to a company on any sum of money deposited with it. The depositor is entitled to receive a certificate setting out the gross amount of interest, the amount of tax withheld, and the net amount of interest paid. With respect to Treasury bills and Treasury bonds issued by the Central Bank, no WHT is deductible at the time of the sale of the Treasury bills and Treasury bonds by the Central Bank in the primary market.

Payment WHT rate prior to 1/04/2020 WHT rate after 1/04/2020 (%)
Dividends:  
Paid by a resident persons 14 -
Non-resident company on remittance of profits (remittance tax) 14 -
Interest paid to non residents 14 -
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 Rs. 250,000 per month shall be exempted from the Withholding Tax (WHT), with effect from January 01, 2020.)

5 -
Rent:  
Paid to a resident person 10 -
Paid a non-resident person 14 14
Service fee and contract payments:  
Royalty premium to non resident  14 14
Payments to resident individuals exceeding LKR 50,000 (no deduction if such payments are chargeable with ESC) 5 -
Winnings from a lottery, reward, betting, and gambling 14 14
Service fee or an insurance premium with a source in Sri Lanka to a non-resident person (no deductions if such payments are chargeable with ESC), subject to rates specified in DTTs 14 14
Payments made by a person to a non-resident person who is in the business of transport or telecommunication 2 2

Treaty WHT rates

Currently, Sri Lanka has entered into 44 DTTs as set out below:

Recipient WHT (%)
Dividends Interest Royalties
Non-treaty 14 14 14
Treaty (9):      
Australia 15 10 10
Bangladesh 15 15 15
Belarus 7.5/10 (7) 10 10
Belgium 15 10 10
Canada 15 15 10
China 10 10 10
Denmark 15 10 10
Finland 15 10 10
France 15 10 0/10 (1)
Germany 15 10 10
Hong Kong (4) - - -
India 7.5 10 10
Indonesia 15 15 15
Iran 10 10 8
Italy 15 10 10
Japan 0 15 (2) 0/7.5 (1, 3)
Korea, Republic of 10/15 (5) 10 10
Kuwait (4) - - -
Luxembourg 7.5/10 (7) 10 10
Malaysia 15 10 10
Mauritius 10/15 (6) 10 (2) 10
Nepal 15 10/15 (8) 15
Netherlands 10/15 (5) 10 (2) 10
Norway 15 10 0/10 (1)
Oman (4) - - -
Pakistan 15 10 20
Palestine 10 10 10
Philippines 10 10 10
Poland 15 10 10
Qatar 10 10 10
Romania 12.5 10 10
Russia 10/15 (5) 10 10
Saudi Arabia - - -
Seychelles 7.5/10 (7) 10 10
Singapore 7.5/10 (7) 10 10
Sweden 15 10 10
Switzerland 10/15 (5) 10 10
Thailand 15 10 15
United Arab Emirates 10 10 10
United Kingdom 15 10 10
United States 15 10 10
Vietnam 10 10 15

Notes

  1. 0% for copyright royalties.
  2. 0% in certain circumstances.
  3. 50% of normal tax, which is 7.5%.
  4. These treaties are limited to the avoidance of double taxation of income from international transport by air.
  5. 10% applies if the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends. In all other cases, the rate is 15%.
  6. 10% applies if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends. In all other cases, the rate is 15%.
  7. 7.5% of the gross amount of the dividends if the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends.
  8. 10% applies to banking business only.
  9. When the treaty rate is higher than the rate specified by the domestic tax statute, the lower rate can be applied subject to obtaining a confirmation from the International Tax Branch of the tax authority.