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 (%)|
|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.)
|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:
|Hong Kong (4)||-||-||-|
|Japan||0||15 (2)||0/7.5 (1, 3)|
|Korea, Republic of||10/15 (5)||10||10|
|Mauritius||10/15 (6)||10 (2)||10|
|Netherlands||10/15 (5)||10 (2)||10|
|United Arab Emirates||10||10||10|
- 0% for copyright royalties.
- 0% in certain circumstances.
- 50% of normal tax, which is 7.5%.
- These treaties are limited to the avoidance of double taxation of income from international transport by air.
- 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%.
- 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%.
- 7.5% 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.
- 10% applies to banking business only.
- 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.