Sri Lanka

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 paid to a non-resident person.

Every bank and financial institution paid to a non-resident person 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.

Treaty WHT rates

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

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.