Sri Lanka

Individual - Taxes on personal income

Last reviewed - 18 January 2021

Resident individuals are subject to income tax on their worldwide income. Non-resident individuals are taxed only on their Sri Lanka-source income.

Personal income tax rates

Tax rates for year of assessment 2018/19 are as follows (valid till 31 December 2019):

Taxable income (LKR) Tax rate (%) Cumulative tax on the taxable income equal to the higher of the range (LKR)
Over Not over
0 300,000 6 180,000
600,000 6,000,000 12 360,000
6,000,000  and above 18  

Concessionary tax rates

Concessionary tax rates apply to sums paid to an employee on cessation of employment when the scheme is uniformly applicable to all employees by way of compensation, commuted pension, retirement gratuity, and contributions to the Employees Trust Fund. Accumulated employers' contribution to an approved or regulated provident fund, when withdrawn, is exempt from tax. 

Tax rate valid till 31 December 2019, in retirement benefit 

Where the period of contribution is 20 years or less Tax rate (%) Cumulative tax
On the first LKR 2 million 0 LKR 0
On the next LKR 1 million 5 LKR 50,000
On the balance 10 LKR 50,000 + 10% on the balance exceeding LKR 3 million
Where the period of contribution is more than 20 years Tax rate (%) Cumulative tax
On the first LKR 5 million 0 LKR 0
On the next LKR 1 million 5 LKR 50,000
On the balance 10 LKR 50,000 + 10% on the balance exceeding LKR 6 million

Proposed tax rates effective from 1 January 2020, in retirement benefit

On the first LKR 10 million Nil
On the next LKR 10 million 6%
On the balance 12%

Withholding tax (WHT) rates up to the year of assessment 2019/20

Income Paid to persons in Sri Lanka (%) Paid to persons outside Sri Lanka (%) (1)
Dividends 14 14
Interest  14 5
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 LKR 250,000 per month shall be exempted from the WHT, with effect from 1 January 2020.
5  5
Royalty and annuity 14 (not a final WHT payment) 14

Prescribed service fees (2) Abolished with effect from 1 January 2020  -
Service fees and insurance premium - 14
Rents 10 14
Winnings from a lottery if exceeds LKR 500,000  14 14
Winnings from gambling, reward, betting  14 14

Notes

  1. Lower treaty rate applies with respect to countries with which Sri Lanka has entered into double taxation treaties (DTTs) when the treaty rate is lower than the statutory rate. When the treaty rate is higher than the statutory rate, then the statutory rate is applicable.  
  2. Prescribed service fees include the payments made to resident individuals: 
    • for teaching, lecturing, examining, invigilating, or supervising an examination
    • as a commission or brokerage to a resident insurance, sales, or canvasing agent
    • in relation to the supply of any article on a contract basis through tender or quotation
    • for any service of construction work, security service, janitorial service, consultation work of any kind, organising of events, catering, designers, dress makers, tour guidance, entertainment, agency functions, or any similar services or connected work where such services are provided under an agreement or otherwise
    • for any management service, or
    • for any type of vocational services provided as an independent service provider.