Sri Lanka

Individual - Taxes on personal income

Last reviewed - 17 February 2020

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

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  

* Sri Lankan rupees

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 Accumulated employers' contribution to an approved or regulated provident fund, when withdrawn, is exempt from tax.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 2,000,000 0 LKR 0
On the next LKR 1,000,000 5 LKR 50,000
On the balance 10 LKR 50,000 + 10% on the balance exceeding LKR 3,000,000
Where the period of contribution is more than 20 years Tax rate (%) Cumulative tax
On the first LKR 5,000,000 0 LKR 0
On the next LKR 1,000,000 5 LKR 50,000
On the balance 10 LKR 50,000 + 10% on the balance exceeding LKR 6,000,000

Proposed tax rates effective from 1 January 2020

On the first LKR 10 Mn  Nil 
On the next LKR 10 MN  6%
On the balance  12%

Withholding tax (WHT) rates up to the Y/A 2019/2020

Income Paid to persons in Sri Lanka (%) Paid to persons outside Sri Lanka (%) (1)
Dividends 14 14
Interest  14 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.) to 31 March 2020)
5  5
Royalty and annuity 14

(not a final WHT payment)

14

Prescribed service fees (2) Abolished with effect from 01 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 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 make to resident individuals being: 
    1. for teaching, lecturing, examining, invigilating, or supervising an examination
    2. as a commission or brokerage to a resident insurance, sales, or canvasing agent     Withholding tax (WHT) rates on or after1 April 2020 WHT on the following has been abolished.  Y/A  (2020/2021)                                                                                                         - employment income (PAYE tax)                                                                                                   - Dividend                                                                                                                                       - Interest                                                                                                                                         - Prescribed Services paid to residents                                                                                         - Rent  paid to residents                                                                                                                - Royalty or annuity paid to resident                                                                                              - Payment made to non resident on                                                                                                  - Prescribed services                                                                                                                      - Rent                                                                                                                                              - Royalty or annuity                                                                                                                   will be subject to 14% WHT or treaty rate whichever is the lower.         
    3.  as an endorsement fee
    4. in relation to the supply of any article on a contract basis through tender or quotation
    5. 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
    6. for any management service, or
    7. for any type of vocational services provided as an independent service provider. ( with effect from1 January 2020 the specified services are not subject to WHT.