Sri Lanka
Corporate - Withholding taxes
Last reviewed - 02 August 2023Resident companies are required to withhold tax on dividend interest, discount, charge, natural resource payment, rent, royalty, premium, 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 is required to withhold income tax at 5% on the amount of any interest paid to a non-resident person 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 31 December 2019 | 1 April 2020 to 31 December 2022 | After 1 January 2023 | |
Dividends paid by a resident company: | |||
To a resident payee | 14 | At the rate given by the payee | 15 |
To a non-resident payee (NRP) | 14 | Exempt (with effect from 1 January 2020) | 15 |
Interest or discount paid: | |||
To a resident payee | 5 | At the rate given by the payee | 5 |
To a non-resident payee | 5 | 5 | 5 (interest on loans given by NRP is exempt) |
WHT is not applied to interest or discount paid to any person on a Government Security, Treasury Bond or Treasury Bill | |||
Royalty paid: | |||
To a resident payee | 14 | At the rate given by the payee | 14 |
To a non-resident payee | 14 | 14 | 14 |
Rent paid: | |||
To a resident payee | 10 | At the rate given by the payee | 10 (only if the rent exceeds LKR 100,000 per month) |
To a non-resident payee | 14 | 14 | 14 |
Sale price payable to the seller of any gem sold at an auction conducted by the National Gem & Jewellery Authority (to both resident and non-resident payees) | 2.5 | 2.5 | 2.5 |
Winnings from a lottery, reward, betting, and gambling (to both resident and non-resident payees) | 14 | 14 | 14 |
Fees for personal and other specified services paid: | |||
To a resident payeee | 5 | - | 5 (only if the rent exceeds LKR 100,000 per month) |
To a non-resident payee | 14 | 14 | 14 |
Payments to non-resident payee with respect to land, sea, air transport or telecommunication service | 2 | 2 | 2 |
Treaty WHT rates
Currently, Sri Lanka has entered into 44 DTTs as set out below:
Recipient | WHT (%) | ||
Dividends | Interest | Royalties | |
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
- 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 Business Consultation Unit of the tax authority.