Sri Lanka

Research notes

Sri Lanka — family-office tax dossier

Last reviewed: 2026-10-15 Tax year: 2026 Reviewer: research agent (Claude), unreviewed by a tax adviser

Summary

Sri Lanka taxes residents on worldwide income at 6%-36% from April 2025. Capital gains on investment assets, including foreign shares, are taxed at 15% from 3 June 2026 (previously 10%); Colombo-listed shares and the main home are excluded. Sri Lankan dividends bear a 15% final withholding tax. Foreign income remitted through a bank in foreign currency is capped at 15%, but foreign income kept abroad is taxed at slab rates. There is no inheritance, gift or wealth tax, and death does not trigger capital gains tax.

US citizens: US citizens pay US tax on top; the Sri Lanka-US treaty gives credits (treaty status not re-verified).

Residence and eligibility

Year of assessment 1 April-31 March. Resident if residing in Sri Lanka or present 183 days or more in any 12-month period commencing or ending in the year (Inland Revenue Act s. 69).

• Residence visas (investor, retiree, 'Golden Paradise' visa) (EU, US, OTHER): Sri Lanka offers long-term residence visas against foreign-currency deposits or investment (amounts and current terms not verified).

Capital gains

Sri Lankan tax resident (standard)

Residents are taxed on worldwide income. Gains from realising 'investment assets' (land and buildings, shares and other securities, membership interests) are taxed separately: individuals paid 10%, raised to 15% from 3 June 2026 by Inland Revenue (Amendment) Act No. 11 of 2026 (First Schedule para. 1(2)(a)). Shares quoted on the Colombo Stock Exchange and the principal residence (owned 3 years, lived in 2) are excluded. Small gains (each up to LKR 50,000, total up to LKR 600,000 a year) are exempt.

• Exemptions and thresholds: CSE-quoted shares excluded; principal residence excluded; resident individual's gains exempt if each gain is LKR 50,000 or less and total gains are LKR 600,000 or less in the year. Cost of assets held on 30 September 2017 = market value then.
• Important exceptions, statute references and announced changes: The IRD CGT page (updated 19 November 2025) still shows 10% for non-companies; the June 2026 Act raises it to 15% from the date it became law. Capital losses are not deductible against gains (IRD). Transfers on death and gifts to close relatives carry over cost (no deemed gain; ss. 45-46).
• Tax year / confidence / verification: 2026 / medium / partially_verified (checked 2026-10-15)
• JSON numbers: headline 15% (0.15); listed domestic 0% (0.0); listed foreign 15% (0.15); private business sale 15% (0.15); local real estate 15% (0.15); foreign real estate 15% (0.15).
• How derived: 15% CGT on gains from realisation of investment assets for individuals from 3 June 2026 (Act No. 11 of 2026, s. 36(1)); CSE-quoted shares excluded (0). Foreign shares and foreign property are investment assets of a resident taxed on worldwide income.
• Holding period: None.
• Trader recharacterisation: Shares or land held as trading stock are business income at slab rates up to 36%.
• Foreign assets: Worldwide taxation with a foreign tax credit (ss. 80-81). From 1 April 2025, foreign-source gains and profits earned in foreign currency and remitted through a bank to Sri Lanka are capped at 15% (Act No. 2 of 2025).

Dividends

Sri Lankan tax resident (standard)

Dividends paid by a Sri Lankan resident company bear 15% withholding tax, which is a final withholding payment since 1 January 2023 (s. 88(1A)(aa)). Foreign dividends of a resident are taxable investment income at the progressive rates (6%-36% from 1 April 2025) with a foreign tax credit, but foreign-source income earned in foreign currency and remitted through a bank to Sri Lanka is taxed at no more than 15% from 1 April 2025.

• Important exceptions, statute references and announced changes: Before 1 April 2025 remitted foreign-source income was exempt; it now bears up to 15%. Foreign income not remitted is taxed at the ordinary rates.
• Tax year / confidence / verification: 2026 / medium / partially_verified (checked 2026-10-15)
• JSON numbers: headline 36% (0.36); domestic 15% (0.15); foreign gross 36% (0.36); foreign tax relief: credit.
• How derived: Domestic: 15% final WHT. Foreign: top slab 36% (taxable income above LKR 2.5 million) before credit, assuming the dividends are not remitted; if remitted via a bank in foreign currency the cap is 15%.
• Outbound withholding: 15% WHT on dividends, final for non-residents too (s. 88(1A)), reducible by treaty.
• Treaty network: About 45 DTAs including the US, UK and several EU states (count from general knowledge, not verified).
• Holding companies: Companies pay 30% from 1 April 2025 (First Schedule para. 4); remitted foreign-source profits of companies 15%.

Inheritance and gifts to children

Sri Lankan tax resident (standard)

Sri Lanka has no inheritance, estate or gift tax. The Inland Revenue Act treats an asset passing on death as realised at its net cost, with the heir taking that cost (s. 45), so death triggers no capital gains tax. Gifts to a child, spouse, parent and other close relatives are likewise realised at cost under conditions (s. 46(2)-(3)). Stamp duty applies to deeds transferring Sri Lankan land (not verified).

• Tax year / confidence / verification: 2026 / medium / partially_verified (checked 2026-10-15)
• JSON numbers: basis none, children fully_exempt, scope worldwide, exemption 0 LKR, brackets (marginal): none; other transfer costs 0% (0.0); deemed disposal 0% (0).
• Gifts: No gift tax. Gifts of investment assets to close relatives roll over at cost (s. 46); other gifts are deemed realised at market value for CGT. (same as inheritance: True; tax-free after years: None)
• Foreign assets: No tax.
• Residence/domicile rules: Not applicable.
• Business relief covers listed shares: False

Wealth tax

Sri Lankan tax resident (standard)

No net wealth tax.

• Tax year / confidence / verification: 2026 / medium / partially_verified (checked 2026-10-15)
• JSON type: none
• Property tax (not a wealth tax): Local authority rates on property; stamp duty on land transfers; restrictions on foreigners owning land (condominium units allowed; not verified).

Special regimes

None modelled; see Residence and eligibility.

Company taxation (kept separate from personal tax)

Headline CIT rate: 30% (0.3). Standard company rate 30% from 1 April 2025; 15% on remitted foreign-source profits and export services; 45% for betting/gaming and liquor/tobacco (Act No. 2 of 2025).

Cost of living notes

Not researched in this pass (no quickly verifiable sources).

Open questions

• PwC Worldwide Tax Summaries no longer covers Sri Lanka; this file relies on IRD legislation and the IRD website.
• Residence-visa programmes and their thresholds not verified.
• (standard.dividends) Whether investment income from foreign portfolios kept abroad is in practice taxed at 36% or can be structured into the 15% cap through remittance was not explored.
• (standard.inheritance) IMF-programme discussions in 2023-2025 mentioned introducing wealth or inheritance taxation; nothing was found in the 2025-2026 amending Acts.

Sources

• Inland Revenue (Amendment) Act, No. 11 of 2026 (certified 3 June 2026) (Inland Revenue Department, Sri Lanka, legislation): https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_11-2026_E.pdf
• Capital Gain Tax (CGT) (Inland Revenue Department, Sri Lanka, tax_authority): https://www.ird.gov.lk/en/Type%20of%20Taxes/SitePages/Capital%20Gain%20Tax%20(CGT).aspx?menuid=1208
• Inland Revenue Act, No. 24 of 2017 - consolidated text with 2025 changes (Inland Revenue Department, Sri Lanka, legislation): https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IRA_Cons_Act_-_2025_Changes.pdf
• Inland Revenue (Amendment) Act, No. 2 of 2025 (Inland Revenue Department, Sri Lanka, legislation): https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_02-2025_E.pdf
• Income Tax (IT) (Inland Revenue Department, Sri Lanka, tax_authority): https://www.ird.gov.lk/en/Type%20of%20Taxes/SitePages/Income%20Tax.aspx

Change log

• 2026-10-15: initial research.