TAX GUIDE 2025 / 2026
For Sri Lankan Citizens Living Abroad | Dual Citizens | Foreign Investors
Assessment Year: April 1, 2025 – March 31, 2026 | Issued: April 2026
⚠ DISCLAIMER: This guide is for general information only and does not constitute legal or tax advice. Laws are subject to change. Always consult a qualified Sri Lankan tax advisor or attorney for advice specific to your situation.
Sri Lanka’s tax system is governed primarily by the Inland Revenue Act No. 24 of 2017 (IRA), as amended by the Inland Revenue (Amendment) Act No. 2 of 2025. The fiscal year runs from 1 April to 31 March. Tax liability depends heavily on an individual’s residency status. The Central Bank’s Department of Foreign Exchange (DFE) governs capital flow regulations, while the Board of Investment (BOI) and the new Economic Commission of Sri Lanka (under the Economic Transformation Act No. 45 of 2024) oversee FDI incentives.
1.1 Residency Status Definitions
Effective from 1 April 2025, the individual income tax-free threshold has been raised to LKR 1,800,000 per year (LKR 150,000/month). Progressive rates apply above this threshold.
2.1 Individual Tax Slab Rates – Residents
2.2 Special Reduced Rates – Applicable to All Investor Categories
Withholding Tax is deducted at source by the paying entity (bank, company, etc.) and serves as either a final tax or an advance income tax payment. Key changes effective 1 April 2025 include an increase of WHT on interest income from 5% to 10%.
The tables below break down the tax treatment of each major investment vehicle for the three investor categories: (A) Non-Resident Sri Lankan Citizens (Diaspora), (B) Dual Citizens, and (C) Foreigners / Non-Resident Non-Citizens.
4.1 Fixed Deposits (FDs) & Savings Accounts
4.2 Equity Investments – Colombo Stock Exchange (CSE)
⚠ CSE-listed equities enjoy the most favourable tax treatment of any Sri Lankan asset class: 0% capital gains tax. Dividends attract a flat 15% WHT, which is the final tax liability.
4.3 Government Securities – Treasury Bills & Treasury Bonds
4.4 Unit Trust Funds & Mutual Funds
4.5 Corporate Bonds & Debentures
Real estate is among the most regulated investment categories for non-residents and foreigners in Sri Lanka. The Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended in 2017 and 2018) is the primary law governing property ownership. Key restrictions apply to foreigners and overseas investors.
Sources: The Property Planners – https://tpp.lk/buying-land-in-sri-lanka-as-a-foreigner/ | D.L. & F. De Saram – https://www.desaram.com/foreign-investment-and-compliance-under-sri-lankan-law/ | property-srilanka.com
⚠ IMPORTANT FOR FOREIGNERS: Using nominee shareholders (local Sri Lankans fronting for foreign investors) to circumvent the 51% rule is illegal and may result in property confiscation, voided contracts, and inability to repatriate funds.
Sri Lanka actively encourages Foreign Direct Investment (FDI) through the Board of Investment (BOI) and the recently enacted Economic Transformation Act No. 45 of 2024 (ETA), which is progressively replacing the BOI framework with the Economic Commission of Sri Lanka (EC).
BOI Sri Lanka: https://investsrilanka.com | Economic Commission: ETA No.45/2024 | D.L. & F. De Saram: https://www.desaram.com/foreign-investment-and-compliance-under-sri-lankan-law/
- 5. INVESTMENT ACCOUNT TYPES & FUND ROUTING **
- 6. DOUBLE TAXATION AVOIDANCE AGREEMENTS (DTAAs) **
- 7. BOI / INVESTMENT INCENTIVES SUMMARY (2025) **
- 8. TAX FILING, COMPLIANCE & DEADLINES **
- 8.1 Penalties for Non-Compliance
- 9. QUICK REFERENCE: TAX RATES BY INVESTMENT TYPE & INVESTOR CATEGORY **
- 10. OTHER APPLICABLE TAXES **
**
- 11. KEY LEGISLATION, GOVERNMENT LINKS & RESOURCES ***
- 11.1 Primary Legislation
- 11.2 Official Government Websites
- 11.3 Useful Professional & Third-Party Resources
- 12. PRACTICAL TIPS & INVESTOR CHECKLIST ***
- 12.1 For Non-Resident Sri Lankan Citizens (Diaspora)
- 12.2 For Dual Citizens
- 12.3 For Foreigners / Foreign Investors
***
IMPORTANT DISCLAIMER & CURRENCY NOTE
This guide has been compiled based on publicly available information from official Sri Lankan government sources, leading law firms, and international tax advisory firms as of April 2026 (covering Assessment Year 2025/2026). Tax laws in Sri Lanka are subject to frequent amendment – particularly following each National Budget (typically presented in November). The Budget 2025 proposals referenced herein are subject to formal amendment of the Inland Revenue Act.
ALWAYS verify current rates and rules with: (1) the Inland Revenue Department at www.ird.gov.lk, (2) the Department of Foreign Exchange at www.dfe.lk, and (3) a qualified Sri Lankan tax advisor or attorney before making investment decisions.
Currency: All LKR amounts are in Sri Lankan Rupees. USD amounts use the prevailing exchange rate at the time of the transaction.
Document prepared: April 2026 | Sources: IRD, CBSL/DFE, BOI, CSE/SEC, Moore Global, KPMG, D.L. & F. De Saram, CAL, TaxPro.lk, U.S. State Department 2025 Sri Lanka Investment Climate Statement.