Tax Advisory Services

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Government tax policies and regulations are complex and are changing from time to time, therefore proper tax planning and preparation is very important to prosper in your business.

Our team is well equipped with industry insights and regular updates on government tax policies and regulations as such, we provide regular updates and consultation to our clients with current and future changes concerning tax policies in Sri Lanka. We ensure our advisory services are in compliance with the stipulated guidelines of the Inland Revenue Department (IRD) of Sri Lanka.

DIOL serves Companies, Partnerships, and Individuals with their taxation requirements, staffed by a committed team of professionals to make sure that our clients are serviced with the right knowledge and direction to be a responsible and an ethical taxpayer.

Tax at a Glance

  • Income Tax
  • Withholding Taxes (WHT)
  • Pay As You Earn Tax (PAYE)
  • Economic Service Charge (ESC)
  • Value Added Tax (VAT)
  • Simplified Value Added Tax (SVAT)
  • Nation Building Tax (NBT)
  • Stamp Duty (SD)
  • Betting and Gaming Levy (B&GL)
  • Share Transaction Levy (STL)
  • Construction Industry Guarantee Fund Levy (CIGFL)
  • Capital Gain Tax (CGT)

What is income tax?

There are several types of Taxes in Sri Lanka, Income tax is the most prominent among them, where you submit a portion of your earnings (Profit and Income) to the government on a yearly basis.

Why Should I pay taxes?

Paying taxes is considered a communal obligation and failure in complying would result in a fine. By law, whether you are an individual or you have your own business you need to file an income tax return every year.

However, you are only intended to submit a “Return of Income” (For individuals), only if you meet any of the four requirements out of the five requirements specified below,

  • Paying monthly residential electricity bill exceeding a net amount of Rs.10,000
  • Incurring a monthly credit card bill exceeding Rs.25,000
  • Paying a monthly residential telephone bill exceeding a net amount of Rs.10,000
  • Purchasing an air ticket to travel abroad
  • Owning a motor vehicle, used for traveling purpose
Why Should I pay taxes?
What should I do?

What should I do?

If you have meet at least four of the five requirements, you have to pay taxes. Once you are eligible for income tax, you are required to submit a return of income on or before the 30th November, following the end of year assessment.

You have to be careful when you pay and submit your tax return, because Inland Revenue Department (IRD) can charge penalty or surcharge for incomplete tax return. Make sure to submit the following information along with your “Income Return”.

  • All sources of income
  • Computation of taxable income and tax liability
  • Exempt profits and income
  • Value of your assets and liabilities

What are the main sources of income on the Individual “Income Tax Return”?

  • Profit from any trade, business, profession or vocation
  • Profit from employment
  • Rent and the net annual value of lands and improvements
  • Dividends, interest or discounts
  • Charges or annuities, royalties or premiums
  • Capital gains
  • Winnings from lotteries, betting and gambling
  • Income from any other source, what-so-ever but not of a casual and non-recurring nature
Individual Income Tax Return

When are the tax returns due for individuals
in Sri Lanka?

Tax returns should be filed by 30th November immediately after the end of the year of assessment for the tax year ending 31st March.

Qualifying Payment and Applicable Tax Rates

  • An individual shall account for income tax purposes on a cash basis by calculating the individual’s income from employment.
  • Additional allowance by way of qualifying payment (Maximum) of Rs.700,000 is granted on employment income.
  • Accordingly, Total Qualifying Payment and Relief for an employee is Rs. 1,200,000/- per annum.
  • The rate of tax depends on your “Taxable Income“. Tax-free allowance is applicable up to a sum of Rs.500, 000. After that,
Taxable Income (Rs.) Tax Payable Rate
Up to Rs. 600,000 4%
Rs. 600,000 – 1,200,000 8%
Rs. 1,200,000 – 1,800,000 12%
Rs.1,800,000 – 2,400,000 16%
Rs. 2,400,000 – 3,000,000 20%
on Balance 24%

Partnerships Income Tax

  • A partnership is chargeable with income tax for every year of assessment on or after April 01, 2004. A partnership is liable to pay income tax in respect of the following profits.
    1. Divisible profit
    2. Other income
  • The liability is calculated at the rate of 10% on the total profits as calculated in (a) and (b) above after deducting a tax relief of Rs. 1,000,000. Where there is a divisible loss for any year of assessment, the tax shall be charged on the total amount of other income without any claim of such divisible loss from other income.

Corporate Income Tax

  • Under the Inland Revenue Act, No 24 of 2017, a company resident in Sri Lanka is liable to pay corporate income tax on its taxable income, which is calculated as the total assessable income for the year of assessment from each business, investment and other sources. Non-resident companies in Sri Lanka are only liable to pay corporate income tax on the profits and income arising in, and derived from Sri Lanka.

Income Tax Payments

All companies generating profit and income from business activities in Sri Lanka are required to make quarterly income tax payments. The year of assessment runs from 1st April to 31st March of the following year. A return of income pertaining to the year of assessment must be submitted by companies on or before eight (8) months from the end of the year of assessment (Before 30th November).

Income Tax (IT) is payable on self-assessment basis in five (5) Installments.
Installment Payment Date
1st Instalment On or before the 15th day of the month of August that relevant year
2nd Instalment On or before the 15th day of the month of November that relevant year
3rd Instalment On or before the 15th day of the month of February next year
4th Instalment On or before the 15th day of the month of May next year
Final Instalment On or before the 30th day of the month of September next year
Applicable Rates

Applicable Rates

The corporate income tax rates will be revised to a (3) three-tier structure comprising of a lower rate of 14%, a standard rate of 28%, and a higher rate of 40%. The standard corporate income tax rate is 28%. The concessionary rate of 14% is available for:

  • Small to medium-sized enterprises
  • Exporters of goods and services
  • Agricultural undertakings
  • Educational service providers
  • Companies providing information technology services
  • Undertakings for the promotion of tourism

A higher rate of 40% is imposed on businesses engaged in betting and gaming, or dealing with liquor and tobacco products.

Our services

Our services / assistance includes “but not limited to”

  • Registration with the Tax Authority
  • Preparation and Filing of Tax Returns with the Tax Authorities
  • Representing you at the Tax Authorities and Dealing with Complex Issues
  • Tax Planning and Compliance
  • Tax Audit Support Service
  • Tax Accounting
  • Private Client Services
  • Online Tax Return Filing

NEED help with your Taxes and Business….. Let Us Help