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Sri Lanka

Taxes

If you want to do business in Sri Lanka, reading this will help you becoming knowlegeable on the specific tax laws and rates for a LLC which is the most common company structure in Sri Lanka.

Sri lanka taxes corporate income, whether it is earned onshore or offshore. The usual approximate tax rate for offshore income, from our research, and this is not personal tax advice, is 28%. The country may not have exemptions to transfer in income accrured abroad. Corporate Income Tax in Sri Lanka ranges from 14% to 40%, depending on the nature of the business income. However, the effective tax rate for most type of income is 28%. This ranks Sri Lanka as 130th overall in terms of corp. taxation rate internationally.

The valued added tax rate in LK is 15%, that ranks Sri Lanka as 79th overall with regards to VAT globally. In terms of other taxation, an employer will contribute 15% to the equivalent of a social security fund and an employee will contribute 8%. The overall complexity of the tax system is low. This is measured by average time to comply with a country's labor tax requirements is as it is 9hours. Contributing to this is the number of yearly labor tax payments, which is 1 in LK.

Thin capitalisation laws are officially enacted. Thin capitalisation refers to any sort of requirements on a business and the debt-to-asset ratios. Dividends paid to resident companies are subject to a final withholding tax of 14%. Stock dividends are not usually subject to withholding tax. Dividends from foreign entities may be considered taxable income and subject to corporate income tax at normal rates. Dividends are distributions of a portion of company's earnings, determined by the board, to shareholders. Dividends can be issued as cash payments, shares of stock, or other property. Capital gains from the transfer of immovable properties are included in corporate income tax and taxed at a flat rate of 10%. Other Capital Gains are not taxable. A capital gains tax is levied on the profits that a corporation or natural person realizes when they sell sells a capital asset for a price that is higher than the purchase price.

Interests and royalties withholding tax rate is estimated at 20%. Which means that the tax authorities expects LLC's to pay tax on at least 20% of payments on interests and royalties to non-residents. The dividends withholding tax rate is 14%. This means that the tax authorities expects LLCs to pay tax on at least 14% of dividends paid to non-residents. Withholding taxes may be reduced under a tax treaty.
There is no known tax on wealth in Sri Lanka. There are no inheritance and transfer taxes in Sri Lanka. There are local real property taxes. We are not aware of any frequently implemented R&D initiatives that provide tax relieft in this country.

The above is not tax or legal advice for your particular circumstances. We are able to reference you to a tax advisor in Sri Lanka who can give you the proper advice and help you need. Ready to get started? Click the free consultation button above.

Country details

Sri Lanka
LKR
Colombo
Asia
si, ta, English
21,513,990

Tax treaties

Country Type Date Signed
India DTC  2013-01-22
Bahrain DTC  2011-07-24
Canada DTC  1982-06-29
Qatar DTC  2004-11-07
Czech Republic DTC  1978-06-26
Seychelles DTC  2011-11-07
Russian Federation DTC  1999-03-02
France DTC  1981-09-17
Finland DTC  1982-05-18
United States DTC  1985-03-14
Pakistan DTC  1981-10-05
Singapore DTC  2014-04-04
Australia DTC  1989-12-18
Luxembourg DTC  2013-01-30
Romania DTC  1984-10-19
Sweden DTC  1983-02-23
Denmark DTC  1981-12-22
Italy DTC  1984-03-28
United Kingdom DTC  1979-06-21
Indonesia DTC  1993-02-03
Philippines DTC  2000-12-11
Slovakia DTC  1978-07-26
Poland DTC  1980-04-25
Norway DTC  1986-12-04
Switzerland DTC  1983-01-11
Germany DTC  1979-09-13
Malaysia DTC  1997-09-16
China DTC  2003-08-11
Netherlands DTC  1982-11-17
Belgium DTC  1983-02-03
Japan DTC  1967-12-12
Mauritius DTC  1996-03-12
Korea, Republic of DTC  1984-05-28
United Arab Emirates DTC  1992-07-07

Tax treaties Map

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Disclaimer

Although we use our best efforts to keep the information of this site accurate and up-to-date, we make no representations or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this website. We disclaim any warranties expressed or implied, merchantability, or fitness for any particular purpose. We shall in no event be held liable for any loss or other damages, including but not limited to special, incidental, consequential, or other damages. The contents of this website are just for illustrative purposes and are NOT to be considered as a legal opinion or tax advice and should not be relied upon as such. Far Horizon Capital Inc., and any associated company, is not engaged in the practice of law or tax. If you wish to receive a legal opinion or tax advice on the matter(s) in this website please contact our offices and we will refer you to an appropriate legal practitioner. Use of our websites FlagTheory.com, Incorporations.io, Residencies.io, Passports.io, is subject to our terms and conditions.

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