Taxation of international executives
The extent of liability to Sri Lanka tax on earnings depends on the individual’s residence status in Sri Lanka. Residents are taxed on worldwide income. Non-residents (including expatriate employees) are taxed on Sri Lankan-source income only. Profits and income derived from outside Sri Lanka by a dual citizen or a citizen of Sri Lanka who holds a permanent residency status in a foreign country will be exempt from income tax in Sri Lanka. The maximum tax rate in Sri Lanka is 24 percent from the year of assessment 2011/12 onwards. Employment income accruing to a person is taxed at a maximum rate of 16% effective from year of assessment 2015/16.
However, the information stated herein in relation to income tax will change with the implementation of the new Inland revenue law. Inland Revenue Act, No. 24 of 2017 (New Act) will come into force with effect from 1st April 2018. Moving forward employment income will be taxed at the maximum rate of 24% and the exemption discussed above will be withdrawn.
With effect from 1 April 2008, all expatriate employees are taxed at the tax rates applicable to resident employees. Offshore income of non citizen employees employed in any undertaking in Sri Lanka is also exempt from tax. This exemption will be withdrawn under the new regime.
The tax year ends on 31 March.
The official currency of Sri Lanka is the Sri Lanka Rupee (LKR).
Herein, the “host country” refers to the country to which the employee is assigned. The home country refers to the country where the assignee lives when he/she is not on assignment.
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