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.
Effective 1 April 2016, profits and income accruing to any individual in excess of LKR 2.4 Million per annum, are to be taxed at a flat rate of 15%.This applies to employees under the PAYE tax scheme , self-employed persons and employees who are employed by more than one employer. This is pending legal enactment.
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 rendering services in Sri Lanka is also exempt from tax.
The tax year ends on 31 March.
The official currency of Sri Lanka is the Sri Lanka Rupee (LKR).
It has been proposed to grant special privileges to individuals who pay LKR 25 million or more, and such privileges will be regularized and specified via a gazette notification.
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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