Sri Lanka (LK)
Sri Lanka is South Asia's most beloved island destination — a tropical tear-drop off India's southern tip offering ancient Buddhist temples, colonial hill stations, spice gardens, surf beaches, and world-renowned tea.
Tax & Payslip Guide
Understanding your taxes in Sri Lanka — tax year April 1 to March 31 (Sri Lankan fiscal year).
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 1,800,000 | 0% | Personal allowance raised from LKR 1,200,000 to LKR 1,800,000/year effective April 1 2025 (tax year 2025/26), per IRD Notice PN/IT/2025-01. Zero tax on first LKR 1,800,000. |
| 1,800,000 | 2,800,000 | 6% | LKR 1,800,001 – 2,800,000/year. 6% rate on this LKR 1,000,000 band. The 12% bracket was eliminated in the 2025/26 restructure. |
| 2,800,000 | 3,300,000 | 18% | LKR 2,800,001 – 3,300,000/year. 18% rate on this LKR 500,000 band. |
| 3,300,000 | 3,800,000 | 24% | LKR 3,300,001 – 3,800,000/year. 24% rate on this LKR 500,000 band. |
| 3,800,000 | 4,300,000 | 30% | LKR 3,800,001 – 4,300,000/year. 30% rate on this LKR 500,000 band. |
| 4,300,000 | ∞ | 36% | Above LKR 4,300,000/year. Maximum rate 36%. Applies to senior expat positions earning above approximately USD 13,000/year at current LKR/USD rates. |
🏛️ Social Contributions
Mandatory retirement savings fund for all private sector employees. Contributions made to EPF account administered by Central Bank of Sri Lanka. Withdrawal on retirement (age 55+), permanent departure from Sri Lanka, or disability. Expats leaving Sri Lanka permanently can withdraw their full EPF balance.
Supplementary retirement fund paid entirely by the employer. Provides gratuity benefits and trust fund payments. Separate from EPF. Administered by ETF Board.
🛒 VAT Rates
VAT was increased from 15% to 18% in January 2024 as part of the IMF-mandated revenue measures. Applied to most goods and services. VAT-registered businesses must have turnover above LKR 60 million/year (2026 threshold).
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Foreign nationals are subject to the same income tax brackets as Sri Lankan nationals on Sri Lanka-sourced income. Tax residency: 183+ days in any 12-month period OR 30 days in the tax year if previously resident. Tax residents are taxed on worldwide income; non-residents on Sri Lanka-sourced income only. Double Tax Treaties (DTTs) available with the UK, Germany, Netherlands, Australia, Canada, India, Pakistan, Singapore, and 30+ others. Terminal gratuity and EPF withdrawal payments are taxable unless covered by treaty.
📋 Double Tax Treaties
Sri Lanka has active Double Taxation Avoidance Agreements (DTAAs) with: UK, Germany, Netherlands, Belgium, France, Sweden, Switzerland, Australia, Canada, USA, India, Pakistan, Bangladesh, Malaysia, Singapore, Thailand, Indonesia, Japan, South Korea, China, UAE, Kuwait, Bahrain, Qatar, Italy, Norway, Denmark, Finland, Iran, Poland, Czech Republic, Romania, and others. DTAAs reduce or eliminate double taxation on income earned in both countries. Consult an IRD-registered tax agent or your employer's tax adviser.
Tax & Payslip
Unlock the complete Tax & Payslip guide for Sri Lanka — including every detail, document, tip and link you need.
Become a SupporterSupport the guide on Ko-fi · Unlocks every premium section, everywhere