Most founders find out about a tax when the penalty arrives. Answer a few questions and see, in two minutes, which Sri Lankan taxes your business is likely to owe.
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Rules as of October 2026. Reviewed by our Chartered Accountant-led team. General guidance only; your position depends on the full facts of your business.
A private limited company pays income tax on its profits, at a standard rate of 30%. A sole proprietor or partner pays tax on business profits as personal income. Either way, tax is paid in quarterly instalments during the year (15 August, 15 November, 15 February and 15 May), and the annual return is due by 30 November after the year of assessment ends on 31 March.
VAT is charged at 18%. Registration has been required once taxable supplies exceed Rs 60 million a year (Rs 15 million a quarter), and Budget 2026 is lowering this to Rs 36 million a year (Rs 9 million a quarter). A single strong quarter can trigger registration, so growing businesses should check turnover every quarter rather than once a year. Exports are generally zero-rated.
The Social Security Contribution Levy is charged at 2.5% on turnover once a business passes Rs 36 million a year (Rs 9 million a quarter). Unlike VAT it cannot be reclaimed, so it comes straight out of your margin. With the threshold now lower, many more small businesses fall inside it.
From your first employee, you contribute EPF (12%) and ETF (3%) and deduct the employee's 8% EPF. Once anyone earns over Rs 150,000 a month, you also deduct APIT from their pay. Our Employee Cost Calculator works out all of these for a given salary.
Some payments require you to deduct tax before you pay: service fees to individuals (5%), rent (10%) and interest (10%) once payments to one person exceed Rs 100,000 a month, dividends (15%), and many payments to overseas suppliers. If you forget to deduct it, the tax becomes your liability.
Until March 2025, income from services provided to overseas clients was largely exempt. Since 1 April 2025 it is taxable, with a concessionary rate available if conditions are met. Founders billing overseas clients should check their position, as quarterly instalments are easy to under-pay.
See the true monthly cost of a hire and their take-home pay, with EPF, ETF, APIT and gratuity worked out for you.
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