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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » Taxes on corporate income

Taxes on corporate income

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Manager - Equity Analytics
Manager - Equity Analytics
come / InstitutionCIT rate (%)
2018/19 and 2019/202020/21
Small and medium enterprises (SMEs) that conduct business in Sri Lanka, which do not have an associate that is an entity, and with an annual turnover less than 500 million Sri Lankan rupees (LKR)1414
Predominantly conducting of a business of exporting goods and services (exports includes specified undertakings)*1414
Predominantly conducting of a business of an agricultural business14-
Companies predominantly providing educational services1414
Companies predominantly engaged in an undertaking for the promotion of tourism1414
Companies predominantly providing information technology services14-
Business consisting of betting and gaming, liquor, and tobacco4040
Profits and income from business other than stated above (including unit trusts and mutual funds)28-
Construction services 2814
Trading, banking, finance, insurance, etc .2824
Healthcare 2814
Gains from the realisation of investment assets1010
* With effect from 1 January 2020, the 'predominantly' concept will be removed. 'Specified undertaking' means an undertaking that is engaged in:

  • Entrepôt trade involving import, minor processing, and re-export.

  • Offshore business where goods can be procured from one country or manufactured in one country and shipped to another country without bringing the same into Sri Lanka.

  • Providing front-end services to clients abroad.

  • Headquarters operations of leading buyers for management of financial supply chain and billing operations.

  • Logistic services, such as bonded warehouse or multi-country consolidation in Sri Lanka.

  • Transhipment operations.

  • Freight forwarding.

  • Supply of services to any exporter of goods or services or to any foreign principal of such exporter directly, being services which could be treated as essentially related to the manufacture of such goods or provision of such services exported by such exporter either directly or through any export trading house, including any service provided by an agent of a ship operator to such agent’s foreign principal, and the payment for such services are made by such exporter or foreign principal to such person in Sri Lanka in foreign currency.

  • Production or manufacture and supply to an exporter of non-traditional goods.

  • The performance of any service of ship repair, ship breaking repair, and refurbishment of marine cargo containers, provision of computer software, computer programmes, computer systems or recording computer data, or such other services as may be specified by the Minister by notice published in the Gazette, for payment in foreign currency.

  • Sale for foreign currency of any gem or jewellery, being a sale made in Sri Lanka by any person authorised by the Central Bank of Sri Lanka to accept payment for such sale in foreign currency.

Dividend tax

A dividend tax is payable at 14% (prior to 1 April 2018, it was at 10%) on the gross dividends distributed by a resident company, other than such dividends distributed out of any dividend received from another resident company. Any dividend distributed prior to 1 April 2019 out of dividends from which withholding tax (WHT) has been deducted at 10% prior to 1 April 2018 will not be subject to dividend tax under the new Inland Revenue Act No. 24 of 2017.
Dividends paid by a resident company to any non-resident person will be exempted from income tax with effect from 1 January 2020.
No WHT will be applicable on dividends distributed to shareholders with effect from 1 January 2020.

Remittance tax

Where profits of a non-resident company are remitted in a tax year, a remittance tax of 14% of the remittances is payable (prior to 1 April 2018, it was at 10%).

Local income taxes

There is no local or provincial income tax applicable to corporates in Sri Lanka.

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Post Sat Nov 13, 2021 5:34 am by ResearchMan

  • No corporate tax changes other than one time tax for persons or companies with taxable income over Rupees 2,000 million for the year of assessment 2020/2021.
  • VAT on banks and financial service providers under supply of financial services by specified institutions is proposed to be increased to 18 percent from 15 percent
1.New Taxes and Levies Surcharge Tax at 25% on persons with taxable income exceeding Rs. 2 Billion(one-off)
2.Increase of VAT and Excise Duty VAT rate on supply of Financial Services to be increased to 18%
It is proposed to increase the VAT on FS rate payable by the Specified institutions to 18% from 15%.This rate increment will be applicable only for a period of one year commencing on 01 January 2022 and ending on 31 December 2022. The expected revenue by the Government from the increased rate is Rs.14 Billion.
Specified Institutions cover a licensed commercial banks, a finance companies and a licensed specialized bank


Post Sat Nov 13, 2021 9:00 pm by D.G.Dayaratne

we can see how this corporate tax will affect the stock market from

next Monday 

I hope no serious effect immediately


Post Mon Nov 15, 2021 11:47 am by Wickyz

2/3 බලය 2/5 වීමට නියමිතය.

ආණ්ඩු පෙරලීමට නියමිතය.

මහින්ද ගෙදර යාවිද ?

අලුත් අගමැති කව්ද ?

නන්දසේන තනි වෙයි.

ලංකාවේ සිවිල් යුද්දයක් ඇති වේද ?

ඉදිරි දිනවල බොහෝ දේ සිදු වේ.අවධානයෙන් සිටින්න.

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Post Mon Nov 15, 2021 12:07 pm by rajini

25% surcharge tax is applicable to the last year. In that way it will not change EPS of the company for the current year. But cashflow and NAV will affected. Anyway most of the bluechips mainly banks are traded at half of the NAV.


Post Tue Nov 16, 2021 6:59 am by D.G.Dayaratne

I am very happy. What I said is correct

NO big effect to the stock market due to corporate =tax

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