Tax guide for Sri Lanka: tax on rent and sale

What you need to know

1. Does a tenant hold back tax from my rent?

   In Sri Lanka a tenant paying rent in the course of a business (a company, partnership, business owner, or the Government) must withhold 14% of rent paid to a non-resident; for a non-resident who is not a Sri Lankan citizen that tax is final and no return is needed for that rent. A private individual tenant not in business withholds nothing (Inland Revenue Act No. 24 of 2017 as amended, ss.84A(1A), 84(3)(b), 88(1A)(b) and First Schedule para 10; IRD Tax Chart 2025/2026).

   Where this comes from

   • Inland Revenue Department, Consolidated Inland Revenue Act No. 24 of 2017 (amendments to 31 Mar 2025), read 26 October 2026

2. At what rates is rent taxed for a foreign owner abroad?

   In Sri Lanka a non-resident foreign individual pays income tax on Sri Lankan rent at 6% to 36% on rent less actual expenses incurred in earning it, with no personal relief and no 25% rent relief, which are given only to residents (and the personal relief also to non-resident citizens) (Inland Revenue Act No. 24 of 2017 as amended, ss.11 and 52; IRD Tax Chart 2025/2026).

   Where this comes from

   • Inland Revenue Department, Consolidated Inland Revenue Act No. 24 of 2017 (amendments to 31 Mar 2025), read 26 October 2026

3. How do I pay tax on rent from a private tenant?

   In Sri Lanka a non-resident landlord whose tenant is a private individual has no tax withheld, so must register for a Taxpayer Identification Number, pay quarterly instalments (15 August, 15 November, 15 February, 15 May) and file a return by 30 November after the tax year ends on 31 March (Inland Revenue Department, Income Tax page, updated 18 June 2025).

   Where this comes from

   • Inland Revenue Department, Income Tax (updated 18 Jun 2025), read 26 October 2026

4. What tax do I pay on the gain when I sell?

   In Sri Lanka an individual pays capital gains tax of 15% on the gain from selling property from 3 June 2026 (10% before), worked out on the higher of the price and market value, with no inflation allowance; nothing is withheld by the buyer and the seller files and pays within 30 days after the end of the month of sale (Inland Revenue (Amendment) Act No. 11 of 2026, ss.1 and 36).

   Where this comes from

   • Inland Revenue (Amendment) Act No. 11 of 2026 (certified 3 Jun 2026), read 26 October 2026

5. Is there tax when an owner dies?

   Inheriting a home in Sri Lanka: No estate duty for deaths since 13 November 1985, and no tax on the gain when an owner dies: the heir takes over the cost and pays only when they sell.

   Where this comes from

   • IRD, Consolidated Text of the Inland Revenue Act No. 24 of 2017 (amendments to 31 Mar 2025): ss.2–12, 37–38, 45–46, 52, 69–70, 73, 80–82, 84–94, 102–103, 159, 1, read 16 October 2026

6. How are yearly city rates charged in Colombo?

   In Colombo the Municipal Council charges rates on each property's assessed annual value; a 10% discount applies if the year's rates are paid before 31 January, 5% if a quarter is paid in its first month, and late rates carry a 15% surcharge for homes and 20% for business premises (Colombo Municipal Council, Payments page).

   Where this comes from

   • Colombo Municipal Council, Payments (rates discounts and surcharges), read 26 October 2026

7. Is there a cap on sending money from an Inward Investment Account?

   The Sri Lankan exchange-control limits issued on 18 June 2026 (Order under s.22, Gazette 2493/38) cap outward transfers by residents and emigrants, such as USD 25,000 a year from a Personal Foreign Currency Account and USD 100,000 as an emigrant's migration allowance; they do not cap remittances from a non-resident's Inward Investment Account.

   Where this comes from

   • Order under s.22 of the Foreign Exchange Act, Gazette Extraordinary 2493/38 (18 Jun 2026), read 26 October 2026

8. Do I charge value added tax (VAT) on rent?

   In Sri Lanka the lease or rent of residential accommodation has not been VAT-exempt since 1 January 2023, but a landlord must register for VAT only when supplies exceed Rs 15 million in a quarter or Rs 60 million in twelve months, so a single let flat is normally outside VAT (VAT Act No. 14 of 2002 as amended, First Schedule Part II item (xi)(e); IRD Tax Chart 2025/2026).

   Where this comes from

   • Inland Revenue Department, Value Added Tax Act No. 14 of 2002, consolidated to 2025 (s.5(7); First Schedule Part II item (xi)), read 26 October 2026