🧾 Corporate Income Tax in Sri Lanka – Complete Guide

ByEntrepreneur

📅 Last Updated: March 2026

This article is continuously updated with the latest corporate income tax regulations in Sri Lanka, including tax rates, compliance requirements, and filing obligations issued by the Inland Revenue Department.

🔄 Latest Updates

Key Changes (2025/2026)

  • Standard Corporate Income Tax rate remains at 30%
  • Concessionary tax rates continue for specific sectors
  • Quarterly installment tax payment system remains unchanged

👉 This section will be updated annually with new tax changes.

📘 What is Corporate Income Tax?

Corporate Income Tax (CIT) is a direct tax imposed on profits earned by companies registered in Sri Lanka.

It applies to:

  • Private limited companies
  • Public companies
  • Foreign company branches
  • Other incorporated entities

👉 Tax is charged on taxable profit, not total revenue.

👤 Who Needs to Pay Corporate Income Tax?

A company must pay CIT if:

✔ It is registered in Sri Lanka
✔ It earns taxable profits
✔ It operates through a permanent establishment in Sri Lanka (for foreign entities)

📊 Corporate Income Tax Rates in Sri Lanka

🔹 Standard Tax Rate

CategoryTax Rate
Standard Corporate Tax30%

🔹 Concessionary Tax Rates

Sector / ActivityTax Rate
Export of goods/services14%
IT & Software services14%
Agriculture14%
Education services14%
Betting, gaming, liquor, tobacco40%

👉 Applicable rate depends on the nature of business activity.

🧮 How to Calculate Corporate Income Tax

Basic Formula:

Taxable Profit = Accounting Profit ± Adjustments

Adjustments include:

  • Disallowed expenses
  • Capital allowances
  • Tax exemptions

Example:

  • Accounting profit: LKR 10,000,000
  • Disallowed expenses: LKR 1,000,000
  • Adjusted taxable profit: LKR 11,000,000

👉 CIT @ 30% = LKR 3,300,000

📅 Tax Filing & Payment Deadlines

🔹 Quarterly Installment Payments

InstallmentDue Date
1st15 August
2nd15 November
3rd15 February
4th15 May

🔹 Annual Income Tax Return

  • Filed after end of Year of Assessment
  • Final tax liability must be settled accordingly

📂 Key Concepts in Corporate Tax

1. Taxable Profit vs Accounting Profit

  • Not all accounting expenses are allowed for tax
  • Adjustments are required

2. Capital Allowances

  • Depreciation replaced with tax-based allowances

3. Withholding Taxes

  • Certain income streams subject to WHT

4. Related Party Transactions

  • Must follow arm’s length principle

📉 Allowable & Disallowable Expenses

✅ Allowable Expenses

  • Business-related expenses
  • Salaries and wages
  • Rent and utilities

❌ Disallowable Expenses

  • Personal expenses
  • Certain penalties and fines
  • Non-business-related costs

⚠️ Common Corporate Tax Mistakes

🚫 Not maintaining proper accounting records
🚫 Incorrect tax adjustments
🚫 Missing installment payments
🚫 Wrong tax rate application
🚫 Ignoring sector-specific tax benefits

👉 These are very common among SMEs in Sri Lanka.

📜 Historical Corporate Tax Rates

🔹 Previous Years

  • Standard rate remained around 30%
  • Concessionary rates introduced for targeted industries

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