Sri Lanka: Tax measures in 2025 budget

Includes direct and indirect tax measures

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February 20, 2025

The president on February 17, 2025, presented the 2025 budget to Parliament, which included the following direct and indirect tax measures:

Direct tax

  • Increase of corporate income tax rate for cigarette, liquor, and gaming businesses from 40% to 45%
  • Removal of exemption and application of 15% concessionary corporate income tax on export of services
  • Imposition of income tax on life insurance and other receipts
  • Increase in capital gains tax rates
  • Various individual (personal) income tax changes

Indirect tax

  • Replacement of simplified value added tax (SVAT) scheme
  • Introduction of 18% VAT on digital platform services
  • Various VAT exemptions
  • Amendments to social security contribution levy
  • Changes to import tax levies on motor vehicles

Read a February 2025 report prepared by the KPMG member firm in Sri Lanka

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