Sri Lanka: Proposed tax amendments include capital gains tax rate changes, provisions affecting insurance industry
Bill with proposed amendments to tax law issued on February 24, 2026.
The Minister of Finance, Planning and Economic Development on February 24, 2026, issued a bill to amend the Inland Revenue Act, No. 24 of 2017, that includes the following proposed tax amendments:
- Capital gains tax rate changes
- Relief for interest on outstanding tax liabilities
- Removal of statement of estimated tax (SET) requirements and revised basis of installment payments
- Acceptance of individual tax returns without further assessment
- Reforms to tax deductions and qualifying payments
- Reforms to withholding tax/advance income tax regime
- Reforms to return filing requirements and compliance obligations
- Amendments to the Third Schedule (exempt amounts)
- Reforms to enhanced capital allowances under the Second Schedule
- Various amendments affecting the insurance industry
- Compliance measures for unit trusts and mutual funds
- Amendments relating to the taxation of salary arrears
- Refund of taxes on cancelled or altered contracts
- Updated tax residency rules for Individuals
- Compliance and enforcement amendments
Read a February 2026 report prepared by the KPMG member firm in Sri Lanka