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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.

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february 25, 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

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