Skip to main content

Sri Lanka: Tax amendments, including capital gains tax changes, enacted

The enacted legislation introduces capital gains tax revisions, enhanced capital allowances, and mandatory taxpayer identification number requirements.

june 8, 2026

The Inland Revenue (Amendment) Act No. 11 of 2026 was published on June 5, 2026, introducing significant updates to the Inland Revenue Act No. 24 of 2017.

The amendments make changes to:

  • Capital gains tax (CGT): The CGT rate is increased to 15% for individuals and partnerships, and to 10% for trusts, unit trusts, mutual funds, and non-governmental organizations, effective from the date of enactment.
  • Enhanced capital allowances: A 100% enhanced capital allowance is introduced for investments in depreciable assets ranging from US$250,000 to US$3 million, effective April 1, 2026, subject to Board of Investment approval.
  • Taxpayer identification number (TIN): Verification of a TIN is mandatory for specified transactions (including opening bank accounts and registering land), effective April 1, 2026. Additionally, a TIN is no longer treated as confidential, effective from the date of enactment.
  • Withholding tax (WHT): The scope of WHT is expanded to include a wide range of professionals, effective from the date of enactment.
  • Filing and compliance: The requirement to submit a Statement of Estimated Tax Payable is discontinued, effective April 1, 2026. Additionally, the 35% temporary concession deduction for information technology companies has been repealed, effective April 1, 2025.
  • Write-off of interest: The Inland Revenue Department (IRD) is empowered to write off any interest on underpayments and late payments chargeable and remaining outstanding up to the year of assessment ending March 31, 2025. The IRD on June 8, 2026, issued notice outlining the procedure and manner in which taxpayers may avail themselves of the provision for the write-off of interest. Read a June 2026 report prepared by the KPMG member firm in Sri Lanka
  • Withdrawn amendments: Following a Supreme Court review, several proposed clauses in the initial bill were withdrawn, including the thin capitalization "reserves" interpretation, amendments to life insurance business rules, and mandatory timelines for producing documents. Additionally, the Supreme Court held that default tax certificates cannot be issued to the Magistrate’s Court when an administrative review or appeal is pending.

Read a June 2026 report prepared by the KPMG member firm in Sri Lanka

The IRD on June 8, 2026, issued a notice outlining the key changes introduced by the Inland Revenue (Amendment) Act, No. 11 of 2026, following the issuance of the Amendment Act.

Read a June 2026 report prepared by the KPMG member firm in Sri Lanka

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.

KPMG. Make the Difference.


Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. KPMG LLP does not provide legal services.

The information contained herein is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

© 2026 KPMG LLP, a Delaware limited liability partnership, and its subsidiaries are part of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

Thank you!

Thank you for contacting KPMG. We will respond to you as soon as possible.

Contact KPMG

Use this form to submit general inquiries to KPMG. We will respond to you as soon as possible.
All fields with an asterisk (*) are required.

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's . Privacy Statement

An error occurred.

Job seekers

Visit our careers section or search our jobs database.

Search now!

Submit RFP

Use the RFP submission form to detail the services KPMG can help assist you with.

Submit

Office locations

View locations

International hotline

You can confidentially report concerns to the KPMG International hotline

Learn more

Press contacts

Do you need to speak with our Press Office? Here's how to get in touch.

Contact

Headline