Tax on corporate transactions in Sri Lanka

A Q&A guide to tax on corporate transactions in Sri Lanka.

This Q&A provides a high level overview of tax in Sri Lanka and looks at key practical issues including, for example, the main taxes, reliefs and structures used in share and asset sales, dividends, mergers, joint ventures, reorganizations, share buybacks, private equity deals and restructuring and insolvency.

Tax authorities

1. What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

The Department of Inland Revenue (DIR) is the main authority responsible for enforcing taxes on corporate transactions in Sri Lanka.

Pre-completion clearances and guidance

2. Is it possible or necessary to apply for tax clearances or obtain guidance from the tax authorities before completing a corporate transaction?

Companies making outward remittances must obtain a tax clearance from the Department of Inland Revenue (DIR), except for the following outward remittances:

  • Sale proceeds of quoted shares owned by non-residents in companies resident in Sri Lanka.

  • Dividends paid to non-resident shareholders.

  • Foreign investments made by resident companies.

  • Transportation expenses in relation to freight forwarding, courier services and airline services involving carriage of passengers and goods.

  • Payments to employees.

  • Remittances by export companies in respect of services in relation to advertising (subject to periodical clearance from the DIR), sales promotion, marketing and trade fairs performed outside Sri Lanka.

  • Remittances by export companies in respect of trade mark registrations outside Sri Lanka.

  • Annual subscriptions for membership of professional bodies, or periodical subscriptions for journals, magazines and other publications.

  • Remittances made in respect of visa expenses, medical expenses, air travel expenses and expenses on hotel accommodation abroad.

  • Payments relating to participation in foreign seminars, conferences and delegations. including registration fees.

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Reproduced with the permission of the publisher, Thomson Reuters