Sri Lanka Enacts Comprehensive Income Tax Reform

The Inland Revenue (Amendment) Act No. 11 of 2026, certified on June 3, 2026, introduces significant changes to Sri Lanka's tax system. Key amendments include:

• Capital Gains Tax Increase: Effective immediately, the capital gains tax rate for individuals and partnerships rises from 10% to 15%. Trusts, unit trusts, mutual funds, and NGOs face an increase from 10% to 30%.
• Enhanced Capital Allowance: From April 1, 2026, a 100% capital allowance applies to investments in depreciable assets between $250,000 and $3 million, subject to Board of Investment approval.
• Qualifying Payments and Reliefs: Changes effective April 1, 2025, aim to broaden the tax base and strengthen compliance.

These reforms align with Sri Lanka's post-IMF agenda to enhance fiscal stability and economic growth.