Capital Gains Tax in Sri Lanka

Capital gains tax is a tax on the profit made from the sale of an asset such as property, shares, or other investments. In Sri Lanka, capital gains tax is levied on both residents and non-residents who sell assets located in the country. It is important to have a clear understanding of the capital gains tax laws in Sri Lanka in order to avoid any potential legal or financial issues.

When it comes to determining the capital gains tax rate in Sri Lanka, the current rate is 10%, which applies to gains made from the sale of assets that have been held for less than 10 years. However, gains made from the sale of assets held for 10 years or more are exempt from capital gains tax.

It is worth noting that there are certain exemptions to capital gains tax in Sri Lanka. For instance, gains made from the sale of a person's primary residence are exempt from capital gains tax, provided that the property has been owned for at least three years. Additionally, gains made from the sale of assets such as government securities and listed shares on the Colombo Stock Exchange are also exempt from capital gains tax.

In the context of valuing assets for capital gains tax purposes, valuers in Sri Lanka can provide expert advice on determining the value of assets such as real estate or shares. Chartered valuers in Sri Lanka are particularly well-equipped to provide accurate valuations that can help individuals and businesses comply with capital gains tax laws.

Non-residents who sell assets in Sri Lanka are subject to a withholding tax on capital gains. The withholding tax rate is 5% for gains made on shares and 10% for gains made on other assets. However, if the non-resident is from a country that has a double taxation agreement with Sri Lanka, the withholding tax rate may be lower.

If you're a resident of Sri Lanka and you've made a capital gain from the sale of an asset, you'll need to include this gain in your income tax return. You'll need to calculate the gain by subtracting the cost of the asset from the sale price and then apply the 10% capital gains tax rate. If you're a non-resident, the withholding tax will be deducted from the sale proceeds and remitted to the Sri Lankan government.

In conclusion, understanding capital gains tax is essential for anyone selling assets in Sri Lanka. It's important to be aware of the capital gains tax rate, exemptions, and withholding tax requirements in order to ensure compliance with Sri Lankan tax laws. Seeking advice from a valuer or a tax professional can help ensure that you're complying with all relevant regulations and avoiding potential penalties.