Sri Lanka’s Inland Revenue Department has implemented new rules on withholding tax and tax clearance certificates for payments to non-residents, effective from 1 January 2025. The regulations apply to withholding agents and financial institutions managing outward remittances.
A tax clearance certificate will now be required for all outward remittances, unless the payments are listed on a prescribed negative list, which simplifies the process for identifying exempt payments.
The negative list includes 21 categories of exempt remittances, such as payments for importing goods, sale proceeds of quoted shares, certain dividends, loan repayments, and foreign currency interest earnings.
Negative list:
- Remittances for the import of any tangible goods;
- Remittances of sale proceeds of quoted shares owned by non-residents in any company resident in Sri Lanka;
- Remittances of dividends to relevant shareholders if the dividends are subjected to advance income tax at the rate of 15%, substantiated by a withholding certificate as proof for outward remittance purposes, or the dividends are exempt from income tax;
- Remittances by export companies in respect of registration of trademarks outside Sri Lanka;
- Remittances of capital repayments or interest payments to any person outside Sri Lanka, in respect of any loan granted to any person in Sri Lanka;
- Remittances for payment of interest, discount or realization of any gain on any sovereign bonds denominated in local or foreign currency issued by or on behalf of the Government of Sri Lanka or interest or discount from Sri Lanka development bonds issued by or on behalf of the Government of Sri Lanka;
- Remittances of interest earned in any foreign currency on or after 01.01.2020, from a foreign currency account opened and maintained by the recipient (deposit holder) of outward remittances in any commercial bank or in any specialized bank with the approval of the central bank of Sri Lanka; and
- · Remittances of remuneration payments for employees), if such remuneration is subjected to Advance personal income tax and a certificate of income tax deduction (T- 10) is issued by the relevant employer.
