If you’re earning dividends from a Sri Lankan company, you might be wondering how much tax you have to pay — and whether you need to worry about declaring it in your tax return.
Good news: dividends from local companies are taxed at a flat rate — and once it’s paid, that’s it. You’re done!
Let’s break it down.
✅ What Is a Dividend?
A dividend is a portion of a company’s profits that is paid out to shareholders.
If you own shares in a Sri Lankan company, you might receive dividend payments once or more during the year.
💸 How Are Dividends Taxed in Sri Lanka?
In Sri Lanka, when a company pays you a dividend, it automatically deducts 15% as Withholding Tax (WHT) before you even receive the money.
Here’s the key point:
👉 This 15% tax is FINAL.
You do not need to pay any more tax on it when you file your annual return.
📊 Example
Let’s say:
- A company declares a dividend of LKR 5,000,000
- The company deducts 15% WHT = LKR 750,000
- You receive LKR 4,250,000 in your bank account
You’re done.
You keep the LKR 4.25 million.
You don’t include it in your income tax return.
You don’t pay anything more.
🧾 Do I Have to Declare It in My Tax Return?
Nope – not if it’s from a Sri Lankan resident company and the 15% WHT was properly deducted.
But make sure to keep documentation (like dividend vouchers or statements) for your records — in case the Inland Revenue Department (IRD) asks.
❗ What If I Have Other Income?
If you also earn:
- Salary
- Business income
- Rent
- Consulting fees, etc.
These are taxed separately under the progressive income tax system (rates between 6% and 36% depending on your income level).
So while dividends are taxed at a flat 15% (and that’s final), your other income must still be reported and taxed based on the tax brackets.
🌍 What About Foreign Dividends?
If you receive dividends from foreign companies, the rules can be different:
- Sometimes, foreign dividends are fully taxable in Sri Lanka
- In some cases, double tax treaties may reduce the tax or avoid double taxation
It’s best to check with a tax advisor or the IRD for guidance on your specific case.
📝 Summary
| Source of Dividend | Tax Rate | Final Tax? | Declare in Tax Return? |
|---|---|---|---|
| Sri Lankan Company | 15% WHT | ✅ Yes | ❌ No |
| Foreign Company | Varies | ❌ Maybe | ✅ Usually Yes |
🧠 Final Thoughts
- If you’re getting dividends from a Sri Lankan company, the 15% withholding tax is your only tax obligation.
- You don’t need to worry about extra tax or including it in your return.
- But if you have other income (like salary or rent), you still need to file your taxes for those earnings.
