{"id":22721,"date":"2024-07-24T22:56:00","date_gmt":"2024-07-24T22:56:00","guid":{"rendered":"https:\/\/simplebooks.com\/srilanka\/?p=22721"},"modified":"2025-10-13T23:14:57","modified_gmt":"2025-10-13T17:44:57","slug":"capital-gains-tax-sri-lanka","status":"publish","type":"post","link":"https:\/\/simplebooks.com\/srilanka\/capital-gains-tax-sri-lanka","title":{"rendered":"Capital Gains Tax in Sri Lanka: How to Calculate, Pay and More"},"content":{"rendered":"\n

Updated 2024<\/em><\/p>\n\n\n\n

Capital Gains Tax (CGT) in Sri Lanka is a fancy term the Inland Revenue Department (IRD) uses to describe the tax they charge you whenever you earn a profit from selling one of your assets.<\/p>\n\n\n\n

Now, this leaves a lot of questions to be answered. What is the Capital Gains Tax percentage? Are all of your assets affected by this tax? Are there any exemptions? How does one actually calculate this tax?<\/p>\n\n\n\n

These are all very fair and valid questions, and we\u2019ve written this blog to answer every single one of them.<\/p>\n\n\n\n

So, if you\u2019re looking for an in-depth, easy to digest guide on Capital Gains Tax in Sri Lanka – this is the blog for you. <\/p>\n\n\n\n

What is capital gains tax?<\/h2>\n\n\n\n

Whenever you sell and make a profit off your assets, you have to pay 10% of the profit you\u2019ve made as Capital Gain Tax in Sri Lanka.<\/p>\n\n\n\n

Like most types of tax, CGT is easier to wrap your mind around when you see its practical use. Here\u2019s an example that should help you understand it a little further:<\/p>\n\n\n\n

Meet Chandaka \ud83d\udc4b\ud83c\udffd<\/p>\n\n\n\n

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Chandaka has been doing well for himself over the past few years. Thanks to his fortune, he has managed to buy himself a nice little house in Colombo + two other houses in Unawatuna and Nuwaraeliya. Aside from his houses, he also holds a bunch of stock in the Colombo Stock Exchange (CSE), owns a bit of cultivation land in Anuradhapura, and is a partner in a Partnership company in Sri Lanka.<\/p>\n\n\n\n

It\u2019s safe to say that Chandaka has a few nice assets to his name. But, let’s say that, for whatever reason, Chandaka wants to sell and transfer some of the things he owns. You know – shed a bit of asset weight and up his liquidity. This is when Capital Gains tax comes into play.<\/p>\n\n\n\n

Aside from his main residence (his nice little house in Colombo), and the CSE stock (we\u2019ll talk about this later), whatever he sells or transfers to other people will be subjected to Capital Gains Tax in Sri Lanka. Here, the selling or transferring of Chandaka\u2019s assets is what’s called a \u2018transfer of ownership\u2019.<\/p>\n\n\n\n

The last thing you need to know about Capital Gains Tax basics is that CGT is only applicable when the sale is made (at or after the point of transaction). In accounting lingo, this is when we consider the asset as \u2018realised\u2019.<\/p>\n\n\n\n

Now that we\u2019ve established the basics of CGT, let\u2019s get into the specifics of it.<\/p>\n\n\n\n

What is the Capital Gains Tax rate in Sri Lanka?<\/h3>\n\n\n\n

As of 2022, the Capital Gains Tax rate in Sri Lanka is 10%. So however much profit you make off your assets, you will have to pay 10% of that amount as tax.<\/p>\n\n\n\n

When should you pay Capital Gains Tax?<\/h3>\n\n\n\n

You need to submit a CGT return within 01 month of the taking place. Then, you must pay the CGT amount within 01 month of the transaction.<\/p>\n\n\n\n

How is Capital Gain Tax in Sri Lanka calculated?<\/h2>\n\n\n\n

Before we jump into the math, quick note: you need to consider the costs that were incurred on buying, improving, and selling your asset(s). Basically, you need to reduce this amount from the overall selling price of whatever you\u2019re selling.<\/p>\n\n\n\n

You can use this equation to calculate the \u2018capital gain\u2019 from the transfer of ownership of an asset:<\/p>\n\n\n\n

Capital Gain = Selling Price – Total Cost of Asset<\/em><\/p>\n\n\n\n

The Capital Gain Tax is 10% of the Total Capital Gain<\/p>\n\n\n\n

Let\u2019s see how this would apply to Chandaka.<\/p>\n\n\n\n

Say hi to Chandaka again \ud83d\udc4b\ud83c\udffd<\/p>\n\n\n\n

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Chandaka has just sold his Unawatuna property for LKR 75,000,000.<\/p>\n\n\n\n

Chandaka originally bought a plot of land at Unawatuna for LKR 10,000,000 and spent 03 years building the house. The cost of building the house was LKR 20,000,000.<\/p>\n\n\n\n

Let\u2019s take a look at how his \u2018Capital Gain\u2019 on the transaction and the \u2018Capital Gain Tax\u2019 is calculated.<\/p>\n\n\n\n

Cost of land<\/td>LKR 10,000,000<\/td><\/tr>
Cost of building<\/td>LKR 20,000,000<\/td><\/tr>
Recent house renovation<\/td>LKR 1,500,000<\/td><\/tr>
Furnishing <\/td>LKR 1,000,000<\/td><\/tr>
Advertising and legal costs<\/td>LKR 500,000<\/td><\/tr>
Sale value of the house as of 2022<\/td>LKR 75,000,000<\/td><\/tr>
Cost of land + building + renovation + furnishing + advertising and legal costs<\/td>(LKR 10,000,000 + LKR 20,000,000 + LKR 1,500,000 + LKR 1,000,000 + LKR 500,000) = LKR 33,000,000<\/td><\/tr>
Capital Gains from the asset<\/td>Selling Price – Total Cost of Asset
LKR 75,000,000 – LKR 33,000,000 = LKR 42,000,000<\/td><\/tr>
Capital Gains Tax %<\/td>LKR 42,000,000 x 10% = LKR 4,200,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Now, what if at some point you had incurred a loss from the asset you\u2019re selling off? Can you deduct that loss from the Capital Gains Tax amount?<\/p>\n\n\n\n

Let\u2019s take a look.<\/p>\n\n\n\n

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Can you deduct capital losses from Capital Gains Tax in Sri Lanka?<\/h3>\n\n\n\n

A capital loss is any type of monetary loss you\u2019ve incurred while buying, maintaining, renovating or attempting to sell your assets.<\/p>\n\n\n\n

It would make sense for you to wonder if you could deduct or offset that loss from the Capital Gains Tax % you have to pay to the IRD.<\/p>\n\n\n\n

Technically, if you make a capital loss – there will be no Capital Gains Tax to be paid.<\/p>\n\n\n\n

However, you can\u2019t offset a  capital loss of one asset from a capital gain of another.<\/p>\n\n\n\n

Let’s take a look at this as an example:<\/p>\n\n\n\n

Here\u2019s Chandika again \ud83d\udc4b\ud83c\udffe<\/p>\n\n\n\n

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By now, we\u2019re all aware of Chandika selling his Unawatuna property for a cool LKR 75,000,000.<\/p>\n\n\n\n

But, for the sake of this example – let\u2019s imagine this scenario differently.<\/p>\n\n\n\n

Let\u2019s imagine Chandika bought the house from someone else in 2015 for LKR 50,000,000.<\/p>\n\n\n\n

However, the property happened to be in not-so-great condition. This meant that Chandika had to renovate the house which eventually cost him LKR 15,000,000. Thanks to a few external factors, the renovations took 5 years, and by the end of it in 2020- Chandika desperately wanted to sell the property off. <\/p>\n\n\n\n

Thanks to the global pandemic, the housing market was a mess; and Chandika was only able to sell the house for LKR 55,000,000.<\/p>\n\n\n\n

Let’s do the math:<\/p>\n\n\n\n

Cost of house<\/td>LKR 55,000,000<\/td><\/tr>
Cost of renovation<\/td>LKR 15,000,000<\/td><\/tr>
Total cost of the house<\/td>LKR 55,000,000 + 15,000,000 = LKR 65,000,000<\/td><\/tr>
Sale value of house as of 2022<\/td>LKR 55,000,000<\/td><\/tr>
(Capital) Loss<\/td>LKR 65,000,000 – 55,000,000 = (10,000,000)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

As you can see, Chandika\u2019s loss on the property was LKR 10,000,000. Let\u2019s imagine he sold one of his other properties for a capital gain of LKR 20,000,000.<\/p>\n\n\n\n

It\u2019d be great if he could deduct his Unawatuna property\u2019s loss of LR 10,000,000 from the LKR 20,000,000 gain and only pay CGT of LKR 10,000,000. But, alas, he cannot do this.<\/p>\n\n\n\n

How to file Capital Gains Tax in Sri Lanka<\/h2>\n\n\n\n

Step 1: Collect your CGT returns form and pay slip<\/h5>\n\n\n\n

All you need to do is visit the \u2018Capital Gain Tax\u2019 department at the IRD and inform them of your pending CGT payment. Once you do this, they will provide the Capital Gains Tax return form + the payment slip to you.<\/p>\n\n\n\n

Also, a quick note: there is no online payment process for CGT in Sri Lanka as of yet (December 2022).<\/p>\n\n\n\n

Step 2: Fill in the CGT returns form + payment slip<\/h5>\n\n\n\n

Your CGT payment slip should look like this:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

If in case you\u2019ve misplaced the slip, you can use a bank pay-in slip as an alternative. However, the IRD recommends you use the pre-printed pay-in slip whenever possible.<\/p>\n\n\n\n

Step 3: Pay your CGT at a Bank of Ceylon (BOC)<\/h5>\n\n\n\n

All Capital Gains Tax payments must be made through the BOC.<\/p>\n\n\n\n

Make sure you\u2019ve filled in all the details in your pay-in slip. Take a look at the Inland Revenue Department\u2019s guide on filling up each box here<\/a>:<\/p>\n\n\n\n

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When is an asset \u2018realised\u2019?<\/h3>\n\n\n\n