Individuals in Sri Lanka, including freelancers earning foreign exchange through services provided to external clients, will be subject to a 15% tax starting April 1, 2025, according to Sarah Afker, Head of Tax Services at BDO Sri Lanka.
Previously exempted to encourage forex inflows, these earnings will now be taxed if remitted through the banking system. The tax, initially categorized under corporate taxation in the budget, was later clarified in amendments to the Inland Revenue Act to include individuals. Unlike corporations, which are taxed on profits after expenses, individuals may explore submitting income statements to deduct expenses.
The International Monetary Fund had initially proposed a 30% tax on service exports, but the government negotiated a reduction to 15%. Analysts highlight that Sri Lanka’s recurrent economic challenges and IMF interventions stem from monetary policies that have led to forex crises, often prompting abrupt tax policy changes.