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Sri Lanka Corporate Income Tax regulations are undergoing a seismic shift as the government unveils a strategic draft bill to amend the Inland Revenue Act. This legislative move is designed to jumpstart economic recovery by introducing a high-impact 100% capital allowance for new investments. Effective April 1, 2026, the provision allows businesses to fully deduct the cost of depreciable assets for projects valued between $250,000 and $3 million within the initial year of assessment.
While the capital allowance offers a significant incentive for investors, the broader bill signals a tightening of the nation’s fiscal framework. Capital Gains Tax (CGT) is set for a sharp increase, rising from 10% to 15% for individuals and surging to 30% for trusts and unit trusts. Furthermore, the government is expanding the 5% withholding tax net to include a diverse array of professionals, from social media specialists to auditors, ensuring a more comprehensive capture of domestic revenue.
For multinational corporations and local enterprises, these changes require an immediate recalibration of 2026 tax strategies. The bill streamlines certain administrative burdens—such as removing the requirement for a Statement of Estimated Tax (SET)—but pairs this with enhanced enforcement powers for the Commissioner-General. As the country balances these targeted incentives with aggressive revenue collection, the 2026 fiscal cycle will be a defining moment for the evolution of Sri Lanka Corporate Income Tax and the nation’s broader economic stability.
