Sri Lanka Capital Gains Tax Guide 2026

Overview — CGT in Sri Lanka

Capital Gains Tax (CGT) was reintroduced in Sri Lanka under the Inland Revenue Act No. 24 of 2017, effective from 1 April 2018. CGT applies to gains arising from the disposal of capital assets, including shares, immovable property, bonds, and other specified assets. The Inland Revenue Department (IRD) administers CGT. The tax is chargeable on the net gain after deducting the cost of acquisition and allowable expenses from the sale proceeds.

CGT Rate — 10% Standard (14% Non-Resident)

The standard CGT rate is 10% for resident individuals and companies. Non-residents are subject to a higher rate of 14% on gains from Sri Lankan assets. There are no reduced rates for long-term holdings or increased rates for short-term holdings — all capital gains are treated uniformly. There is no annual exemption threshold for CGT (though a small de minimis exemption of approximately LKR 750,000 per year may apply for individual taxpayers in certain circumstances).

Assets Subject to CGT

CGT applies to the disposal of the following classes of capital assets:

• Immovable property: Land, buildings, and any interest in immovable property
• Shares and securities: Shares in private and public companies (including listed shares on the Colombo Stock Exchange), bonds, debentures, and other marketable securities
• Business assets: Goodwill, intellectual property, and other intangible business assets
• Collectibles: Art, jewellery, and other valuable personal property (if held for investment purposes)

Colombo Stock Exchange (CSE) Securities

Marketable securities listed on the Colombo Stock Exchange (CSE) are subject to CGT on disposal. Key points:

• Shares, warrants, and unit trusts listed on the CSE are taxable on gains
• The cost of acquisition for CSE shares is the purchase price plus brokerage and transaction costs
• Securities held as trading stock (by a trader or financial institution) may be taxed as revenue income rather than capital gains
• There is no specific exemption for CSE-listed shares; all gains are taxable at the standard 10% rate

No Indexation Allowance

Sri Lanka does not provide an indexation allowance for CGT purposes. The gain is calculated as the nominal difference between the sale proceeds and the cost of acquisition, without adjustment for inflation. This means that taxpayers may face a tax on gains that are purely inflationary in nature, particularly for assets held over long periods. There is no proposal to introduce indexation as of 2026.

No Distinction Between Short-Term and Long-Term Gains

Sri Lanka does not distinguish between short-term and long-term capital gains. All capital gains, regardless of the holding period, are taxed at the same standard rate of 10% (14% for non-residents). This simplifies the tax calculation but may be less favourable for long-term investors who could benefit from reduced rates in other jurisdictions.

Disposal Cost Deduction

When calculating the capital gain on disposal, the following costs are deductible from the sale proceeds:

• Brokerage fees and commissions paid on the sale
• Legal fees directly attributable to the sale
• Advertising costs for finding a buyer
• Transfer taxes and stamp duty paid by the seller on disposal
• Valuation fees if required for the sale

Only costs directly attributable to the disposal are deductible. General expenses not specifically related to the sale are not allowable.

FAQs

Is there a CGT exemption for the sale of a primary residence?

A principal private residence exemption may apply under certain conditions, exempting the gain on the disposal of a taxpayer's main home from CGT. Specific rules apply regarding the period of ownership and use.

How do I report and pay CGT?

CGT is reported in the annual tax return. Taxpayers must self-assess the gain and pay the tax by the due date. For transactions involving CSE securities, the stockbroker may withhold and remit CGT at the time of sale.

Can capital losses be offset against capital gains?

Yes, capital losses from the disposal of assets can be offset against capital gains in the same tax year. Unused losses may be carried forward to offset future capital gains, subject to time limits.

Disclaimer

This guide provides general information about Sri Lankan Capital Gains Tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Sri Lankan tax advisor or the Inland Revenue Department directly for advice specific to your situation. InvestmentKit does not provide tax advice.