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Withholding Tax (WHT) is income tax collected at the moment of payment — the payer deducts a fixed percentage and remits it to IRD on behalf of the recipient. If you run a business, freelance, or earn bank interest in Sri Lanka, WHT touches you on both sides. Here is the fast version.
Common rates (YA 2025-26)
- Bank interest / discount: 10% (up from 5% from 1 April 2025).
- Service fees to residents: 5% — applies when a single monthly payment exceeds Rs 100,000.
- Rent to residents: 10% — monthly rent above Rs 100,000.
- Dividends: 15% (final withholding).
- Royalties and natural-resource charges: 14%.
- Service fees / rent to non-residents: 14%.
- Lottery / gambling winnings: 14% (winnings under Rs 500,000 exempt).
If you pay (withholding agent)
- Register with IRD as a withholding agent before you start deducting — TPR_005_E form.
- Deduct at the time of payment or credit on the gross amount (excluding VAT).
- Remit to IRD by the 15th of the month following the deduction.
- Issue a certificate of deduction to the recipient within 30 days of month-end so they can claim the credit on their return.
If you are paid (recipient)
- Collect the WHT certificate from every payer — bank, tenant, client, employer.
- WHT is a credit against your final tax liability, not an extra tax. On your annual return you reduce the tax owed by the WHT already deducted.
- Residents whose annual income is under Rs 1,800,000 can self-declare to their bank to avoid the 10% interest WHT at source.
Key trap
Losing certificates. If you cannot produce a WHT certificate, IRD may disallow the credit at assessment — and you will effectively pay the same tax twice. Keep a folder, digital or physical, of every certificate for at least five years.
Getting your withholding wrong — either under-deducting as a payer or losing credits as a payee — is one of the most common Sri Lanka tax mistakes. If you would like someone to review your WHT position for the year, get in touch.
Estimate WHT before you pay or invoice — try our Sri Lanka WHT Calculator →