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Domestic relief in Sri Lanka for foreign tax paid

Liability to income tax in Sri Lanka is based on the domestic law and the Double Taxation Agreement (if any) between two countries.

In terms of Inland Revenue Act, No 24 of 2017, s 69(1)(b), accessed at Gov.lk, an employee is treated as resident, if the individual is present in Sri Lanka during the year and that presence falls within a period or periods amounting in aggregate to 183 days or more in any 12-month period that commences or ends during the year (2.1.1).

If a non-resident employee becomes resident, the tax-free threshold is deductible and the balance of income is taxable on progressive rates (2.1).

However, once the employee becomes resident, they are liable to tax on their global income.

In Sri Lanka domestic relief for double taxation is provided by credit for the tax paid in other countries on the source principle under Inland Revenue Act No 24 of 2017, s 80.

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