Capital Gains Tax Sri Lanka 2026

Last Updated: September 2026 | Based on Inland Revenue Act No. 24 of 2017 (as amended), IRDInland Revenue Department — Sri Lanka's tax authority guidelines, and IRDInland Revenue Department — Sri Lanka's tax authority Public Notice SEC_PN_IT_2026-02_E (revised CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid rates effective 3 June 2026).

What is Capital Gains Tax?

Sell a property you bought for Rs. 8,000,000 at Rs. 12,000,000 and the Rs. 4,000,000 gain is taxed at 10% — that's Rs. 400,000 to the IRDInland Revenue Department — Sri Lanka's tax authority. Capital Gains Tax (CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid) applies whenever you sell or dispose of an asset for more than you paid. In Sri Lanka, CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid applies to gains from selling:

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• Immovable property (land, houses, apartments)
• Shares and securities
• Other capital assets

The Basic Formula

Capital Gain = Sale Price - (Purchase Price + Improvement Costs + Transaction Costs)

Current CGT Rates (2025/2026)

Rate change — effective 3 June 2026: Per IRDInland Revenue Department — Sri Lanka's tax authority Public Notice SEC_PN_IT_2026-02_E, the revised CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid rates below apply to disposals on or after 3 June 2026. Disposals completed before 3 June 2026 remain taxed at the previous 10% rate — the applicable rate depends on the date of disposal, not the date you file.

Standard Rates

Important: CGT is Separate from Income Tax

For individuals and partnerships, capital gains are taxed separately at a flat rate — 10% for disposals before 3 June 2026, 15% from 3 June 2026. They are NOT added to your regular income for progressive tax calculation. Trusts, unit trusts, mutual funds and NGOs pay 30% on net gains from the same date — for unit trusts the 30% applies where the fund is taxed as an entity; when the fund issues its IRDInland Revenue Department — Sri Lanka's tax authority certificate the gain passes through to unit-holders at their applicable rate.

What's Taxable and What's Exempt

Taxable Disposals

Key Exemptions

Calculating CGT on Property Sales

Step-by-Step Calculation

Example: Selling a House

Stamp duty is one of the deductible purchase costs — the stamp duty calculator estimates it from the transaction value so you can plug a real figure into your CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid working.

Allowable Deductions from Sale Price

What Counts as "Improvement"?

Calculating CGT on Share Sales

Unlisted Shares (CSE-listed shares are exempt)

CSEColombo Stock Exchange — Sri Lanka's stock market-listed (quoted) shares are an excluded investment asset — gains on them are outside CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid entirely. The example below uses unlisted shares, which are taxable.

Important Notes for Shares

• FIFO Method: First In, First Out for calculating cost
• Brokerage: Both buy and sell commissions deductible
• SECSecurities and Exchange Commission of Sri Lanka — capital-markets regulator levy: Deductible from gain calculation
• Losses: A loss on an investment asset cannot be deducted against gains on other investment assets (Sec. 7(5)) — capital losses do not offset capital gains or carry forward to CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid

Primary Residence Exemption

Qualifying Conditions

To claim the primary residence exemption (Sec. 195 "excluded investment asset"), you must:

1. Own the property continuously for the 3 years before disposal
2. Have lived in it for at least 2 of those 3 years — calculated on a daily basis (it does not need to be the entire ownership period)
3. File proper documentation proving residence

Proving Primary Residence

Partial Exemption

If you used part of the property for business (e.g., home office, rental):

• Exemption applies only to residential portion
• Business portion is taxable proportionally

When CGT is Due

Payment Timeline

Late Payment Penalties

CGT for Different Scenarios

Scenario 1: Selling Investment Property

Mr. Silva bought an apartment in 2020 for Rs. 25M and sells in 2025 for Rs. 40M

Scenario 2: Selling Primary Residence (Exempt)

Mrs. Perera sells her home after living there for 5 years

• Meets 3-year ownership requirement ✅
• Occupied as primary residence ✅
• CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid Due: Rs. 0 (Fully exempt)

Scenario 3: Selling Inherited Property

Mr. Fernando inherits land worth Rs. 10M and sells for Rs. 15M

• No CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid at inheritance
• Cost base = value at inheritance (Rs. 10M)
• Gain = Rs. 15M - Rs. 10M = Rs. 5M
• CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid @ 15% = Rs. 750,000 (disposal on/after 3 Jun 2026)

Reporting CGT

How to File

1. For property: File CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid return (Form CG1) within 30 days
2. For shares: Broker withholds and remits CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid
3. Annual return: Report all capital transactions

Required Information

Strategies to Minimize CGT

Legal Tax Planning

What NOT to Do

❌ Underreport sale price (illegal, severe penalties) ❌ Fake improvement receipts (fraud) ❌ Claim false primary residence (can be audited) ❌ Not report offshore gains (Sri Lanka taxes worldwide income for residents)

CGT vs Other Property Taxes

Frequently Asked Questions

"Do I pay CGT if I sell at a loss?"

No. CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid only applies to gains — and under Sec. 7(5) a capital loss on an investment asset cannot be deducted against gains on other investment assets, in the same or later years.

"How is property value determined for inherited assets?"

The market value at the date of death becomes your cost base. Get a professional valuation for large inheritances.

"Is CGT applied on property gifted to family?"

Yes. Gifts are treated as disposals at market value. Both parties may have tax implications.

"Do foreigners pay CGT on Sri Lankan property?"

Yes. Non-residents pay the same CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid rates as residents on Sri Lankan assets — 15% for individuals and partnerships on disposals on or after 3 June 2026 (10% for earlier disposals), 30% for trusts and similar entities. Tax must be paid before repatriating funds.

Read: Related Guides

Official Resources

• Inland Revenue Department: ird.gov.lk
• CGTCapital Gains Tax — tax on profit when you sell an asset for more than you paid Forms: IRD Capital Gains Forms
• Inland Revenue Act: Parliament.lk
• Registrar General: rgd.gov.lk (for property transfers)

Disclaimer

Capital gains tax rules are complex and subject to change. This guide provides general information for educational purposes. For significant transactions, consult a qualified tax professional.

Last Updated: September 28, 2026

Sources:

• Inland Revenue Act No. 24 of 2017
• IRD Practice Notes
• Budget Proposals