Freelancers, individuals to pay 15% Dollar tax?

The government’s 2025 budget outlines a 15 per cent services export tax for individuals in Sri Lanka who provide services to external parties and bring back foreign exchange, it was reported. 

According to EconomyNext, the Head of Tax Services at BDO Sri Lanka, Sarah Afker said freelancers doing IT work for foreign parties and other professionals who provide services to foreign parties fall under this category.

Afker explained that the services export tax had been listed as a corporate tax in the budget, but Bills to amend the Inland Revenue Act published later indicate that the tax also applied to individuals.

She added that from 01 April 2025, that particular description, as well as any other foreign source income, will be liable for a 15 per cent tax. 

Sarah Afker highlighted the following key factors linked to the tax;

• The tax will apply if the money is brought back to Sri Lanka through the banking system. Up to now, such incomes were exempted, to encourage foreign exchange earnings.
• Under changes proposed to the Inland Revenue Act on individual income tax, income up to 1.8 million rupees is exempt from tax. The next 500,000 is taxed at 6 per cent.
• The earlier 12 per cent tax will be removed and the next 500,000 slab will be taxed at 18 per cent.
• Foreign exchange earnings will be at 15 per cent, above the 6 per cent rate without an upper limit.
• Corporates who export services are taxed only on profits after deducting expenses.
• Individuals could also try to submit an income statement and charge expenses.

The tax specialist added that the services export tax has been included as the International Monetary Fund had proposed a 30 per cent tax, but the government had negotiated it down to 15 per cent.