Sri Lanka Foreign Employment Income Tax Calculator 2025

Calculate monthly Advance Personal Income Tax (APIT) for Sri Lankan residents employed by foreign companies and receiving foreign currency income. Our comprehensive calculator uses Tax Table No. 08 to compute cumulative tax liability throughout the Year of Assessment (April to March). Enter monthly foreign currency income with automatic exchange rate fetching, track cumulative income progression, and see exact monthly tax payments due within 15 days. Perfect for remote employees, digital workers, and expatriates working for foreign employers while residing in Sri Lanka. The calculator handles partial year inputs, supports multiple currencies (USD, EUR, GBP, etc.), and provides CSV export for year-round tax tracking and compliance.

Foreign Employment Income Tax Calculator

Calculate cumulative APIT for foreign employment income throughout the Year of Assessment (April–March)

Updated: Oct 2025
Import the CSV you previously exported from this tool to restore your entered months, amounts, and exchange rates. This allows you to continue tracking your tax from where you left off.
Year of Assessment: 2025 - 2026 (Apr–Mar)

April 2025

USD 0.00
Not available
Source: Central Bank of Sri Lanka Exchange Rates (Buy Rate)

About This Tool

Learn more about this financial tool.

Sri Lanka Foreign Employment Income Tax - Complete Guide

What Is Foreign Employment Income Tax?

If you're a Sri Lankan resident working remotely for a foreign employer and receiving your salary in foreign currency, you're subject to a special tax treatment under Tax Table No. 08 of the Inland Revenue Act (IRA).

This calculator helps you determine your exact monthly tax liability using the cumulative assessment method prescribed by Sri Lankan tax law.

Who This Calculator Is For

This calculator is specifically designed for:

  • Employees of foreign companies (not freelancers or independent contractors)
  • Individuals physically present in Sri Lanka while working remotely
  • Those receiving remuneration in foreign currency through a Sri Lankan bank
  • Remote workers, digital employees, and expatriates employed abroad

Important: This Calculator Is NOT For

Independent contractors, freelancers, or consultants - Your income is classified as business income, not employment income. You should use a different tax calculator designed for self-employed individuals.

Sri Lankan companies with foreign operations - If your employer has a permanent establishment in Sri Lanka, different tax rules apply.

Three Critical Conditions for Tax Table No. 08

To qualify for this tax treatment, ALL of the following conditions must be met:

  1. Foreign Employer: Your employer must be completely outside Sri Lanka (no Sri Lankan permanent establishment)
  2. Foreign Utilization: Your services must be utilized outside Sri Lanka by the employer
  3. Foreign Currency Remittance: Payments must be received in foreign currency and remitted through a bank to Sri Lanka

Understanding the Year of Assessment

The Sri Lankan tax year runs from April 1st to March 31st (not January to December).

Example:

  • Y/A 2025/2026 = April 1, 2025 to March 31, 2026

This is crucial because tax calculations are cumulative throughout this period.

How Tax Calculation Works

Cumulative Assessment Method

Unlike many tax systems that calculate tax on each month's income independently, Sri Lanka uses a cumulative approach:

  1. Each month, add your new income (in LKR) to your cumulative total for the year
  2. Calculate total tax on the cumulative amount using the tax rates below
  3. Subtract previously paid tax to get the current month's payment

Tax Rates (Effective from April 1, 2025)

The tax rates are applied to your cumulative employment income in LKR:

Cumulative Income (LKR) Tax Calculation
Up to 1,800,000 0% (Tax Relief)
1,800,001 to 2,800,000 6% of cumulative income - 108,000
Above 2,800,000 15% of cumulative income - 360,000

Maximum Rate: 15% (this is a special preferential rate for foreign currency earnings)

Monthly Tax Calculation Formula

Monthly Tax Due = Current Cumulative Tax - Previously Paid Tax

Payment Requirements

When to Pay

Tax must be paid within 15 days after the end of the calendar month in which you received the payment.

Example:

  • Income received: May 20, 2025
  • Payment due: June 15, 2025

How to Pay

  • To: Commissioner General of Inland Revenue
  • Using: Your Taxpayer Identification Number (TIN)
  • Tax Type: Individual Income Tax (IIT)

What Counts as Employment Income?

Your taxable employment income includes more than just your base salary:

Cash Payments

  • Salary and wages
  • Bonuses and commissions
  • Overtime pay
  • Leave pay
  • Gratuities
  • Pensions

Allowances

  • Cost of living allowances
  • Subsistence allowances
  • Rent allowances
  • Entertainment allowances
  • Travel allowances

Non-Cash Benefits (Fair Market Value)

  • Employer-provided housing
  • Vehicle/conveyance benefits
  • Electricity and utilities
  • Telephone bills
  • Tax-on-tax (employer pays your tax)

Quantifying Non-Cash Benefits

If your employer provides non-cash benefits, add these amounts to your monthly income:

Benefit Type Taxable Amount
Housing (Rated Area) 12.5% of monthly salary
Housing (Unrated Area) 10% of monthly salary
Telephone Bills 50% of the cost
Electricity & Gas 100% of the cost
Tax Paid by Employer 100% of tax paid

Historical Context & Tax Changes

Before April 1, 2025

Service income from foreign sources, received in foreign currency and remitted through banks, was completely exempt from income tax (from January 1, 2020 onwards).

From April 1, 2025 Onwards

The exemption was replaced with a maximum 15% tax rate. While no longer exempt, this rate is still preferential compared to standard employment income tax rates.

Common "Gotchas" & Important Points

1. Employer Won't Deduct Tax

Since your employer is outside Sri Lanka, they won't deduct APIT (Advance Personal Income Tax). You are personally liable for ensuring timely payment.

2. Use CBSL Exchange Rates

When converting foreign currency to LKR, use the Central Bank of Sri Lanka (CBSL) buying rate for the date the income was received (or the closest available date).

3. Don't Mix Up Employment Types

If you're an independent contractor or freelancer, this calculator doesn't apply to you. Your tax obligations, rates, and payment schedules are different.

4. Keep Accurate Records

Maintain records of:

  • All foreign currency receipts
  • Bank remittance confirmations
  • Exchange rates used
  • Tax payments made
  • Employment contract and terms

5. Annual Tax Return Still Required

Even though you're paying monthly, you must still file an annual Return of Income within 8 months after the Year of Assessment ends (i.e., by November 30).

Practical Example

Profile: Kasun works remotely for a UK company, earning USD 6,000/month with a USD 10,000 bonus in October.

Year of Assessment: 2025/2026 (April 2025 - March 2026)

Sample Calculation (Simplified)

Month USD Rate LKR Income Cumulative Cumulative Tax Monthly Tax
April 6,000 299.00 1,794,000 1,794,000 0 0
May 6,000 301.00 1,806,000 3,600,000 180,000 180,000
October 16,000 297.00 4,752,000 15,366,000 1,944,900 712,800

Key Observations:

  • No tax in April (below relief threshold)
  • Tax starts in May when cumulative exceeds 1.8M
  • October bonus significantly increases that month's tax (cumulative effect)

Related Tax Calculators

  • Primary Employment APIT Calculator - For regular Sri Lankan employment
  • Advanced Foreign APIT Calculator - For complex scenarios with multiple income sources per month
  • Lump-sum Payment Tax Calculator - For bonuses and one-time payments

Compliance Checklist

  • Obtain a TIN if you don't have one
  • Track monthly foreign currency income
  • Record CBSL exchange rates for each receipt
  • Calculate cumulative tax monthly
  • Pay tax within 15 days of month-end
  • Keep payment receipts
  • File annual Return of Income by November 30

Frequently Asked Questions

How do I calculate my foreign employment tax in Sri Lanka step-by-step?

Calculating your foreign employment tax in Sri Lanka involves following these six essential steps:

Step 1: Record Income Receipt When you receive foreign currency payment, note: (1) Exact foreign currency amount, (2) Currency type (USD, EUR, GBP, etc.), (3) Date of receipt in your Sri Lankan bank account, (4) Save bank confirmation for records.

Step 2: Look Up CBSL Exchange Rate Visit the Central Bank of Sri Lanka website or use our calculator's automatic exchange rate feature to find the buying rate for your receipt date. If no rate exists for your exact date (weekend/holiday), use the closest available date.

Step 3: Convert to LKR Multiply your foreign currency amount by the CBSL buying rate. Example: USD 6,000 × 299.00 = Rs. 1,794,000.

Step 4: Calculate Cumulative Income Add this month's LKR income to all previous months' income within the current Year of Assessment (April-March). This running total is crucial for the cumulative tax method.

Step 5: Determine Cumulative Tax Apply Tax Table 08 rates to your cumulative income: Up to Rs. 1,800,000 = 0% (tax relief), Rs. 1,800,001 - 2,800,000 = (Cumulative × 6%) - 108,000, Above Rs. 2,800,000 = (Cumulative × 15%) - 360,000.

Step 6: Calculate Monthly Payment Subtract tax paid in previous months from the current cumulative tax to find this month's payment. Example: If cumulative tax is Rs. 180,000 and you've paid Rs. 0 previously, pay Rs. 180,000.

Payment Deadline: Within 15 days after the month-end. Use our calculator to automate all these steps with accurate CBSL exchange rates and cumulative tracking throughout the entire Year of Assessment.

What is Tax Table 08 and who does it apply to in Sri Lanka?

Tax Table 08 is a specialized tax table in the Inland Revenue Act specifically designed for resident employees receiving employment income from foreign employers. It was implemented to address the unique situation of Sri Lankan residents working remotely for overseas companies.

Who Tax Table 08 Applies To:

The table applies ONLY if you meet all three of these critical conditions:

  1. Foreign Employer Location: Your employer must be completely outside Sri Lanka with no permanent establishment in Sri Lanka. A foreign company with a Sri Lankan office doesn't qualify.

  2. Service Utilization: Your work product or services must be utilized outside Sri Lanka by the employer. If you're supporting Sri Lankan operations, different tax rules apply.

  3. Foreign Currency Remittance: You must receive payment in foreign currency (USD, EUR, GBP, etc.) that's remitted through a Sri Lankan bank. Local currency payments don't qualify.

Who Tax Table 08 Does NOT Apply To:

Independent contractors and freelancers - Your income is business income, not employment income Consultants with multiple clients - Classified as business operations Employees of Sri Lankan companies - Use standard employment tax tables Foreign companies with Sri Lankan PE - Different tax treatment applies

Key Distinction - Employee vs Freelancer:

Aspect Employee (Tax Table 08 Applies) Freelancer (Different Tax Rules)
Contract Type Contract of service Contract for service
Work Direction Employer directs how/when/where Independent control
Income Pattern Regular salary Project-based fees
Multiple Clients Single employer relationship Can have multiple clients
Expense Deductions Not allowed Business expenses allowed

The calculator implements the exact Tax Table 08 methodology with cumulative assessment, 15% maximum rate, and Rs. 1,800,000 relief threshold for the 2025/2026 Year of Assessment.

What exchange rate should I use for foreign currency conversion?

You must use the Central Bank of Sri Lanka (CBSL) buying rate for the specific date you received the foreign currency income. This is not optional it's a requirement for tax compliance.

Where to Find CBSL Exchange Rates:

  1. CBSL Official Website: Published daily at cbsl.gov.lk under exchange rates section
  2. Our Calculator: Automatically fetches the official CBSL buying rate when you enter your receipt date
  3. Commercial Banks: Must align with CBSL rates (slight variations may exist)

What If No Rate Exists for My Date?

If your income arrives on a weekend, public holiday, or day when CBSL didn't publish rates:

  • Use the closest previous business day rate
  • Our calculator automatically selects the nearest available rate
  • Document your reasoning for IRD verification

Example Scenario:

  • Income received: Saturday, October 5, 2025
  • CBSL closed on Saturday
  • Last published rate: Friday, October 4, 2025
  • Use: Friday's buying rate for your calculation
  • Keep: Screenshot or printout of the CBSL rate page

Buying Rate vs Selling Rate:

Always use the buying rate (the rate at which banks buy foreign currency from you), NOT the selling rate. The buying rate is typically lower than the selling rate.

Example Rates (Illustrative):

  • USD/LKR Buying: 299.00
  • USD/LKR Selling: 301.50
  • Use for tax: 299.00 (buying rate)

Record Keeping Requirements:

For each month's income, maintain:

  • Date of receipt in Sri Lankan bank
  • Foreign currency amount
  • Currency type (USD, EUR, GBP, etc.)
  • CBSL buying rate used
  • Calculated LKR amount
  • Source documentation (bank statement, CBSL rate printout)

These records are essential for your monthly tax payments and annual Return of Income (due November 30). The IRD may request verification during audits or assessments.

Calculator Advantage: Our tool automatically fetches and applies the correct CBSL buying rate, with the option to manually override if you have a specific rate approved by IRD for special circumstances.

How is foreign employment tax different from freelancer tax in Sri Lanka?

Foreign employees and freelancers have fundamentally different tax treatments in Sri Lanka, despite both earning foreign currency. Understanding your correct classification is critical for compliance.

1. Income Classification

Foreign Employee (Tax Table 08):

  • Income Type: Employment income
  • Legal Basis: Tax Table No. 08 of IRA
  • Classification: Gains and profits from employment

Freelancer/Independent Contractor:

  • Income Type: Business income
  • Legal Basis: General business income provisions
  • Classification: Gains and profits from business

2. Expense Deductions

Foreign Employee:

  • No expense deductions allowed
  • Tax calculated on gross salary received
  • Cannot deduct: Office rent, equipment, software, internet, utilities, travel
  • Only standard Rs. 1,800,000 relief applies

Freelancer:

  • Business expense deductions allowed
  • Tax calculated on net income (revenue minus expenses)
  • Can deduct: Business equipment, software subscriptions, co-working space, professional fees, utilities (proportional business use)
  • Plus standard Rs. 1,800,000 relief

3. Payment Schedule

Foreign Employee:

  • Frequency: Monthly
  • Deadline: 15 days after month-end
  • Example: May income => pay by June 15
  • Method: Cumulative calculation each month

Freelancer:

  • Frequency: Quarterly instalments
  • Deadlines: August 15, November 15, February 15, May 15
  • Based on: Annual estimated tax
  • Method: Four equal payments throughout year

4. Tax Calculation Method

Foreign Employee:

  • Cumulative throughout Year of Assessment
  • Each month adds to running total
  • Tax recalculated on full cumulative amount
  • Monthly payment = Current total tax - Previous payments

Freelancer:

  • Annual estimate at start of year
  • Divided into four quarterly payments
  • Final reconciliation with annual return
  • Adjustment in final quarter if needed

5. Tax Rates (2025/2026)

Both apply the same 15% maximum rate for foreign currency income, but calculation differs:

Foreign Employee:

  • Up to Rs. 1.8M cumulative: 0%
  • Rs. 1.8M - 2.8M: 6% of cumulative - Rs. 108,000
  • Above Rs. 2.8M: 15% of cumulative - Rs. 360,000

Freelancer:

  • Same rate structure
  • Applied to net income after business expense deductions
  • Can result in significantly lower tax if substantial business expenses

6. Determining Your Status

You're a Foreign Employee if:

  • Single employer relationship
  • Employer controls how/when/where you work
  • Regular salary payments
  • Employer provides tools/equipment
  • Integrated into employer's organization
  • Employment contract specifies work hours, duties

You're a Freelancer if:

  • Multiple clients simultaneously
  • Control your own work methods and schedule
  • Project-based or deliverable-based fees
  • Provide your own tools/equipment
  • Independent business operations
  • Contract for specific deliverables, not time

Common Mistake: Many people working for a single overseas client on long-term contracts consider themselves freelancers, but legally they're employees if the employer controls their work. Misclassification can lead to penalties.

Example Comparison:

Scenario: Rs. 10,000,000 foreign currency income for Y/A

Foreign Employee:

  • Gross Income: Rs. 10,000,000
  • Relief: Rs. 1,800,000
  • Taxable: Rs. 10,000,000 (no expense deduction)
  • Tax: (Rs. 10M × 15%) - Rs. 360,000 = Rs. 1,140,000

Freelancer with 20% business expenses:

  • Gross Revenue: Rs. 10,000,000
  • Business Expenses: Rs. 2,000,000 (equipment, software, workspace)
  • Net Income: Rs. 8,000,000
  • Relief: Rs. 1,800,000
  • Taxable: Rs. 8,000,000
  • Tax: (Rs. 8M × 15%) - Rs. 360,000 = Rs. 840,000
  • Savings: Rs. 300,000 due to expense deductions

Which Calculator to Use:

  • Foreign Employee: This calculator (Tax Table 08)
  • Freelancer: Freelancer Tax Calculator (different tool)

Can I deduct business expenses from my income?

No. As an employee (not a freelancer), you cannot deduct business expenses. Your income is taxed on the gross amount received. Only the standard Rs. 1,800,000 relief applies.

What if I start working mid-year?

The calculator supports partial year input. Simply add the months you worked, and it will calculate cumulative tax from your start month. You only pay tax on income received during the Year of Assessment.

What if I miss a payment deadline?

Late payments may incur penalties and interest charges from the IRD. Contact the Inland Revenue Department immediately if you miss a deadline. Penalties compound, so early action is essential.

Do I need to pay quarterly like freelancers?

No. As a foreign employee, you pay monthly (within 15 days of month-end). Quarterly payments apply only to independent contractors/freelancers with business income.

Can I use this calculator for cryptocurrency income?

Only if you receive cryptocurrency as employment income from a foreign employer and it's converted to LKR through a bank. Other crypto income may have different tax treatment.

Do I need to file an annual tax return if I pay monthly APIT?

Yes. Even though you pay APIT monthly, you MUST file an annual Return of Income by November 30 (8 months after Y/A end). The return reconciles your payments and may result in additional tax due or refunds.

Recent Updates & Changes

October 2025 Updates

  • Tax Table 08 rates confirmed for Y/A 2025/2026 - No changes from April 2025 rates
  • Rs. 1,800,000 relief threshold maintained - Consistent with prior year
  • 15% maximum rate continues - Preferential rate for foreign currency income
  • CBSL exchange rate integration improved - Faster auto-fetch in calculator
  • CSV import/export enhanced - Better year-round tracking capabilities

September 2025 Updates

  • Updated calculator with comprehensive multi-currency support (18 major currencies)
  • Enhanced CSV import/export functionality for seamless data continuation
  • Added automatic CBSL exchange rate fetching with manual override option
  • Improved mobile responsiveness for on-the-go tax calculations
  • Added payment due date tracking in results table

April 2025 Updates (Major Tax Law Changes)

  • Tax exemption removed: Foreign currency employment income no longer exempt
  • 15% maximum rate introduced: Replaces previous 100% exemption
  • Cumulative assessment method: New month-by-month tracking requirement
  • Monthly payment requirement: 15-day deadline after month-end established
  • Tax Table 08 activated: Specific framework for foreign employment income

Foreign Employment Tax Payment Process - Complete Guide

Step 1: Income Receipt & Recording (Within 24 hours)

  1. Receive foreign currency payment in your Sri Lankan bank account
  2. Record receipt date precisely - needed for CBSL exchange rate lookup
  3. Note exact amount in foreign currency (USD, EUR, GBP, etc.)
  4. Save bank confirmation or statement showing the transaction
  5. Screenshot CBSL rate for that date or use our auto-fetch feature

Documents to Maintain:

  • Bank credit advice or statement
  • Employer payment confirmation
  • CBSL exchange rate documentation

Step 2: Tax Calculation (Within 7 days of receipt)

  1. Look up CBSL buying rate for your income receipt date
  2. Convert to LKR by multiplying foreign amount × exchange rate
  3. Add to cumulative income for current Year of Assessment (April-March)
  4. Calculate cumulative tax using Tax Table 08 progressive rates
  5. Determine monthly payment by subtracting previously paid tax

Calculation Formula:

LKR Income = Foreign Amount × CBSL Buying Rate
Cumulative Income = Sum of all months to date in Y/A
Cumulative Tax = Apply Tax Table 08 rates to cumulative
Monthly Payment = Current Cumulative Tax - Previous Total Tax Paid

Use Our Calculator: Automates all steps with real-time CBSL rates and accurate cumulative tracking.

Step 3: Payment Submission (By 15th of next month)

  1. Calculate payment due date - 15 days after the calendar month ends
  2. Prepare payment amount determined in Step 2
  3. Use your TIN (Taxpayer Identification Number) for identification
  4. Select tax type: Individual Income Tax (IIT)
  5. Submit payment through approved IRD channels:
    • Online banking (if bank supports IRD payments)
    • Bank branch with IRD payment form
    • IRD office directly

Payment Confirmation:

  • Obtain and save payment receipt
  • Note receipt number and date
  • Keep for annual Return of Income

Step 4: Record Keeping (Ongoing throughout Y/A)

  1. Maintain monthly spreadsheet or use our CSV export feature
  2. Track cumulative totals - income and tax paid to date
  3. Store all documentation: Bank statements, CBSL rates, payment receipts
  4. Update after each month for accurate ongoing tracking
  5. Prepare for annual return due November 30

Essential Records Checklist:

  • Monthly foreign currency amounts and currencies
  • All CBSL exchange rates used
  • Calculated LKR amounts per month
  • Cumulative income totals
  • All tax payment receipts with dates
  • Employment contract and employer details

Total Timeline: Income receipt => 15 days to calculate and pay by month-end + 15 days

Example Timeline:

  • May 1-31: Income received
  • June 1-15: Payment due by June 15
  • Late payment: Penalties and interest apply

Tax Planning & Optimization Tips for Foreign Employees

1. Timing Your Income Receipts

Strategic Timing Considerations:

  • Early Year of Assessment income: Income received in April benefits from the full Rs. 1,800,000 relief threshold immediately
  • Spread large bonuses: If possible, request bonuses split across months to avoid large cumulative spikes
  • Understand cumulative impact: A large bonus in one month increases tax for that month AND all remaining months due to cumulative assessment
  • Avoid: Receiving all annual income in one or two months - loses cumulative relief benefit

Example of Bonus Timing Impact:

Scenario A: USD 10,000 bonus in December

  • Cumulative income hits Rs. 15M+
  • October-March all taxed at 15% rate
  • Total Y/A tax: Rs. 1,944,900

Scenario B: USD 5,000 split bonus in June and December

  • Gradual cumulative growth
  • Some months still in 6% bracket
  • Total Y/A tax: Rs. 1,820,000
  • Savings: Rs. 124,900 (approximate)

2. Exchange Rate Awareness

Maximize Your Tax Position:

  • Monitor CBSL rates: Be aware of favorable exchange rate periods
  • Coordinate with employer: If timing flexibility exists, receive income when LKR is stronger (lower conversion)
  • Document rate fluctuations: Keep records showing you used official CBSL rates, not commercial rates
  • Avoid: Using bank commercial rates instead of CBSL rates (not compliant)

Rate Monitoring Strategy:

  • Check CBSL exchange rate trends monthly
  • Understand seasonal patterns (if any)
  • Document rationale for any payment timing requests to employer

3. Record Keeping Best Practices

Essential Documentation System:

  • Digital + Physical: Maintain both formats for security
  • Monthly CSV exports: Use our calculator's export feature after each payment
  • Cloud backup: Store copies in secure cloud storage (Google Drive, Dropbox)
  • Organized folders: Year > Month > Documents structure
  • Running spreadsheet: Track cumulative totals in real-time

Monthly Documentation Checklist:

  • Bank statement showing foreign currency receipt
  • CBSL exchange rate printout or screenshot
  • Tax calculation worksheet (from our calculator)
  • IRD payment receipt
  • Updated cumulative tracker

4. Payment Strategy & Compliance

Ensure Timely Compliance:

  • Set calendar reminders: 10 days before 15th of each month
  • Budget monthly: Set aside tax amount immediately when income received (typically 10-15% of gross)
  • Early payment advantage: Pay 3-5 days before deadline to account for bank processing
  • Maintain payment buffer: Keep emergency fund for unexpected tax increases (bonus months)
  • Avoid: Last-minute payments on the 15th (risk of late payment penalties)

Budgeting Rule of Thumb:

  • Income < Rs. 1.8M cumulative: Set aside 0%
  • Income Rs. 1.8M - 2.8M cumulative: Set aside 6-8% of gross
  • Income > Rs. 2.8M cumulative: Set aside 12-15% of gross

5. Non-Cash Benefits Planning

Understand Your Total Tax Liability:

If your employer provides benefits beyond cash salary:

  • Know the valuation rules: Housing (10-12.5%), utilities (100%), phone (50%)
  • Request cash instead: If possible, negotiate cash salary instead of benefits for clearer tax treatment
  • Document all benefits: Maintain records of what employer provides
  • Include in calculations: Add benefit values to monthly income for accurate tax

Common Non-Cash Benefits:

Benefit Taxable Value Tax Impact Example
Housing (Rated Area) 12.5% of salary Rs. 300,000 salary => Add Rs. 37,500/month
Housing (Unrated) 10% of salary Rs. 300,000 salary => Add Rs. 30,000/month
Electricity/Gas 100% of cost Rs. 15,000 bill => Add Rs. 15,000/month
Mobile Phone 50% of cost Rs. 10,000 bill => Add Rs. 5,000/month

6. Year-End Planning

Prepare for Annual Return (November 30 deadline):

  • October review: By October, review cumulative tax paid vs. liability
  • Adjustment opportunities: If underpaid, make additional payments before year-end
  • Document collection: Gather all 12 months of records for return preparation
  • Professional consultation: Consider tax advisor for first annual return
  • Early filing: Don't wait until November 30 - file in October for peace of mind

Comparison: Foreign Employee vs Freelancer Tax Treatment

A comprehensive side-by-side comparison to help you understand the critical differences and ensure you're using the correct tax framework.

Aspect Foreign Employee (Tax Table 08) Independent Contractor/Freelancer
Income Classification Employment Income Business Income
Legal Framework Tax Table No. 08 (IRA) General Business Income Provisions
Tax Basis Gross salary (no deductions) Net income (after expenses)
Expense Deductions Not allowed Business expenses allowed
Examples of Deductions None Office rent, equipment, software, utilities, professional fees
Payment Frequency Monthly Quarterly (4 instalments)
Payment Deadlines 15th of next month Aug 15, Nov 15, Feb 15, May 15
Calculation Method Cumulative (month-by-month) Annual estimate with quarterly splits
Tax Rate Structure Progressive cumulative (6%-15%) 15% on taxable income
Relief Threshold Rs. 1,800,000 Rs. 1,800,000
Maximum Rate 15% 15%
Exchange Rate CBSL buying rate CBSL buying rate
Monthly Tracking Required Not required (annual focus)
Annual Return Due November 30 November 30
Calculator to Use This calculator Freelancer Tax Calculator
IRD Tax Type Individual Income Tax (IIT) Individual Income Tax (IIT)
Employment Contract Contract of service Contract for service
Work Control Employer directs work Independent control
Multiple Clients Single employer Can have multiple clients
Tools/Equipment Employer provides Self-provided

Tax Calculation Example (Rs. 7,200,000 annual income)

Foreign Employee:

  • Gross Salary: Rs. 7,200,000
  • Allowable Deductions: Rs. 0 (no expense deductions)
  • Cumulative Relief: Rs. 1,800,000 (applied through cumulative formula)
  • Taxable Amount: Rs. 7,200,000
  • Tax Calculation: (Rs. 7.2M × 15%) - Rs. 360,000
  • Total Tax: Rs. 720,000
  • Effective Rate: 10%

Freelancer (with 25% business expenses):

  • Gross Revenue: Rs. 7,200,000
  • Business Expenses: Rs. 1,800,000 (equipment, software, workspace, utilities)
  • Net Income: Rs. 5,400,000
  • Relief: Rs. 1,800,000 (applied in calculation)
  • Taxable Income: Rs. 5,400,000
  • Tax Calculation: (Rs. 5.4M × 15%) - Rs. 360,000
  • Total Tax: Rs. 450,000
  • Effective Rate: 6.25%
  • Tax Savings: Rs. 270,000 (37.5% less tax)

How to Determine Your Correct Classification

You ARE a Foreign Employee if:

  1. You have a single, ongoing employer relationship
  2. Employer controls your work schedule, methods, and deliverables
  3. You receive regular salary payments (monthly, bi-weekly)
  4. Employer provides tools, equipment, or software
  5. You're integrated into the employer's team and structure
  6. Employment contract specifies work hours and job duties
  7. You cannot refuse assigned work without consequences

You ARE a Freelancer/Independent Contractor if:

  1. You work with multiple clients simultaneously
  2. You control how and when work is completed
  3. You're paid per project or deliverable, not time-based salary
  4. You provide your own tools, equipment, and workspace
  5. You operate as an independent business
  6. Contracts specify deliverables, not work methods
  7. You can accept or decline projects at will

Misclassification Consequences:

  • Using wrong tax table = incorrect tax calculations
  • Potential IRD penalties for non-compliance
  • Interest on underpaid tax amounts
  • Required retroactive corrections

When Uncertain: Consult with a qualified Sri Lankan tax professional to review your employment arrangement and determine correct classification.

Legal Basis

This calculator implements:

  • Inland Revenue Act provisions for foreign employment income
  • Tax Table No. 08 - Rate for deduction of tax from employment income received from foreign employer
  • Section 83A(3) - Withholdee liability when withholding agent fails to withhold
  • Ministerial Gazette effective from April 1, 2025

Disclaimer

This calculator provides estimates based on current Sri Lankan tax law. Tax laws are subject to change. For personalized tax advice or complex situations, consult a qualified tax professional or the Inland Revenue Department of Sri Lanka.

Need Help?

If you have questions about your specific tax situation, contact:

  • Inland Revenue Department of Sri Lanka: www.ird.gov.lk
  • Tax Consultant: For complex cases involving multiple income sources

💡 This tool provides comprehensive calculations. All results are estimates and should be used for planning purposes only.