Entity Setup
Sri Lanka: Capital Gains & Enhanced Capital Allowance Rules You Should Know
Sri Lanka has revised capital gains rates and granted 100% Enhanced Capital Allowance for large capital investment—learn how this affects your investments and business assets.
By NomadicTax Research Team • 5-8 min read • September 16, 2026
## Recent Tax Measures in Sri Lanka
Sri Lanka’s **Inland Revenue Department** issued notice **SEC/PN/IT/2026/02**, effective **3 June 2026**, introducing several important amendments. ([ird.gov.lk](https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/793/SEC_PN_IT_2026-02_E.pdf?utm_source=openai))
### Key changes include:
- Revised **Capital Gains Tax rates**: 15% for individuals and partnerships; 30% for trusts, mutual funds, NGOs. ([ird.gov.lk](https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/793/SEC_PN_IT_2026-02_E.pdf?utm_source=openai))
- A new **Enhanced Capital Allowance (ECA)**: for businesses that invest over **USD 250,000** in depreciable assets (excluding intangibles); those assets qualify for **100% deduction**. ([ird.gov.lk](https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/793/SEC_PN_IT_2026-02_E.pdf?utm_source=openai))
- **Interest waiver**: late payment interest or underpayment surcharges for assessments up to AY 2024-25 will be waived, if principal tax paid by **2 December 2026**. ([ird.gov.lk](https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/793/SEC_PN_IT_2026-02_E.pdf?utm_source=openai))
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## Who is affected
- **Individual investors** disposing of capital assets (stocks, real estate, etc.): new rates raise or equalize their tax burden, depending on asset class and legal structure.
- **Business enterprises** investing in machinery or equipment: if the investment is more than USD 250,000, you can claim full Enhanced Capital Allowance in the year of purchase.
- **Taxpayers with pending assessments**: those with overdue interest/surcharge should pay up principal by 2 December to avoid interest.
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## Practical steps and strategies
1. Plan asset disposals considering new capital gains rates—especially for trusts and mutual funds.
2. Accelerate or delay investments: if a business can frontload purchases to cross the USD 250,000 threshold, achieve full ECA.
3. For those with overdue interest: ensure you settle principal tax by 2 Dec 2026 to get waiver.
4. Maintain strong records: acquisition dates, cost, market value, depreciation details for qualifying assets.
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## Example scenarios
- **Investor A**, individual, sells shares at profit: now taxed at 15%, versus possibly lower rates earlier depending on asset type.
- **Company B** buys machinery worth USD 300,000: can claim **100% ECA**, thus reducing taxable profit sharply in year of purchase.
- **Trust C**, mutual fund: capital gains taxed now at 30%, so consider holding period or structure to reduce exposure.
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## Actionable insights
- Review long-term investment plans in light of revised capital gains tax—especially portfolios held in trusts or funds.
- Companies should model cashflows with ECA benefit factored in vs depreciation spread across years under older rules.
- Individuals with assets to sell or realize: act before rules come into further modification, and consult accountants.
These reforms reflect Sri Lanka’s intent to incentivize large fixed investments and modernize capital market taxation—if you operate in Sri Lanka or hold Sri Lankan assets, the new rules matter.