In today's evolving tax environment, staying informed about legislative changes is essential for both businesses and individuals. The Inland Revenue (Amendment) Act No. 11 of 2026 has introduced several important revisions to Sri Lanka’s tax framework, including significant changes to Capital Gains Tax (CGT).
If you own property, invest in shares, or hold other investment assets, understanding these changes can help you make better financial decisions and avoid unexpected tax liabilities.
What Is Capital Gains Tax (CGT)?
Capital Gains Tax (CGT) is a tax imposed on the profit earned when an investment asset is sold, transferred, or otherwise disposed of.
Common examples of investment assets include:
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Land and property
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Buildings
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Shares and securities
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Business interests
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Other qualifying investment assets
It is important to note that CGT is applied to the gain (profit) made from the transaction, not the total sale value of the asset.
For example, if you purchased a property for LKR 5 million and later sold it for LKR 8 million, your capital gain would be LKR 3 million. The applicable CGT would be calculated on this gain.
New Capital Gains Tax Rates Under the 2026 Amendment
One of the most notable changes introduced by the Inland Revenue (Amendment) Act No. 11 of 2026 is the revision of CGT rates for different categories of taxpayers.
Individuals and Partnerships The Capital Gains Tax rate for individuals and partnerships has increased:
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Previous Rate: 10%
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New Rate: 15%
This means that gains arising from the disposal of qualifying investment assets will now attract a higher tax liability than before.
Trusts and Unit Trusts For trusts, unit trusts, and certain mutual funds, the increase is even more significant:
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Previous Rate: 10%
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New Rate: 30%
This substantial increase may affect investment structures that operate through trusts and similar arrangements.
Charitable Institutions Certain charitable institutions are also affected by the amendments:
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Previous Rate: 10%
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New Rate: Up to 30%
However, specific qualifying charitable institutions may be subject to different rates depending on their circumstances.
Effective Date of the New CGT Rates
The revised Capital Gains Tax rates became effective from 03 June 2026. Any capital gains realized before this date may continue to be subject to the previous tax rates, while gains arising on or after the effective date are generally taxed under the new rates.
Because tax treatment can depend on the timing and nature of a transaction, obtaining professional advice is recommended before completing major asset disposals.
How Will These Changes Affect Investors?
The increase in CGT rates can directly impact the net return on investments.
Investors who are planning to:
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Sell property
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Dispose of shares
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Transfer business assets
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Restructure investments
should carefully evaluate the tax implications before proceeding.
A higher CGT rate means a larger portion of the profit earned from the disposal of an asset may be payable as tax, reducing the overall return on investment.
Impact on Business Owners
Business owners should also pay close attention to the new CGT rates.
Many businesses hold valuable assets such as:
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Commercial property
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Land
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Investment portfolios
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Business shares
When these assets are sold or transferred, the resulting gains may now attract higher tax liabilities. As a result, businesses may need to revisit their:
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Tax planning strategies
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Investment decisions
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Corporate restructuring plans
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Succession and ownership transfer arrangements
The Importance of Tax Planning
With the new CGT rates now in effect, proactive tax planning has become more important than ever.
Effective tax planning can help businesses and individuals:
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Understand potential tax obligations before a transaction occurs
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Improve financial forecasting
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Reduce compliance risks
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Make informed investment decisions
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Ensure adherence to Inland Revenue regulations
Seeking professional tax advice before selling or transferring significant assets can help prevent costly mistakes and unexpected tax exposure.
Final Thoughts
The Inland Revenue (Amendment) Act No. 11 of 2026 has brought notable changes to Sri Lanka's Capital Gains Tax regime. With CGT rates increasing from 10% to 15% for individuals and partnerships, and from 10% to 30% for trusts and unit trusts, investors and business owners should carefully assess the impact on their financial plans.
Understanding these amendments is essential for making informed decisions regarding asset sales, investment planning, and long-term wealth management.
Need Expert Tax Advice? At Talentspark Consulting, our tax advisory team can help you understand the latest tax amendments and ensure compliance with Inland Revenue regulations.
Contact us today to discuss your tax planning and compliance needs.
