Small and Medium Enterprises (SMEs) in Sri Lanka can significantly reduce their tax burden by properly claiming “allowable expenses.” Here is how to keep more of your hard-earned profit.
1. Management & Operational Expenses
Any expense incurred “wholly and exclusively” for the production of income is deductible. This includes:
- Staff salaries and EPF/ETF contributions.
- Rent for office or factory space.
- Electricity, water, and internet bills related to the business.
2. Capital Allowances (Depreciation)
You cannot deduct the full cost of a machine or vehicle in one year. Instead, you claim a “Capital Allowance” over several years.
- Computers/Software: Usually 20%–25% per year.
- Plant & Machinery: 20% per year.
3. Marketing and Advertising
Costs for digital marketing, local newspaper ads, and business signage are fully deductible. Keeping receipts is vital here to prove the expense to the IRD during an audit.
4. VAT Threshold in 2026: Correction
An earlier version of this post said the VAT registration threshold had been lowered to Rs. 36 million annually from April 2026. That proposed reduction was withdrawn by Parliament on 23 June 2026, and the Value Added Tax (Amendment) Act No. 14 of 2026 (gazetted 3 July 2026) confirms the threshold remains at Rs. 60 million per year (Rs. 15 million per quarter). If your turnover exceeds Rs. 60 million, you must register for VAT, but you can also start claiming “Input VAT” on your business purchases. Voluntary registration below the threshold is still available if it suits your business.
Next Steps for AdSense Approval:
- Internal Linking: In “Blog 1,” add a link that says “Learn how to file these taxes in our [Step-by-Step Guide].”
- Images: Add at least one unique image or chart to each post (e.g., a screenshot of the IRD login page or a table of tax slabs).
- Frequency: Try to post one of these every 2-3 days so Google sees the site is active.