The UAE is home to over 300,000 Sri Lankans — one of the largest diaspora communities outside South Asia. The UAE’s zero personal income tax environment makes it an attractive destination, but it does not mean Sri Lanka has no claim on your earnings. Here is what every Sri Lankan in Dubai, Abu Dhabi, Sharjah, and across the Gulf needs to know.
Sri Lanka–UAE Double Taxation Agreement
Sri Lanka and the UAE have a Double Taxation Agreement. However, because the UAE levies zero personal income tax, the DTA works differently here than in the UK or Australia. Since you pay no income tax in the UAE on your salary, you cannot claim a foreign tax credit against your Sri Lanka liability — there is no UAE tax paid to credit. This is one of the most important differences for Gulf-based Sri Lankans compared to those in Western countries.
The 15% Remittance Tax: Especially Significant for UAE-Based Sri Lankans
Because you pay no income tax in the UAE, you have no foreign tax credit to offset against Sri Lanka’s 15% remittance tax. If you are a Sri Lanka tax resident — including under the deemed residency rule — and you remit your UAE salary to Sri Lanka through the banking system, the full 15% applies to that remittance with no reduction.
This is a significant amount. On a monthly remittance of AED 5,000 (approximately LKR 415,000), the annual 15% tax liability would be around LKR 747,000 — close to LKR 750,000 per year. Many UAE-based Sri Lankans are sending far more than this home to family.
Are You a Deemed Resident?
This is the first question to answer. Many Sri Lankans who moved to the UAE in the last 1–3 years are still deemed residents under Sri Lanka’s tax law — even if they spent only a few weeks in Sri Lanka last year. The 2-year prior residency rule under Section 79 means you remain taxable as a resident in Sri Lanka until you have been continuously absent for 365 days.
The 2025 Employment Contract Exemption: Important for Gulf Workers
If you left Sri Lanka for your UAE job under a formal employment contract of at least one year with an employer that has no connection to a Sri Lankan employer of yours, the 2025 IRA Amendment Act automatically treats you as non-resident from the first day of the tax year you left. This is excellent news for many Gulf workers who hold formal expatriate employment contracts — but the contract must meet the qualifying conditions.
Property and Business Income in Sri Lanka
Many UAE-based Sri Lankans own property or run a business back home. Rental income from Sri Lanka property is subject to 14% withholding tax regardless of your residency status. Business income requires separate calculation and a dedicated filing schedule. GDP Consultants manages both remotely for Gulf-based clients.
Get Your Sri Lanka Tax Position Confirmed
Use our free Sri Lanka Expat Tax Checker to confirm your residency status, calculate the 15% remittance tax on your UAE income, and understand exactly what you owe — if anything — to the Sri Lanka IRD.
GDP Consultants works with Sri Lankans across Dubai, Abu Dhabi, Sharjah, Riyadh, Doha, Kuwait City, and Muscat. Our service is fully remote. Message us on WhatsApp to speak with our team today.
Written by Lal Kumarasiri, Chartered Accountant (ACA, MAAT), GDP Consultants Pvt Ltd. Questions about your specific situation? WhatsApp us or email info@taxcalculator.lk.