Withholding Tax (WHT) is tax deducted at the source — meaning the person paying you deducts tax before you receive the money. In Sri Lanka, WHT applies to interest income, rent, service fees, dividends, and more.

Understanding WHT is crucial because these deductions are credits against your final tax liability. If too much was withheld, you get a refund.

WHT Rates for 2025/2026

Payment Type	WHT Rate	Deducted By
Interest paid to residents by banks	5% (or 10% without self-declaration)	Bank
Interest paid to non-residents	10% (Final WHT)	Bank
Dividends	15%	Company paying dividend
Rent (paid by companies/partnerships)	10%	Tenant company
Service fees (to residents)	5%	Payer
Service fees (to non-residents)	14%	Payer
Contract payments	5%	Payer
Insurance commissions	5%	Insurance company

What “Final Withholding Tax” Means

Some WHT deductions are “final” — meaning the tax deducted is the full tax you owe on that income. You don’t include it in your return of income.

Final WHT applies to:

• Interest income for non-resident Sri Lankan citizens (10% = final)
• Dividends (15% = final in most cases)

Non-final WHT (which you claim as credits):

• WHT on rent
• WHT on service fees
• WHT on contract payments
• WHT on interest for residents (if not covered by self-declaration)

How WHT Credits Work When You File

When you file your Return of Income, you calculate your total tax liability on all income. Then you subtract all WHT credits:

Example:

• Total tax liability: Rs. 150,000
• APIT deducted by employer: Rs. 100,000
• WHT on interest: Rs. 20,000
• WHT on rent income: Rs. 40,000
• Total credits: Rs. 160,000
• Result: Rs. 10,000 REFUND

Many taxpayers don’t realize they’re owed refunds because they don’t file returns. The IRD won’t send you money automatically — you must file to claim it.

The New Bank Interest WHT Rules (From April 2025)

This is the biggest WHT change affecting individuals. Banks now deduct WHT on interest as follows:

• If you submit a self-declaration (income below Rs. 1,800,000): No WHT deduction
• If you DON’T submit a self-declaration: 10% WHT is deducted automatically
• Non-residents: 10% WHT (Final — no refund needed)

See our detailed guide: Bank Self-Declaration Form Sri Lanka 2025

WHT on Rent — What Landlords Need to Know

If your tenant is a company, partnership, or government entity, they must deduct 10% WHT when paying rent. As the landlord, you receive only 90% of the rent. The 10% is credited to your tax account, which you claim when filing.

Example:

• Monthly rent: Rs. 100,000
• WHT deducted by tenant: Rs. 10,000
• You receive: Rs. 90,000
• Annual WHT credit: Rs. 120,000

If your total tax liability after all deductions is less than Rs. 120,000, you’re owed a refund.

Calculate Your Tax After WHT Credits

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Claiming Your WHT Refund

GDP Consultants can review your WHT deductions across all income sources and file your return to maximize your refund.

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