Sri Lanka’s 15% tax on dollar income, for US LLC owners

What changed in April 2025

Before April 2025, income Sri Lankans earned by providing services to clients abroad was largely exempt from income tax. The Inland Revenue (Amendment) Act, No. 2 of 2025 removed that exemption from the 2025/26 year of assessment, which started on 1 April 2025.

In its place came a cap. For individuals, qualifying service export income is taxed at a maximum of 15% and kept out of the higher 18% to 36% bands. Companies that export services pay a flat 15%. The IRD confirmed both again in August 2026.

Does it apply to you?

It covers services you provide from Sri Lanka to clients abroad: freelancing, software development, design, consulting, online marketing and similar work, including work found through platforms such as Upwork or Fiverr. The capped rate applies when:

• you’re paid in foreign currency, and
• the money is brought into Sri Lanka through a bank here.

Income you keep offshore, for example left in your Mercury account, can be taxed at the ordinary progressive rates instead, which go up to 36%. That’s a strong reason to bring earnings home regularly.

How much you’d pay

For an individual, the first LKR 1.8 million of income each year is covered by the personal relief and isn’t taxed. Based on the IRD’s published bands and the 15% cap, qualifying income is then taxed like this:

Worked example

Say your LLC earns profit you bring home that comes to LKR 4,000,000 in a year, and you have no other income:

That’s an effective rate of 6%. If the same income were taxed at the ordinary rates instead, the bill would be about LKR 330,000.

Business expenses, such as software, equipment and your Entryly fees, can be deducted before tax, so keep receipts.

Filing and paying

• Register for a TIN with the IRD if you don’t have one.
• The tax year runs from 1 April to 31 March.
• File a self-assessment return for each year. The return for 2025/26 is due by 30 November 2026.
• Keep records: Stripe payouts, Mercury and Wise statements, and your bank’s inward remittance records show what you earned and when it arrived.

Tax paid abroad

If a foreign country taxes the same income, Section 80 of the Inland Revenue Act lets a resident claim a credit for that foreign tax, even without a double tax agreement. For most Sri Lankan owners of a single-member US LLC, though, there’s no US income tax to credit.

The US side

A single-member LLC owned by a non-resident with no US trade or business usually owes no US federal income tax. It still has paperwork:

• Form 5472 with a pro forma Form 1120, every year, due 15 April. The penalty for not filing starts at $25,000. Entryly files it for $99 a year.
• Your state’s requirements: a registered agent every year, and Wyoming’s annual report if you formed there.

A multi-member LLC files Form 1065 instead, due 15 March.