Proposed Changes to Individual Residency Rules: 2026 Amendment Bill

The residency rules for individuals in Sri Lanka are set to undergo significant changes under the Inland Revenue (Amendment) Bill of 2026. While the 183-day rule remains a core pillar of residency, the new Bill introduces specific exceptions designed to encourage investment and clarify the status of Sri Lankans working abroad.

Key Proposed Amendments

1. Exemption for Golden Paradise Visa Holders

A new provision in the Bill states that an individual will not be considered a resident for tax purposes if they hold a Golden Paradise Residence Visa issued by the Controller of Immigration and Emigration.

• Example: If an international investor stays in Sri Lanka for 300 days under this specific visa, they will be treated as a non-resident and will only be taxed on income derived from Sri Lankan sources, rather than their worldwide income.

2. Clarification for Long-Term Overseas Employment

The Bill introduces Section 69(2A) to protect those leaving the country for work. If an individual leaves Sri Lanka for employment under a contract of at least one year with a non-associated employer, they are deemed non-residents.

• Effective Period: This status begins on the first day of the year of assessment in which they depart and remains until the contract expires.
• Example: A professional leaving for a two-year contract in Dubai on June 1st will be considered a non-resident for that entire tax year, even though they were physically present in Sri Lanka for the first two months.

3. Protections for Foreign Citizens on Sri Lankan Ships

While employment on a Sri Lankan ship usually triggers residency, the Bill adds a proviso for foreign citizens. These individuals will be deemed residents only for the purpose of taxing their income from that specific ship employment.

• Example: A Japanese engineer working on a Sri Lankan vessel will not have their Japanese investment income taxed in Sri Lanka; they will only pay tax on the salary earned from the ship.

Summary of Key Changes

Important Legal Note

It is critical to understand that the information presented above is based on a Bill currently before Parliament. These provisions do not have the force of law yet. Under Section 1(2) of the Bill, these changes will only become legal and active once the Bill is passed by Parliament and approved (certified) by the Speaker, at which point it becomes an Act. Until that time, the existing rules of the Inland Revenue Act No. 24 of 2017 remain in full effect.