A new subsection inserted into Sri Lanka’s Inland Revenue Act on 3 June 2026 says that if you leave Sri Lanka on an employment contract of not less than one year, with an employer unconnected to your previous Sri Lankan employer, you are not a resident of Sri Lanka from the first day of the year of assessment in which you left until that contract expires. It is backdated to 1 April 2025, and almost nothing written about Sri Lankan expatriate tax reflects it yet.

That matters because on 1 April 2025 Sri Lanka also started taxing foreign-source income remitted through a bank at up to 15 percent, having previously exempted it. This guide covers the residence tests in section 69 and the new subsection 69(2A), the worldwide-versus-local charge in section 4, the 15 percent rate on remitted foreign income, the current rate table and personal relief, and the Sri Lanka Bureau of Foreign Employment registration that sits outside tax law but decides whether your family gets anything if something goes wrong here.

The 2026 Amendment That Settles the Year You Leave

Section 9 of the Inland Revenue (Amendment) Act, No. 11 of 2026, certified on 3 June 2026, inserted a new subsection 69(2A) into the principal Act with effect from 1 April 2025. It declares, for the avoidance of doubt, that an individual who leaves Sri Lanka for employment under a contract of not less than one year, with an employer not associated with their immediate Sri Lankan employer, is not treated as resident from the first day of the year of assessment in which they leave until the contract expires.

Before that, the year of departure was genuinely uncertain. Section 70(1) treats a person as resident for the whole of a year of assessment unless they are resident only by reason of the 183-day count, in which case residence starts from the beginning of the 183-day period. Someone who left Colombo in August with a Dubai contract had spent more than 183 days in Sri Lanka that year and was arguably resident, and therefore arguably taxable on the Dubai salary from September onward.

What the two conditions actually require

The contract has to be for not less than one year. A six-month probationary letter, or a rolling arrangement with no stated term, does not meet the wording. Keep the signed offer that states the term, because it is the document that establishes the position.

The employer also has to be unassociated with your immediate Sri Lankan employer. A secondment from a Colombo company to its own Dubai branch or group company is exactly what the condition excludes, so a transfer inside the same group does not benefit from the subsection and falls back on section 69 and section 70 as ordinarily applied.

The same amendment inserted subsection 69(1A), which provides that an individual holding an Investor Category Residence Visa issued by the Controller of Immigration and Emigration is not a resident of Sri Lanka for a year of assessment, whatever the day count says.

The Residence Tests in Section 69

Section 69(1) makes an individual resident in Sri Lanka if they reside in Sri Lanka, or are present for 183 days or more in aggregate in any twelve-month period that commences or ends during the year of assessment. It also catches Sri Lankan government employees and officials whose spouse is posted abroad, and individuals employed on a Sri Lanka ship.

The first limb is the one nobody counts. “Resides in Sri Lanka” is a facts test with no day threshold behind it, so a person who keeps a family home, a family in it, and a life centered on Colombo can be resident on that limb even with a low day count. The 183-day limb is the safe harbor, not the whole test.

The twelve-month window is not the tax year

The 183 days are counted in any twelve-month period that commences or ends during the year of assessment, which runs 1 April to 31 March. That wording lets a single stretch straddling two tax years catch you in both. Four months at home from January to April, repeated the following year, can build a rolling twelve-month window over 183 days without any individual tax year looking heavy.

Section 70(1) then decides how much of the year is affected. If you are resident only by reason of the day count, residence begins at the start of the 183-day period. Otherwise you are treated as resident for the whole year of assessment, which is why the “resides in Sri Lanka” limb is more expensive than it looks.

What Residence Costs You

Section 4 draws the line in one sentence. A resident person’s assessable income is their income from employment, business, investment or other source “wherever the source arises.” A non-resident person is assessable only “to the extent that the income arises in or is derived from a source in Sri Lanka.”

So while you are non-resident, a UAE salary is entirely outside the Sri Lankan charge, which is the same result a tax-free UAE salary produces at the UAE end. Rent from a house in Nugegoda, or interest on a Sri Lankan rupee deposit, stays inside it regardless of where you live.

Income Resident Non-resident
UAE salary, kept in a UAE account Taxable, worldwide basis (s.4(a)) Not taxable (s.4(b))
UAE salary remitted to Sri Lanka through a bank Taxable at a maximum of 15% Not taxable
Rent from a Sri Lankan property Taxable at the ordinary slab rates Taxable, Sri Lankan source
Gain on selling a Sri Lankan investment asset 10% 10%, Sri Lankan source
Interest on a UAE deposit Taxable, worldwide basis Not taxable

Foreign Income Is No Longer Exempt, It Is Capped at 15 Percent

Section 3 of the Inland Revenue (Amendment) Act, No. 2 of 2025 inserted a new paragraph in the First Schedule taxing an individual’s foreign-source gains and profits at a maximum rate of 15 percent with effect from 1 April 2025, where they are earned in foreign currency and remitted through a bank to Sri Lanka. The same 15 percent applies to income from services rendered in or outside Sri Lanka to a person for use outside Sri Lanka, where payment is received in foreign currency and remitted through a bank.

The pre-2025 position, which most secondary guidance still describes, was an exemption. The 15 percent rate replaced it. For someone who is genuinely non-resident this changes nothing, because section 4(b) keeps foreign income outside the charge entirely. For a returnee, a consultant who splits the year, or anyone caught by the “resides in Sri Lanka” limb, it is the difference between nil and 15 percent.

The decision point that follows from it

The rate attaches to foreign currency earnings remitted through a bank. That gives a returning worker a real choice about sequencing: bringing accumulated savings home in the year you become resident again is a different transaction from bringing it home in a year you were still non-resident, and the two are taxed differently.

Anyone planning a permanent return should decide the order of operations before booking the flight, and should read it alongside moving a large sum out of the UAE and closing a UAE bank account correctly, both of which take longer than most people allow.

The Rates That Apply if You Are Caught

The First Schedule, as amended with effect from 1 April 2025, taxes a resident or non-resident individual’s taxable income at 6 percent up to LKR 1,000,000, then 18 percent to LKR 1,500,000, 24 percent to LKR 2,000,000, 30 percent to LKR 2,500,000, and 36 percent above that. Gains on realizing investment assets are taxed separately at 10 percent.

Personal relief was raised to LKR 1,800,000 for each year of assessment commencing on or after 1 April 2025, from LKR 1,200,000 for the two preceding years. Both figures were set by section 5 of the 2025 amendment Act, so anything quoting LKR 1.2 million for the current year is out of date.

Taxable income band (from 1 April 2025) Rate
Not exceeding LKR 1,000,000 6%
LKR 1,000,001 to 1,500,000 18%
LKR 1,500,001 to 2,000,000 24%
LKR 2,000,001 to 2,500,000 30%
Above LKR 2,500,000 36%
Foreign-source income remitted through a bank Maximum 15%
Gains on realizing investment assets 10%

SLBFE Registration Is Separate From Tax, and More Urgent

The Sri Lanka Bureau of Foreign Employment states that under the provisions of the SLBFE Act, every Sri Lankan leaving for employment outside Sri Lanka should register with the Bureau before departure. Registration triggers an insurance cover provided free of charge and valid for the contract period, and it is the mechanism through which the Bureau can intervene when a worker has a problem abroad.

Registration is valid for two or three years depending on the employment contract, and the Bureau states that renewal can be done through its head office, its branch offices, and Sri Lankan diplomatic missions overseas. For the UAE that means the Embassy in Abu Dhabi and the Consulate General in Dubai, which is the practical point: you do not have to fly home to renew.

What actually happens when registration is missing

The Bureau’s protection follows registration, not citizenship. A worker who arrived on a visit visa and converted to employment locally, or who was placed by an unlicensed agent, is normally outside the free insurance cover and outside the Bureau’s formal intervention channel at the point when it is needed.

If your departure was not routed through the Bureau, raise it with the labor section at the mission in Abu Dhabi or Dubai while you are still working here, rather than leaving your family to discover the gap. It is the single cheapest administrative fix in this guide.

Registration requirements the Bureau lists are a valid passport and identification documents, a copy of the employment contract meeting SLBFE standards, and medical screening. Keeping a copy of the registered contract also helps with the section 69(2A) question above, because that subsection turns on the contract’s stated term.

What the Sri Lanka to UAE Tax Treaty Does and Does Not Do

Sri Lanka and the UAE have both a limited agreement, signed 7 July 1992 and published in Gazette 824/13 of 23 June 1994, and a comprehensive agreement, signed 24 September 2003 and published in Gazette 1346/1 of 21 June 2004, effective from the year of assessment 2004/2005. The Inland Revenue Department lists both in its international relations table.

For a salaried worker the treaty rarely does any work, because the UAE levies no personal income tax on employment income and there is no double charge to relieve. Where it can matter is a dual-residence conflict, and there the operative document at the UAE end is a tax residency certificate from the Federal Tax Authority.

The Order to Do This In

Start with the contract. If it runs for a year or more and your Dubai employer is unconnected to your last Sri Lankan employer, subsection 69(2A) settles your position for the year you left, and you should keep the signed document with the stated term somewhere you can find it years later.

Then check the residence limbs honestly, including the “resides in Sri Lanka” limb rather than only the day count. Confirm your SLBFE registration exists, names a current nominee and has not lapsed. Keep bank advices for every remittance. And if a permanent return is coming, decide the order in which money moves before you decide the date you fly, because 15 percent turns on which side of the residence line the transfer lands.

Readers comparing positions across the region may find our guides for non-resident Indians in the UAE, Pakistanis and Section 82(d), and Filipinos and the three compulsory funds useful, since the residence tests differ sharply between them.

What We Could Not Verify

The Central Bank of Sri Lanka publishes its foreign exchange directions through a page that returned no readable content, so this guide states no rules for Personal Foreign Currency Accounts, Non-Resident Foreign Currency accounts, or outward remittance limits under the Foreign Exchange Act, No. 12 of 2017. Confirm those with your bank in Sri Lanka.

The Inland Revenue Department’s international relations page publishes the signature and effect dates of the Sri Lanka to UAE agreements but does not link the treaty texts, so no article of either agreement is quoted here. In particular we could not read the residence article, which in several UAE treaties restricts the definition of a UAE resident in ways that shut expatriates out. Anyone relying on treaty relief rather than on non-residence under domestic law should get that article read before doing so.

The Bureau of Foreign Employment publishes its registration process but not a current fee schedule in a form we could retrieve, so no registration or insurance figures are quoted. A 2026 notice on its site refers to an employer-paid insurance scheme for Sri Lankan migrant workers, which suggests the arrangement is changing, and that is another reason to confirm the current position at the Bureau rather than from any secondary source.

Frequently Asked Questions

Do Sri Lankans working in Dubai pay tax in Sri Lanka?

Not on the UAE salary while you are non-resident. Section 4(b) of the Inland Revenue Act, No. 24 of 2017 assesses a non-resident only on income arising in or derived from a source in Sri Lanka. Sri Lankan rent, Sri Lankan interest and gains on Sri Lankan investment assets stay taxable whatever your residence status.

What is the new section 69(2A) and who does it help?

It is a subsection inserted by the Inland Revenue (Amendment) Act, No. 11 of 2026, certified on 3 June 2026 and effective from 1 April 2025. It provides that someone leaving Sri Lanka for employment under a contract of not less than one year, with an employer not associated with their immediate Sri Lankan employer, is not a resident from the first day of the year of assessment in which they leave until the contract expires.

How many days can I spend in Sri Lanka before becoming resident?

Section 69(1)(b) sets 183 days or more in aggregate in any twelve-month period that commences or ends during the year of assessment. Note that this is a rolling twelve months rather than the tax year itself, so a stay that straddles 31 March can count toward a window in either year.

Is foreign income still exempt in Sri Lanka?

No. From 1 April 2025 the exemption was replaced by a maximum rate of 15 percent on an individual’s foreign-source gains and profits earned in foreign currency and remitted through a bank to Sri Lanka. The change was made by section 3 of the Inland Revenue (Amendment) Act, No. 2 of 2025.

Does the 15 percent rate apply to me if I live in Dubai full time?

Not if you are non-resident, because section 4(b) keeps foreign income outside the charge altogether. The 15 percent rate is relevant to residents, so it bites on a returnee, on someone caught by the “resides in Sri Lanka” limb of section 69(1)(a), and on anyone who trips the 183-day count.

Do I have to register with the SLBFE if I already have a UAE visa?

The Bureau states that under the SLBFE Act every Sri Lankan leaving for employment outside Sri Lanka should register before departure. If you left without registering, raise it with the labor section at the Sri Lankan mission in Abu Dhabi or Dubai, because the free insurance cover and the Bureau’s intervention channel both follow registration rather than citizenship.

Can I renew SLBFE registration from the UAE?

Yes. The Bureau states that registration is valid for two or three years depending on the employment contract, and that renewal is facilitated through its head office, its branch offices and Sri Lankan diplomatic missions overseas, which in the UAE means the Embassy in Abu Dhabi and the Consulate General in Dubai.

What is the personal relief in Sri Lanka now?

LKR 1,800,000 for each year of assessment commencing on or after 1 April 2025, raised from LKR 1,200,000 which applied for the years commencing on or after 1 April 2023 and before 1 April 2025. Trustees, receivers, executors and liquidators cannot deduct it in that capacity, and it cannot be set against gains on realizing investment assets.

What are the current Sri Lankan income tax rates?

From 1 April 2025 the individual bands are 6 percent up to LKR 1,000,000, 18 percent to LKR 1,500,000, 24 percent to LKR 2,000,000, 30 percent to LKR 2,500,000 and 36 percent above that. Gains on realizing investment assets are taxed at 10 percent, and qualifying remitted foreign income at a maximum of 15 percent.

Is there a tax treaty between Sri Lanka and the UAE?

Yes, two. A limited agreement signed 7 July 1992 and a comprehensive agreement signed 24 September 2003, effective from the year of assessment 2004/2005, both listed by the Inland Revenue Department. For salaried workers the treaty usually does no work, because the UAE imposes no personal income tax and there is no double charge to relieve.

Official Sources

Information current as of September 2026. Sri Lankan tax rates, reliefs and residence rules have changed in each of the last three years, and residence is decided on facts specific to your travel and living arrangements. Confirm your position with the Inland Revenue Department or a Sri Lankan tax practitioner before relying on any treatment described here.