A worked example for freelancers
Illustrative figures for a typical mix: consulting fees, overseas clients, bank interest. Your own numbers will differ; use the questions above for yours.
Worked out with the TaxWise engine: 25% rent allowance, Rs 1,800,000 relief, 6–36% slabs, foreign service income capped at 15%, 10% AIT credited, dividends final at 15%. No optional reliefs claimed.
What to watch as one of the freelancers
Quarterly SET instalments are where freelancers most often get caught out, because the threshold is based on estimated annual liability, not last year's actual — a strong Q1 with no corresponding income later in the year can still trigger an instalment obligation you didn't expect, and underpaying an instalment carries its own penalty separate from a late return. Foreign-client payments only qualify for the 15% remittance ceiling if they arrive through a Sri Lankan bank account; funds routed through payment apps or converted informally before reaching a local bank don't automatically carry the same treatment, so route international client payments deliberately rather than through whichever channel is fastest. Keep client contracts and invoices matched to specific bank credits — a freelancer's income is entirely self-reported, and an IRD query almost always starts with "show me where this figure came from." Equipment — laptops, cameras, a home office setup — is claimed through capital allowances over its useful life, not expensed outright, even for a sole freelancer with no formal business registration. If you work through multiple platforms simultaneously, reconcile each platform's own statement separately before combining them; platform fees and currency conversion are easy to double-count or miss entirely when merging several income streams into one figure.
Common questions
- How is income from foreign clients taxed?
- Service income remitted through a Sri Lankan bank is charged at a maximum rate of 15% — a ceiling rather than a flat rate, so a lower marginal rate applies if that is what your income produces. Payments not remitted through a bank do not get the cap.
- Do freelancers pay quarterly instalments?
- Yes, once estimated liability crosses the SET threshold. Nothing is withheld from self-assessed income, so the IRD collects it quarterly on 15 August, 15 November, 15 February and 15 May.
- What can I deduct as a freelancer?
- Expenses wholly incurred in producing the income — software, equipment, co-working space, professional fees, a reasonable share of home internet. Equipment is claimed through capital allowances, not written off in one year.