Govt to introduce imputed rental income tax due to failure to implement property tax?

Wasantha Athukorala, a professor in the Department of Economics and Statistics at the University of Peradeniya, alleges that the government is working to introduce an imputed rental income tax, as the government failed to prepare plans for the implementation of a property tax by April 2025, as proposed by the International Monetary Fund (IMF).

Furthermore, Prof. Athukorala expressed that if a property tax is implemented in the country, all ill-gotten gains will be exposed.

It was announced that Sri Lanka will likely introduce an imputed rental income tax, as part of the ongoing revenue mobilization efforts. The new tax comes as a substitute for the property tax, as the introduction of the property tax and the gift and inheritance tax by 2025 encountered delays, due to constitutional restrictions on sharing revenues between the central and local authorities and the lack of adequate information on property values.

Accordingly, Sri Lanka will promptly initiate preparatory work to introduce an imputed rental income tax, though the expected gains would only fully materialize in 2026.

The imputed rental income tax on owner-occupied and vacant residential properties will be introduced before the beginning of the tax year on April 1st, 2025, as per the IMF Country Report No. 24/161.