Payroll Compliance Updates- Sri Lanka
A. Update

As already informed by the Notice PN/APIT/2020-01 dated April 20, 2020 of the Inland Revenue Department (IRD), APIT was replaced PAYE tax with effect from April 01, 2020 on optional basis. The employers are required to remit the APIT by deducting from the remuneration of respective employees, if such employees are resident in terms of the provisions of the Inland Revenue Act No. 24 of 2017, with the consent of respective employees.

However, consent of the respective employee is required only from the resident but citizen employees. Therefore, deduction of APIT is compulsory with effect from April 01, 2020 on the remuneration payments to following employees regardless of their consent:

  • a) All Non-Resident Employees, and
  • b) All Resident but Non-Citizen Employees.

This clarification has been provided by a recent Notice PN/APIT/2020-03 dated August 11, 2020. Employers may apply the Tax Table 05 of the APIT tables for the months of April-July 2020 of the Year of Assessment 2020/2021, to deduct the APIT from the remuneration payments of the resident but non-citizen employees (who have not given their consent to deduct APIT prior to this notice) and such computed APIT must be paid on or before August 15, 2020.

B. Statutory Compliance Release Date: August 13, 2020
C. Effective Date: April 01, 2020
 
A. Update

PAYE/T.10 Certificate of Income Tax Deductions for the tax year 2019-20 has got updated thereby, segregating income and PAYE details into two periods as for first 9 months (from April 01, 2019 to December 31, 2019) and for last 3 months (from January 01, 2020 to March 31, 2020).

B. Statutory Compliance Release Date: May 12, 2020
C. Effective Date: April 01, 2019
 
A. Update

Annual Statement of Employer for Y/A 2019/2020 has been updated. The same needs to be submitted up to May 31, 2020.

B. Statutory Compliance Release Date: April 27, 2020
C. Effective Date: April 01, 2019
 
A. Update

A notice has been released by IRD on Deduction of Advance Personal Income Tax (APIT) on Gains and Profits from Employment by an employer on its Resident employees' consent.

In line with this Notice, IRD has issued detailed Guidelines on calculation and deduction of Advance Personal Income Tax (APIT). The tax rates, exemptions and deductions are similar to PAYE, however, deduction shall be made only on a Resident employee’s consent.

B. Statutory Compliance Release Date: April 22, 2020
C. Effective Date: April 01, 2020
 
A. Update

The Inland Revenue Department (IRD) Sri Lanka has issued a notice on April 15, 2020 clarifying that employers can withhold taxes for Resident employees on their employment income as Pay As You Earn (PAYE) for the employment income paid during January 2020 to March 2020, after getting employee’s consent.

The details provided in the notice have been summarized in brief below:

Employer should deduct the PAYE tax from the remuneration of April 2020 and the relevant details of such liability/payment shall be declared in the PAYE Return of the employer for the Year of Assessment 2019/2020 which is due to be submitted on or before April 30, 2020. The same must be remitted as PAYE tax payment on or before May 15, 2020.

PAYE Tax shall be calculated as under:

  • 1. Only if the eligible employee agrees, PAYE should be calculated and deducted as below:
    • a. Taxable employment income earned during January to March 2020.
    • b. The employment income constitutes:
      • - Monthly regular salary (including Cash and Non-Cash benefits); and
      • - Lump sum payments
  • 2. On the Taxable employment income for the period mentioned above, calculate the PAYE tax payable in accordance with the Table 1 as prescribed in the Notice.
  • 3. In case of gross-up of taxes, tax rates as per Table 2, as in the Notice, should be applied on the taxes calculated in Step 1 above.
B. Statutory Compliance Release Date: April 16, 2020
C. Effective Date: April 01, 2020
 
A. Update

Inland Revenue Department (IRD) released a Notice to the Withholding Agents (WHA), the details of the same are summarized below:

  • a) PAYE for Resident Employees
  • With effect from Apr. 01, 2020, on the request of employee whose gross remuneration for a month exceeds Rs. 250,000 p.m. or Rs. 3,000,000 p.a., an Advance Personal Income Tax could be deducted by the employer. (A separate guideline will be published for this purpose in due course)
  • Where no request has been made by an employee, no PAYE is deductible.
  • b) Retaining part of the payment of terminal benefits to Resident Employees
  • Retaining part of the payment of terminal benefits in lieu of income tax by the employer/ETF/Provident Fund is required as per the earlier published Circular No. SEC/2020/02 dated 18.02.2020.
  • c) WHT on the payments to Non-Resident Persons
  • Deduction of WHT is applicable by any person on or after January 01, 2020, on any payment which has a source in Sri Lanka and is due and payable to any non-resident person. The tax (WHT) shall be deducted (excluding exempt income) at the rate of 14%.
  • Personal relief for residents or non-residents but citizens for each year of assessment of Rs. 3,000,000 are given.
B. Statutory Compliance Release Date: April 08, 2020
C. Effective Date: April 01, 2020
 
A. Update

Donations to COVID-19 Health Care and Social Security Fund that has been established to strengthen the mitigation activities aimed at controlling the spread of COVID-19 virus in the country and related social welfare program have been exempted from taxes.

B. Statutory Compliance Release Date: March 27, 2020
C. Effective Date: March 01, 2020
 
A. Update

Inland Revenue Department issued a Notice to the Taxpayers and Withholding Agents (WHA) on Implementation of Proposed Changes to the Inland Revenue Act, No. 24 of 2017 and as per it, requirement for deduction of PAYE on any payment which is due and payable to a Resident employee, in respect of the services performed (employment) by such employee, is removed.

However, retaining part of the payment of terminal benefits in lieu of income tax by the employer is required. A separate guideline is published for this purpose.

As per this notice and the guidelines issued on terminal benefits:

  • 1. For Uniform payments, if the total exceeds SLR 5,000,000, 12% tax must be withheld on the excessive amount, and
  • 2. For Non-uniform payments, tax must be withheld at 18% on the total.
B. Statutory Compliance Release Date: February 18, 2020
C. Effective Date: January 01, 2020
 
A. Update

As per the Notice dated 18th Feb. 2020, tax will be withheld from payment, including salary, made to a Non-Citizen Non-Resident at the rate of 14%.

B. Statutory Compliance Release Date: February 18, 2020
C. Effective Date: January 01, 2020
 
A. Update

A notice has been released by IRD, Sri Lanka, stating that PAYE on any employment receipts to any resident or non-resident individual is removed. Employers are instructed not to deduct any PAYE on payments to be made on or after Jan. 01, 2020. Any PAYE already deducted thereafter should be paid back to the employees.

Accordingly, PAYE tax has been abolished and there is no requirement for the employer to withhold PAYE tax from the salary (via payroll) and remit it to the Tax Authority.

Instead, an employee would be required to pay the tax on the salary under self-assessment basis and file the tax return, provided it exceeds the threshold. This has been proposed by another Notice released by IRD.

B. Statutory Compliance Release Date: February 05, 2020
C. Effective Date: January 01, 2020
 

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