A. Update

On March 29, 2023, guideline no. SEC/2023-E/01 was released by Inland Revenue Department (IRD) of Sri Lanka, providing employer’s the necessary instructions to deduct APIT from employment income as per Section 83A sub-Section (1A) of the Inland Revenue Act, No. 24 of 2017 as amended by the Inland Revenue (Amendment) Act, 10 of 2021 and Inland Revenue (Amendment) Act. 45 of 2022 (‘the IRD Act’), and the extraordinary gazette notification No. 2312/16 which will be effective from the Y/A 2023-2024 and onwards.

The guideline instructs that employer is required to deduct Advance Personal Income Tax (APIT) with effect from January 01, 2023, on any payment, specified as gains and profits from employment under section 5 of the IRD Act, made to each employee who is liable to pay income tax at the time of remuneration is paid and has released the Advance Personal Income Tax (APIT) tables for the purpose of tax withholding by employers from Y/A 2023-2024

This Guideline further explains the below points:

• Employee and employment
• Gains and profits from employment liable to tax
• Excluded gains and profits from employment
• Exempt gains and profits from employment
• Reliefs for employment Income
• Tax tables for tax deductions from employment Income
• How to apply tax tables
• Primary employment
• Secondary employment
• Remittance of tax deducted
• Return submission by employees

Following are the updated APIT Tables applicable with effect from April 01, 2023

• Tax table No. 01 - Monthly Tax Deductions from Regular Profits from Employment

  Applicability: This table should be applied to deduct tax from regular profits from employment payable to every employee who is resident or non-resident but citizen, during a calendar month. Tax deduction should be compulsorily made regardless of his consent.

  Monthly regular taxable profits from employment	Amount of Tax Deductible (Rs.)
  Monthly regular profits from employment up to Rs.100,000/-	Relief from Tax
  Monthly regular profits from employment exceeding Rs. 100,000/- but not exceeding Rs. 141,667/-	6% of monthly regular profits from employment less Rs. 6,000/-
  Monthly regular profits from employment exceeding Rs. 141,667/- but not exceeding Rs. 183,333/-	12% of monthly regular profits from employment less Rs. 14,500/-
  Monthly regular profits from employment exceeding Rs. 183,333/- but not exceeding Rs. 225,000/-	18% of monthly regular profits from employment less Rs. 25,500/-
  Monthly regular profits from employment exceeding Rs. 225,000/- but not exceeding Rs. 266,667/-	24% of monthly regular profits from employment less Rs. 39,000/-
  Monthly regular profits from employment exceeding Rs. 266,667/- but not exceeding Rs. 308,333/-	30% of monthly regular profits from employment less Rs. 55,000/-
  Monthly regular profits from employment exceeding Rs. 308,333/-	36% of monthly regular profits from employment less Rs. 73,500/-

• Tax table No. 02 - Rates for the Deduction of Tax from Lump-sum Payments

  Applicability: This table should be applied for deducting tax on lump-sum payments made to resident and non-resident but citizen employees who have submitted primary declarations to employers. Following are the steps involved in applying this tax table:

  Step 1: Computation of Estimated Gross Aggregate Remunerations including the Lump-sum payments (EGAR)

  Gross aggregate monthly remunerations already paid during the Y/A 2023/2024 = (A)	XXX
  Gross aggregate monthly remunerations payable during the Y/A 2023/2024 = (B)	XXX
  Gross aggregate Lump-sum payments already made, being made now, & payable during the Y/A 2023/2024 =(C)	XXX
  Estimated Gross Aggregate Remunerations (EGAR) (paid and payable) during the Y/A 2023/2024 =(D)	XXX

  Step 2: APIT Rates

  EGAR during the Y/A 2023/2024	Amount of Tax Deductible (Rs.)
  If D is equal to or less than Rs. 1,200,000	Relief from Tax
  If D is in between Rs. 1,200,001 and Rs. 1,700,000	(D x 6%) – [(72,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]
  If D is in between Rs. 1,700,001 and Rs. 2,200,000	(D x 12%) - [(174,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]
  If D is in between Rs. 2,200,001 and Rs. 2,700,000	(D x 18%) - [(306,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]
  If D is in between Rs. 2,700,001 and Rs. 3,200,000	(D x 24%) - [(468,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]
  If D is in between Rs. 3,200,001 and Rs. 3,700,000	(D x 30%) - [(660,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]
  If D is more than Rs. 3,700,000	(D x 36%) - [(882,000 + Aggregate of monthly tax deducted on A + Aggregate of monthly tax deductible on B, as per Table 01) + Tax deducted previously on Lump-sum payments, if any]

• Tax table No. 03 – Rates for the Deduction of Tax from Once-and-for-all Payments (Terminal Benefits – All Employees)

  Applicability: As per the Circular No. SEC/2020/02 dated February 18,2020, this table should be applied on all terminal benefits payable to any resident and non-resident but citizen employees.

  The Employees’ Trust Fund (ETF), all provident funds and all employers shall retain 12% on the excessive amount of the payments or benefits if the aggregate amount of the payments exceeds Rs. 5,000,000
  	(a) Amount payable in commutation of a pension;
  	(b) Amount payable as a retiring gratuity;
  	(c) Amount received as compensation for loss of office or employment
  	(d) Any sum payable from the Employees’ Trust Fund (ETF) (excluding the share of investment income of the fund, earned on or after 01.04.1987).
  The Employees’ Trust Fund (ETF), all provident funds and all employers shall retain 36% on the excessive amount of the payments or benefits, If the aggregate amount of the following payments exceeds Rs. 5,000,000
  	(a) Compensation for loss of office or employment under a scheme, which has not been considered by the Commissioner General of Inland Revenue;
  	(b) Payment from other than Regulated Provident Fund which has not been approved by the Commissioner General of Inland Revenue;
  	(c) Any other Payment;
  	(d) Retirement non-cash benefits (to be valued at the market price)

• Tax table No. 04 - Rates for the deduction of Tax from any profits from employment

  Applicability: The deduction of tax should be made from all non-resident employees who are non- citizens in Sri Lanka

  Table No 4.1: For monthly regular profits from employment

  Monthly regular taxable profits from employment (Rs.)	Amount of Tax Deductible (Rs.)
  Monthly regular profits from employment up to Rs. 41,667/-	6% of monthly regular profits from employment
  Monthly regular profits from employment exceeding Rs. 41,667/- but not exceeding Rs. 83,333/-	12% of monthly regular profits from employment less Rs. 2,500/-
  Monthly regular profits from employment exceeding Rs. 83,333/- but not exceeding Rs. 125,000/-	18% of monthly regular profits from employment less Rs. 7,500/-
  Monthly regular profits from employment exceeding Rs. 125,000/- but not exceeding Rs. 166,667/-	24% of monthly regular profits from employment less Rs. 15,000/-
  Monthly regular profits from employment exceeding Rs. 166,667/- but not exceeding Rs. 208,333/-	30% of monthly regular profits from employment less Rs. 25,000/-
  Monthly regular profits from employment exceeding Rs. 208,333/-	36% of monthly regular profits from employment less Rs. 37,500/-

  Table No 4.2: For Lump-sum payments

  Following are the steps involved in applying this tax table:

  Step 1: Computation of Cumulative Expected Income from the Employment

  Gross Monthly Income already paid in the Y/A 2023/2024 x No. of months =(A)	XXXX
  Gross Monthly Income to be paid in the Y/A 2023/2024 x No. of months =(B)	XXXX
  Lump-sum Payment paid/payable during current month =(C)	XXXX
  Cumulative Expected Income for the Y/A 2023/2024 =(D)	XXXX

  Step 2: APIT Rates

  Cumulative Expected Income from the Employment for the Y/A 2023/2024 (Rs.)	Amount of Tax Deductible (Rs.)
  If (D) ≤ 500,000	(D x 6%) – Aggregated Tax as per table 4.1 for each month in (A) & (B)]
  If 500,000 < (D) ≤ 1,000,000	(D x 12%) – [30,000 + Aggregated Tax as per table 4.1 for each month in (A) & (B)]
  If 1,000,000 < (D) ≤ 1,500,000	(D x 18%) – [90,000 + Aggregated Tax as per table 4.1 for each month in (A) & (B)]
  If 1,500,000 < (D) ≤ 2,000,000	(D x 24%) – [180,000 + Aggregated Tax as per table 4.1 for each month in (A) & (B)]
  If 2,000,000 < (D) ≤ 2,500,000	(D x 30%) – [300,000 + Aggregated Tax as per table 4.1 for each month in (A) & (B)]
  If (D) > 2,500,000	(D x 36%) – [450,000 + Aggregated Tax as per table 4.1 for each month in (A) & (B)]

• Tax table No. 05 - Deduction of Tax on Cumulative Gains and Profits from Employment

  Applicability: This table should be applied in respect of employees (residents or citizens) whose monthly regular gains and profits from employment is less than Rs. 100,000/-, but cumulative gains and profits from employment up to any month in the second three-month period of the Y/A 2023-2024 exceeds Rs. 1,200,000/- due to payment of higher regular gains and profits from employment in certain months. Also, in the case where an employee commences first employment or retires from employment in the second three-month period of the Y/A 2023- 2024.

  Cumulative Gains and Profits from Employment (Taxable)	Amount of Tax Deductible (Rs.)
  Cumulative gains and profits from employment up to Rs.1,200,000/-	Relief from Tax
  Cumulative gains and profits from employment exceeding Rs. 1,200,000/- but not exceeding Rs. 1,700,000/-	6% of monthly regular profits from employment less Rs. 72,000/-
  Cumulative gains and profits from employment exceeding Rs. 1,700,000/- but not exceeding Rs. 2,200,000/-	12% of monthly regular profits from employment less Rs. 174,000/-
  Cumulative gains and profits from employment exceeding Rs. 2,200,000/- but not exceeding Rs. 2,700,000/-	18% of monthly regular profits from employment less Rs. 306,000/-
  Cumulative gains and profits from employment exceeding Rs. 2,700,000/- but not exceeding Rs. 3,200,000/-	24% of monthly regular profits from employment less Rs. 468,000/-
  Cumulative gains and profits from employment exceeding Rs. 3,200,000/- but not exceeding Rs. 3,700,000/-	30% of monthly regular profits from employment less Rs. 660,000/-
  Cumulative gains and profits from employment exceeding Rs. 3,700,000/-	36% of monthly regular profits from employment less Rs. 882,000/-

  Rate: Tax deduction should start from the month in which the cumulative gains and profits up to that month exceeds Rs. 1,200,000. Thereafter, tax deduction should be made monthly until end of the year of assessment, applying this table.

• Tax table No. 06 – Tax-on-tax rates

  Applicability:

  • - This table should be applied, when an employer or any other person settles income tax liability of an employee, without being deducted from his salary,
  • - Reimbursement by the employer of Income Tax already deducted from employee’s salary.

  Table No 6.1: Tax-on-tax Rates for Monthly gains and Profits from Employment

  Use Table 6.1 for computing tax-on-tax where applicable for all resident and non-resident but citizen employees who have furnished primary declarations to their employers and resident and non-resident but citizen employees who have one employment, in respect of the tax liability is computed on monthly remuneration of employee for any month in the year of assessment.

  Tax payable by the employer can be directly obtained by applying the below table.

  Monthly Remuneration (Rs.)	Tax Payable by Employer (Rs.)
  0 – 100,000	Relief from Tax
  100,001 – 139,167	(Monthly Remuneration X 6.38%) - 6,380
  139,168 – 175,833	(Monthly Remuneration X 13.64%) - 16,482
  175,834 – 210,000	(Monthly Remuneration X 21.95%) - 31,095210,001 – 241,667
  210,001 – 241,667	(Monthly Remuneration X 31.58%) - 51,318
  241,668 – 270,833	(Monthly Remuneration X 42.86%) - 78,578
  270,834 and above	(Monthly Remuneration X 56.25%) - 114,844

  Table No 6.2: Cumulative Tax-on-tax Rates for Lump-sum Payments or Terminal Benefits (under Normal Rates) from Employment

  This table is used for computing tax-on-tax where the tax liability of an employee is computed on cumulative basis for any year of assessment.

  Following are the steps involved in applying this tax table:

  Step 1: Computation of Cumulative Expected Income from the Employment

  Gross Monthly Income already paid in the Y/A 2023/2024 x No. of months =(A)	XXXX
  Gross Monthly Income to be paid in the Y/A 2023/2024 x No. of months =(B)	XXXX
  Lump-sum Payment paid/payable during current month =(C)	XXXX
  Cumulative Expected Income for the Y/A 2023/2024 =(D)	XXXX

  Step 2: APIT Rates

  Estimated Gross Aggregate Remunerations (EGAR) / Terminal Benefits for the Y/A (Rs.)	Amount of Tax Deductible (Rs.)
  If D is equal or less than Rs. 1,200,000	Relief from Tax
  If D is in between Rs. 1,200,001 and Rs. 1,670,000	(D x 6.38%) – [(76,560 + Aggregate of monthly tax deducted on A, as per Table 6.1 + Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]
  If D is in between Rs. 1,670,001 and Rs. 2,110,000	(D x 13.64%) - [(197,788 + Aggregate of monthly tax deducted on A, as per Table 6.1 + Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]
  If D is in between Rs. 2,110,001 and Rs. 2,520,000	(D x 21.95%) - [(373,145 + Aggregate of monthly tax deducted on A, as per Table 6.1 + Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]
  If D is in between Rs. 2,520,001 and Rs. 2,900,000	(D x 31.58%) - [(615,816 + Aggregate of monthly tax deducted on A, as per Table 6.1 + Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]
  If D is in between Rs. 2,900,001 and Rs. 3,250,000	(D x 42.86%) - [(942,940 + Aggregate of monthly tax deducted on A, as per Table 6.1+ Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]
  If D is more than Rs. 3,250,000	(D x 56.25%) - [(1,378,125 + Aggregate of monthly tax deducted on A, as per Table 6.1 + Aggregate of monthly tax deductible on B, as per Table 6.1) + Tax deducted previously on Lump-sum payments, if any, as per Table 6.1]

  Table No 6.3: Tax-on-tax Rate on Secondary Employment of Any Non-resident Employee

  Monthly Remuneration from Secondary Employment (Rs.)	Tax payable by Employer (Rs.)
  On any amount	(Monthly Remuneration x 1.5625) X 36%

• Tax table No. 07 – Rates for the deduction of Tax from the Secondary Employment

  Applicability: This table is applied for the deduction of tax from the gains and profits from employment of any resident and non-resident employee who has not furnished the primary employment declaration or is employed under more than one employer.

  Table No 7.1 - Rates for Deduction of Tax from Secondary Employment - Residents

  Category 1: If the aggregate of monthly gains and profits from Primary Employment and Monthly gains and profits from Secondary Employment is less than Rs.100,000 then Tax Rate on remunerations from Secondary Employment is 0%

  Category 2: If the aggregate of monthly gains and profits from Primary Employment and Monthly gains and profits from Secondary Employment is higher than Rs.100,000 then tax is determined with the table below.

  Monthly gains and profits from Primary Employment (Rs.)	Amount on which Monthly Tax is deductible	Tax Rate on Remunerations from Secondary Employment
  0 – 100,000	On the total remunerations from Secondary Employment	6%
  100,001 - 141,667		12%
  141,668 - 183,33318%		18%
  183,334 - 225,000		24%
  225,001 – 266,667		30%
  266,668 and above		36%

  Table No 7.2: Rate for Deduction of Tax from Secondary Employment – Non-residents (citizen or not)

  Monthly Remunerations from Secondary Employment (Rs.)	Tax Rate
  On the total remunerations from secondary employment	36%

B. Statutory Compliance Release Date: March 29, 2023

C. Effective Date: From Y/A 2023 - 2024 and onwards.

A. Update

Inland revenue department (IRD) of Sri Lanka has released the updated format of APIT/T10 (Certificate of Income tax deductions) for the Y/A 2022-2023 with respect to the amended APIT tables. Accordingly, earnings and APIT details for the two periods, viz. April 2022 to December 2022 and January 2023 to March 2023, need to be shown separately.

B. Statutory Compliance Release Date: January 02, 2023

C. Effective Date: Assessment year 2022/2023

A. Update

Further to our previous update “Changes in APIT Tables for lump sum payments till December 31, 2022”, the Inland Revenue Department (IRD) of Sri Lanka has released Guideline SEC/2022-E/04 providing the necessary instructions to employers to deduct Advance Personal Income Tax (APIT) with effect from January 01, 2023, on any payment, specified as gains and profits from employment under section 5 of IRD act, 2017, made to each employee who is liable to pay income tax at the time of remuneration is paid.

This Guideline further explains the below points:

• Employee and employment
• Gains and profits from employment liable to tax
• Excluded gains and profits from employment
• Exempt gains and profits from employment
• Reliefs for employment Income
• Tax tables for tax deductions from employment Income
• How to apply tax tables
• Primary employment
• Secondary employment
• Remittance of tax deducted
• Return submission by employees

Accordingly, IRD has updated the Advance Personal Income Tax (APIT) tables for the purpose of tax withholding by employers for the three-month period of January 01, 2023 to March 31, 2023 of the Y/A 2022-2023, as under:

Tax table No. 01 - Monthly Tax Deductions from Regular Profits from Employment

Applicability:

Tax table No. 02 - Rates for the Deduction of Tax from Lump-sum Payments

Applicability:

Step 1: Computation of Estimated Gross Aggregate Remunerations including the Lump-sum payments (EGAR)

Step 2: APIT Rates

Tax table No. 03 – Rates for the Deduction of Tax from Once-and-for-all Payments (Terminal Benefits – All Employees)

Applicability:

Tax table No. 04 - Rates for the deduction of Tax from any profits from employment

Applicability:

The deduction of tax should be made from all non-resident employees who are non- citizens in Sri Lanka

Table No 4.2:

Following are the steps involved in applying this tax table:

Step 1: Computation of Cumulative Expected Income from the Employment

Step 2: APIT Rates

Tax table No. 05 - Deduction of Tax on Cumulative Gains and Profits from Employment

Applicability:

Rate: Tax deduction should start from the month in which the cumulative gains and profits up to that month exceeds Rs. 300,000. Thereafter, tax deduction should be made monthly until end of the year of assessment, applying this table.

Tax table No. 06 – Tax-on-tax rates

• Applicability: This table should be applied: When an employer or any other person settles income tax liability of an employee, without
  being deducted from his salary,
• Reimbursement by the employer of Income Tax already deducted from employee’s salary.

Table No 6.1: Tax-on-tax Rates for Monthly gains and Profits from Employment

Use Table 6.1 for computing tax-on-tax where the tax liability is computed on monthly emoluments of employee for any month. Determine the tax payable for the month in accordance with the Tax Table No. 01, Tax Table No. 4.1), Tax Table No. 05 or Tax Table No. 7.1), as the case may be. If monthly payable tax falls within any range given below, then apply the corresponding tax on tax rate.

Table No 6.2: Cumulative Tax-on-tax Rates for Lump-sum Payments from Employment

This table is used for computing tax-on-tax where the tax liability of an employee is computed on cumulative basis for any year of assessment. Determine the tax payable for the year in accordance with the Tax Table No. 02 or Tax Table No. 03, as the case may be. If the annual payable tax falls within any range given in this table, then apply the corresponding tax-on-tax rate.

Table No 6.3:

Tax table No. 07 – Rates for the deduction of Tax from the Secondary Employment

Applicability:

Table No 7.1 - Rates for Deduction of Tax from Secondary Employment - Residents

Table No 7.2: Rate for Deduction of Tax from Secondary Employment – Non-residents (citizen or not)

B. Statutory Compliance Release Date: December 23, 2022

C. Effective Date: January 01, 2023 to March 31, 2023

A. Update

On October 13, 2022, Notice PN/IT/2022-01 was issued by IRD providing that until the Inland Revenue (Amendment) Bill for 2022 (“Bill”) is enacted, existing Advance Personal Income Tax (APIT) tables as applicable with effect from April 01, 2020 would continue to apply. Further, notice PN/IT/2022-03 was released by IRD on December 15, 2022, providing that the changes related to APIT provided in the Bill, confirmed by the Parliament but yet to be certified by Hon. Speaker, will become effective from January 01, 2023, unless otherwise stated.

Accordingly, IRD has released Notice PN/APIT/2022-01 on December 20, 2022 providing for changes in rates for the deduction of tax from lump-sum payments for the first nine months of the Y/A 2022/2023 (April to December 2022). These changes are based on the existing APIT Tables which have been in effect from April 01, 2020.

Following Advance Personal Income Tax (APIT) Tables have been introduced for the lump-sum payments that are to be paid up to December 31, 2022:

Amended APIT Table No. 02 (Amended) for April 01, 2022 to December 31, 2022:

Step 1: Computation of Estimated Gross Aggregate Remunerations including the Lump-sum payments (EGAR)

Step 2: APIT Rates

Amended APIT Table No. 4.2 for April 01, 2022 to December 31, 2022:

Step 1: Computation of Cumulative Expected Income from the Employment

Step 2: APIT Rates

Amended APIT Table No. 6.2 (Amended) for April 01, 2022 to December 31, 2022:

Once payable tax for the first nine-month period of the Y/A 2022/2023 has been computed in accordance with the Tax Table No. 02 (Amended, as above) or Tax Table No. 3 (as existing), and such amount falls within any range given in the Tax Table No. 6.2 (Amended, as below), then apply the corresponding tax-on-tax rate. Tax on Tax Rates APIT Table No. 6.2:

Other than these 3 APIT tables, existing calculation method and rates would apply till December 31, 2022.

B. Statutory Release Date: December 20, 2022

C. Effective Date: April 01, 2022 to December 31, 2022

A. Update

The Inland Revenue (Amendment) Bill has been gazetted to amend the Inland Revenue Act, No. 24 of 2017. Following are the proposed changes impacting payroll:

Tax free Threshold limits

The tax-free threshold for personal income tax has been proposed to reduce to LKR 1,200,000 per annum from LKR 3,000,000 per annum for each year of assessment commencing on or after April 2023, and LKR 1,500,000, for first six months and LKR 600,000 for second six months of the year of assessment commencing from April 1, 2022.

Tax rate for Residents

The income tax payable by a person for the year of assessment commencing on April 1, 2022, is proposed to be calculated separately for two periods of the year of assessment as first six months and second six months.

To such calculation, the individual may use pro-rata basis (as 50% for first six months and balance 50% for second six months of the year of assessment) to arrive at the annual taxable income.

The taxable income of a resident or nonresident individual for the year of assessment commencing from April 1, 2022, is proposed to be taxed at the following rates:

a) Taxable income for the first six months period of the year of assessment commencing from April 1, 2022:

b) Taxable income for the second six months period commencing from October 1, 2022:

The taxable income of a resident or non-resident individual for a year of assessment commencing from April 1, 2023, is proposed to be taxed at the following rates: -

APIT Deduction by the employers

Employer must deduct APIT for all the employees (Sri Lankan employees and foreign employees irrespective of the residency status). Consent requirement will not apply. It is proposed that Employer must deduct APIT if the employment income exceeds LKR 100,000 per month or LKR 1,200,000 per annum from 250,000 per month or 750,000 per annum. this threshold is applicable for Sri Lankan citizens (both residents and non-residents) and non-citizens residents. Non-citizen non- residents are not entitled for this threshold.

B. Statutory Compliance Release Date: October 11, 2022

C. Effective Date: Assessment year commencing from April 1, 2022

Note: The changes proposed in the Bill to amend the IRA will be effective once the Bill is passed in Parliament (From the dates specified thereon). Until such time, the existing provisions of the IRA as amended by the Inland Revenue (Amendment) Act, No.10 of 2021 are effective.

Accordingly, Employers, are advised to comply with following existing guidelines/circulars/notices issued by the IRD based on the existing provisions, until the new guidelines/circulars/notices are issued, soon after the Bill is enacted.

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