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Who should pay taxes?
Any person who has a taxable income during a year of assessment.
What is a year of assessment?
A twelve-month period from the 01st of April to the 31st March of the following year.
Do non-residents need to pay taxes in Sri Lanka?
Non-residents with income from sources within Sri Lanka are also generally required to pay taxes.
Is there any tax-free limit?
Yes, for individuals there is an annual tax-free limit of Rs. 1,200,000 million.
What kinds of income are considered taxable?
Employment Income, Business Profit, Interest Income, Rental Income, Dividend Income, Investment Income, Etc.
I have a taxable income. What should I do?
- Get tax registration done and obtain a Tax Identification Number (TIN).
- Register yourself for income tax.
- Submit the Statement of Estimated Income (SET).
- Make quarterly income tax payments.
- Submit the Return of Income.
Are there any deductions or credits I can claim?
Various deductions and credits may be available based upon specific expenses, investments, and personal circumstances, including pension contributions and donations to approved charities.
What will happen if I do not obtain the tax registration?
Will be subject to a penalty of a maximum Rs. 50,000.
What will happen if I do not pay taxes on time?
Late payment interest and penalty will be charged.
I paid the taxes on time but could not submit the return of income.
Return of income is an integral part of income tax. There will be a penalty.
What are the implications for not accurately reporting or under-reporting income?
Not accurately reporting or under-reporting income can lead to penalties, interest and/or potential legal issues.
How can I pay my taxes?
Online – Online tax payments can be done via OTPP member banks.
Manually – You can visit any BOC bank, obtain a pay-in-slip and make your tax payment.
What is a SET?
SET is an estimation of your income and income tax liability. This will act as the source for your quarterly income tax payment.
What is a Return of Income?
You are required to file a return of income in a prescribed format along with financial statements and supporting schedules (if applicable).
What are the important tax deadlines?
- SET submission – On or before the 15th of August.
- 1st Quarterly installment payment – On or before the 15th of August.
- 2nd Quarterly installment payment – On or before the 15th of November.
- 3rd Quarterly installment payment – On or before the 15th of February of the following year.
- 4th Quarterly installment payment – On or before the 15th of May of the following year.
- Final payment – On or before the 30th of September of the following year.
- Return of income submission – On or before 30th November of the following year.
What do I do if I made a mistake on my SET or Income Tax return?
In the event you made a mistake on your SET or tax return, you should rectify it as soon as possible by submitting a revised return.
My employer deducts APIT from my salary. Do I still need to submit SET and Return of Income?
Yes, even though you are still required to submit a SET and a Return of Income on your behalf.
What exactly is APIT?
APIT stands for Advance Payment of Income Tax. This is a tax that is withheld from your salary by your employer and paid to the government.
APIT is already deducted from my salary. Do I still need to pay any taxes?
If you have any other income apart from your employment, yes, you will have to pay income tax on those incomes as well.
How do I dispute a tax notice or solve a dispute with the Inland Revenue Department?
The procedure for doing so varies, and it may be beneficial to seek professional advice. You can begin the process by writing a letter of objection to the relevant Inland Revenue Office.
What if I can’t afford to pay my taxes?
Under certain circumstances, the Department of Inland Revenue may be able to function out a payment plan. Consult them for detailed procedures.
What records should I keep and for how long?
In general, any records related to income, expenses, deductions or credits that have been declared on your tax return should be kept. The standard timeframe to keep these records is generally around six years but can vary.