Apr 12, Colombo: The Sri Lankan government has reintroduced the taxes abolished from January this year as another measure to rescue the economy impacted by the coronavirus pandemic.

With effect from 1st April the Pay As You Earn (PAYE) tax abolished from 1 January 2020 has been re-introduced as an Advance Personal Income Tax (APIT) which can be deducted by the employer with the consent of the employee or paid by the employee on a voluntary basis.

The notice issued by the Inland Revenue Department (IRD) to the Taxpayers and Withholding Agents (WHA) says “With effect from 01.04.2020, on the request of employee whose gross remuneration for a month exceeds Rs. 250,000 per month or Rs. 3,000,000 for a year of assessment, an Advance Personal Income Tax could be deducted by the employer.”

The Withholding Tax imposed on payments such as interest and rent has also been scrapped making way for an Advance Income Payment which could be made on the request of the recipient.

According to the circular, the taxable income of a company has been revised to 24 percent, while the gains and profits from following specific businesses is taxed at 14 percent and gains and profits from Manufacturing to an 18 percent tax.

Gains and profits from conducting betting and gaming and from manufacture and sale or import and sale of any liquor or tobacco products are taxed at 40 percent.

A resident Individuals’ income will be taxed at 6 percent for the first Rs. 3 million income and 12 percent for the second Rs. 3 million and at 18 percent on anything above it.

Meanwhile, Withholding Taxes will be imposed on interest payments to Sri Lankan expatriates who earn a monthly interest income of Rs 250,000 and an annual interest income of three million rupees from a bank or financial institution.

Several reliefs have been granted for resident individuals. Expenditure up to a total sum of Rs. 1,200,000, incurred during a year of assessment could be deducted as relief in arriving at the taxable income in the case of (a) health expenditure including contributions to medical insurance; (b) educational expenditure incurred locally, for such individual or on behalf of his children; (c) interest paid on housing loans; (d) contributions made to an approved pension scheme; (e) expenditure incurred for the purchase of equity or security.

The amendments to the Inland Revenue Act had invalidated the host of concessions offered by the government soon after it was elected to power in November last year.

Full notice issued by the IRD