Sri Lanka firms told not to deduct any PAYE, WHT tax; refund Jan collections
ECONOMYNEXT – In the latest twist to Sri Lanka’s fluctuating taxes the Department of Inland Revenue which earlier raised the threshold for pay-as-you-earn (PAYE) tax to 250,000 rupees from January 2020, has now asked firms to return January deductions, extending the treatment for withholding tax as well.
The revenue office said the Finance Ministry has instructed that pending formal change to the Inland Revenue Act, withholding taxt on on any payments (including interest, dividends rent etc.) made to any resident person and PAYE on any employment receipts to any resident or non-resident individual is removed with effect from January 01, 2020.
“Accordingly, withholding agents including employers are instructed not to deduct any WHT / PAYE on payments to be made on or after January 01, 2020, for the above persons,” the Department of Inland Revenue said in a notice.
“Any WHT/PAYE already deducted after January 01, 2020 on above payments should be paid back to the respective persons (employees, deposit holders or any other persons).”
A 14 percent withholding tax on lottery or gambling winnings and a 2.5 percent tax on the sale of any gem at an auction conducted by the National Gem and Jewellery Authority would continue.
Sri Lanka has slashed several taxes by cabinet and finance ministry decree without getting parliamentary consent with experts saying some taxes may go up due to the removal of withholding tax.
Sri Lanka has slashed a number of direct and indirect taxes in a bid to boost growth which flagged in the wake of a currency collapse in 2018 which reduced domestic credit and demand.
While direct taxes destroy investible capital, economic growth and future jobs, concerns have been raised over the cutting of value added tax, which is an indirect consumption tax, undermining state finances. (Colombo/Feb12/2020)