News
Tax cuts withdrawn; high rates for big income earners
Reversing the tax bonanza announced in January, the Government has reintroduced tax amendments for top earning individuals and companies, in another measure to overcome the economic challenges due to the coronavirus pandemic.
The about-turn on the tax cuts include a revised tax structure for corporates, the Pay As You Earn (PAYE) Tax and the Withholding tax (WHT) under different taxes called Advance Personal Income Tax (APIT) and Advance Income Tax.
The PAYE tax which was scrapped as part of a tax relief package is to be reintroduced as APIT which can be deducted by the employer with the consent of the employee or paid by the employee on a quarterly basis to the Inland Revenue Department.
In a circular issued this week, the IRD says that from April 1, “on the request of an employee whose gross remuneration for a month exceeds Rs. 250,000 or Rs. 3,000,000 for a year of assessment, an Advance Personal Income Tax could be deducted by the employer.”
The IRD’s Deputy Commissioner General, R.M. Jayasinghe, told the Sunday Times the department would maintain separate files for those who were earning Rs 3 million or more a year even though the measure is a voluntary basis.
“The introduction of APIT was due to the request to the government by those who were paying PAYE tax in the past, considering its flexibility rather than becoming a victim of tax liability through a complicated procedure later on,” Mr. Jayasinghe said.
He said the department had not collected a significant tax revenue in the past three months, since the new tax bonanza was introduced by the new government soon after it took office.
On removal of the Withholding Tax (WHT) on the payments for residents, in respect of the dividend, interest, discount, charge natural resource payment, rent, royalty, premium or retirement payment received and /or on service performed by such individuals, an Advance Income Tax could be deducted by the payer of such payment on the request of the recipient from April 1, the IRD issued by the IRD said.
According to the revised income tax rates for a company, an individual or a partnership, the taxable income of a company is fixed at 24 percent while on gains and profits from specific businesses it was set at 14 percent.
For gains and profits from conducting betting, gaming and from manufacture and sale or import and sale of any liquor or tobacco products, the new income tax is fixed at 40 percent.