Understanding Sri Lanka’s New Income Tax Rates: IRD Releases 2023 APIT Calcuation
The budget for 2023 was successfully passed in Parliament of Sri Lanka on 14 November 2022 and made a tremendous impact on taxes. The Inland Revenue Department (IRD), Sri Lanka, has published a new personal income tax calculation rate, which is going to be effective from 01.01.2023. It means each employer who registered as a Sri Lankan business is required to deduct the new APIT rates immediately from the employee’s gross salary for the Y/A 2022/2023.
Reliefs and Tax brackets completely differ from the new 2023 PIT and every employer must be concerned over the recent changes.
APIT – Advance Personal Income Tax Tables Year of Assessment 2020/2021 (Previous)
Available Reliefs (Per annum)
- Residents, non-resident, and citizens’ personal reliefs is LKR 3,000,000.
- Residents of Sri Lanka maximum expenditure relief LKR 1,200,000.
|Taxable Income (Per annum) (Except gains from the realization of investment asset)||Rate|
|First LKR 3,000,000/-||6%|
|Next LKR 3,000,000/-||12%|
Investment assets earnings will be taxed at 10% tax rate.
Gaming & Betting related businesses will be charged 40% as tax
Liquor or tobacco product import, manufacturers, related sales & businesses will be taxed at 40% rate.
So this is the old one, if you see the chart the per annum personal reliefs for the residents, non-resident, citizens was LKR 3,000,000. So in that case, most of the Sri Lanka based small & medium-sized enterprises no need concern about the PIT. But new updates are gonna make your payroll manager busy for sure. Because the new PIT relief residents, non-resident, and citizens of Sri Lanka is LKR 1,200,000. It means employers might require more PIT calculations for most of the employees and need an extra hand to handle this.
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Advance Personal Income Tax (APIT) Tables 2022-2023 (For 2023.01.01 – 2023.03.31) New
Available Reliefs (Per annum)
- Residents, non-resident, and citizens’ personal reliefs is LKR 1,200,000 (Monthly relief LKR 100, 000 × 12).
During the second three-month period (2023.01.01 – 2023.03.31) tax relief will be LKR 300,000 for the Y/A 2022/2023.
Tax For Monthly Gross Salary
|Taxable Monthly Gross Salary From Employment||Tax|
|First 100, 000 LKR from gross salary||0 – Relief from Tax|
|LKR 100,000/- but not exceeding LKR 141,667/-||6%|
|LKR 141,667/- but not exceeding LKR 183,333/-||12%|
|LKR 183,333/- but not exceeding LKR 225,000/-||18%|
|LKR 225,000/- but not exceeding LKR 266,667/-||24%|
|LKR 266,667/- but not exceeding LKR 308,333/-||30%|
|More than LKR 308,333/-||36%|
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Taxable Income Per Annum
|Cumulative Gross Profits From Employment (Including Bonus)||Rate (%)|
|First LKR 1,200, 000||Tax Free|
|Next LKR 500, 000||6%|
|Next LKR 500, 000||12%|
|Next LKR 500, 000||18%|
|Next LKR 500, 000||24%|
|Next LKR 500, 000||30%|
Calculation Example – Advance Personal Income Tax (APIT) Sri Lanka 2023
There will be multiple ranges of salaries in an organization as per the designations. So, if an employee earns a billow 100, 000 LKR then the organization has no need to create a tax account for him/her.
If another employee earns 120, 000 LKR, then the additional 20, 000 is eligible for tax under the new amendment of Inland Revenue Department (IRD), Sri Lanka 2023. And the employee will be charged 6% tax rate since 120, 000 comes under the first tax bracket. The PIT will be 1,200 LKR for that month.
Let’s say another employee earns 160, 000 LKR, then we need to divide that into two more portions and make calculations like the billow table.
|For 160, 000 = 100, 000 + 41, 666 + 18, 334|
|100, 000 × 0%||= 0|
|41, 666 × 6%||= 2, 499.96|
|18, 334 × 12%||= 2, 200.08|
|Tax for 160, 000 will be||= 4, 700.04|
It will vary if employee’s monthly bonuses or incentives have changed. And if any employee earns more, your layer of calculation will extend. Too much calculations, isn’t it?
However, according to section 83A (1A) of the Inland Revenue Act, No. 24 of 2017 as amended by the Inland Revenue (Amendment) Act, No. 10 of 2021 and Inland Revenue (Amendment) Act, No. 45 of 2022 every employer must deduct APIT with effect from January 01, 2023 for each taxable earnings. So are you ready for new calculations? Click here to relieve your payroll burden.
Regular Employment Profits
- Salary, commissions, bonuses, incentives, wages, overtime pay, traveling or fuel allowance, pension or any other profits from employment that arise in any pay period.
- Payment for accommodation, conveyance, electricity, telephone & data expenditures and entertainment charges, etc.,
- Medical & insurance fees (aside from discharge or repayment of an employee’s dental, maternity or any other medical insurance prices in which the advantage is to be had to all full-time personnel on identical terms),
- Payments or transfers to another person for the benefit of the individual or an associate person of the individual
Every employee who is resident or non-resident but a citizen, during a calendar month. Advance Personal Income Tax (APIT) deduction should be compulsorily made regardless of his/her consent.
More updated details on the subject area will be posted here when the Inland Revenue Department (IRD), Sri Lanka published.
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