Cabinet approves amendments to IRA to incorporate tax cuts

Sri Lanka’s Cabinet of Ministers has approved the proposed amendments to the Inland Revenue Act (IRA) presented by Prime Minister and Finance Minister Mahinda Rajapaksa to give effect to the tax cuts announced in November.

Finance, Economy and Policy Development Ministry in a statement said that these proposed amendments will promote easy tax administration and introduce self-compliance for tax payments leading to a simple, transparent and efficient tax system.

Accordingly, the Cabinet of Ministers approved the amendments and the Bill is expected to be presented to Parliament shortly for approval.

The amendments cover a wide range of tax cuts while abolishing certain taxes such as the Economic Service Charge (ESC). 

Pay-As-You-Earn (PAYE) tax threshold will be increased for salaries over Rs.250, 000 from Rs.100, 000 and income tax will be liable for tax at the progressive rate of 06 percent ,12 percent and 18 percent for each tax slab of Rs.250,000 with effect from January 01,2020.

The tax-free threshold turnover for VAT will be raised from Rs.1 million to Rs.25 million or Rs.300 million per annum and interest income up to Rs.250,000 per month will be exempted from withholding tax with effect from January 01, 2020.

While majority of tax reliefs have already come into effect, several are set to come into effect from April 1 this year.