Pay As You Earn Tax (PAYE)

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Up to 31.03.2018-In terms of Sectio​n 114 of the Inland Revenue Act, No. 10 of 2006, Employers are required to deduct Income Tax on Employment Income of employees at the time of payment of remuneration.

For this purpose, the Commissioner General of Inland Revenue specifies Tax Tables which are to be used in making such tax deductions. Since the Tax is paid at the time of earning the remuneration, This System is called Pay-As-You-Earn System (PAYE)

Applicability of provisions of Inland Ravenue Act,No.24 of 2017 w.e.f 01.04.2018

How to apply Tax Tables

An employer who makes a payment during a year of assessment to an employee, in respect of that employee’s employment, the employer must withhold an amount from such payment using the relevant PAYE table.

In the case of employee who has furnished a Primary Employment Declaration, the applicable PAYE tables are as follows.

Profits from EmploymentRelevent Table 
Regular profits from the employment    Table 01    Summarised Tax Table 01
Lump-sum payment  Table 02    Summarised Tax Table 02
Once-and-for-all payment (Terminal Benefits)  Table 03

Payment received by the non-citizens in Sri Lanka 

 Table 04

Where the monthly regular profits is less than LKR 100,000 but the cumulative profits from the employment up to any month  in the year of assessment exceeds LKR 1,200,000.Table 05
Tax on Tax TableTable 06

In case where the employee who has not furnished a Primary Employment Declaration, or who has more than one employment the applicable tax table  

Table 07

 

 SPECIAL NOTE

  • Where the employee has given Primary Employment Declaration the deduction of tax under Table 1 commences after exceeding the regular profits from employment of LKR 100,000 per month.
  • In case where the employee who has not furnished a Primary Employment Declaration, or who has more than one employment the tax should be deducted as follows.
Monthly payment Tax Rate 
Up to LKR 50,000   10%
More than LKR 50,000 
           LKR 50,000  10%
           Balance 20%

                                                                              

 

SPECIAL NOTE FOR EMPLOYERS AND EMPLOYEES

  • An employee shall furnish an employer, with a declaration nominating the employment as the employee’s primary employment. (Primary Employment Declaration)
  • The declaration must be signed and dated by the employee and the employer, and may relate to one or more years of assessment.
  • An employee must not have more than one primary employment at any one time.
  • An employee may withdraw such declaration only at the end of a year of assessment, unless the primary employment is ceased.

Note: - Please use the specified form of Primary Employment Declaration

  • If the employee has another employment after the primary employment has ceased, the employee must provide the employer of the other employment with, a new declaration and the withholding tax certificate issued with respect to the prior primary employment.
  • The new primary employer, who is provided with a withholding tax certificate, must return the certificate to the employee within 7 days.
  • The new primary employer shall withhold the tax in accordance with the Tax Tables from the payments to be made to the employee during the remainder of the year of assessment .
  • The Employee ceases two or more primary employments during a year of assessment, the employee may provide the new employer with multiple withholding tax certificates.
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