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Covid-19 and Tax – Updated 30th April 2020

Covid-19 and Tax – Updated 30th April 2020

TAX

By the Notice PN/IT/2020-03 (Revised) dated 8th April 2020, the deduction of Withholding Tax (WHT) on employment income that was under Pay-As-You-Earn (PAYE) Scheme was removed with effect from 01.01.2020 and replaced with deduction of Advance Personal Income Tax (APIT) in lieu of PAYE tax with effect from 01.04.2020 on optional basis.
However, by Notice PN/PAYE/2020-01 dated 15th April 2020 , employers are allowed to make the tax payment of employees for the period from 1st January 2020 to 31st March 2020, under PAYE scheme either by deducting from their remuneration of respective employees or by any other manner, with the consent of respective employees.
Duly computed tax liability and the amount of tax deducted from the remuneration (or as per any alternative arrangement) must be remitted as PAYE tax payment on or before 15th May 2020 and relevant details of such liability/payment shall be declared in the PAYE Return of the employer for the Year of Assessment 2019/2020 which is due to be submitted on or before 30th April 2020.

Tax Computation for “The Period” (1st January 2020 – 31st March 2020)

The gains and profits from employment constitutes,

  • Monthly regular profits from the employment (Cash and Non-Cash benefits) and
  • Lump sum payments

Payments received for The Period should be considered under this table.

Cumulative Gains and Profits from Employment

Tax

750,000

Nil

750,001 – 1,500,000

6% of Cumulative Income from Employment less Rs. 45,000/-

1,500,001 – 2,250,000

12% of Cumulative Income from Employment less Rs. 135,000/-

2,250,001 – and above

18% of Cumulative Income from Employment less Rs.270,000/-

Tax on Tax Rates:

This is applicable where:
i. When an employer or any other person settles income tax liability of an employee, without being deducted from his salary,
ii. Reimbursement by the employer of Income Tax already deducted from employee’s salary.

Tax for The Period (Rs.) Tax on Tax Rate
0 – 42,300 6.38%
43,301 – 121,500 13.64%
121,501 – and above 21.95%
   

Deduction of Tax on Cumulative Income from Secondary Employment

  1. Standard rate: same as above.
  2. Tax on tax rate:

The following changes to the tax regime by a revision to Notice PN/IT/2020-03 (Revised) dated 8th April 2020 are still applicable:
[http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/233/IT08042020_E.pdf]

  • Introduction of an Advance Personal Income TaxWith effect from 1st April 2020, on the request of Resident employee whose gross remuneration for a month exceeds Rs. 250,000 per month or Rs. 3,000,000 for a year of assessment, an Advance Personal Income Tax could be deducted by the employer. (A separate guideline will be published for this purpose in due course).With effect from 1st April 2020, a Resident person who obtains a regular fixed payment in respect of dividend, interest, discount, charge, natural resource payment, rent, royalty, premium or retirement payment received and /or on service performed by such individual, on the request of the recipient, an Advance Income Tax could be deducted by the payer of such payment (if such payer is a Withholding Agent), as per the declaration made to the Withholding Agent.2
  • Income tax rates remain the same except for the following amendments brought about by Notice PN/IT/2020-03 (Revised) dated 8th April 2020:For companies:
    • Gains and profits from conducting betting and gaming:                                       40%
      • Gains and profits from manufacture and sale
        or import and sale of liquor or tobacco products:                               40%

      For individuals (residents and non-residents)

      • Business consisting of betting and gaming, manufacture and                              40% sale or import and sale of any liquor or tobacco products:

Time Extensions

The following time extensions have been granted by the IRD:

  1. Annual Statement of Withholding Tax3
    31st May 2020
  2.  Annual Declaration of Employer (PAYE Tax Return)4
    31st May 2020
  3. VAT returns for the months of February, March and quarter ending5
    31st May 2020
  4. Economic Service Charge (ESC) Return6
    31st May 2020
  5. Compounded Stamp Duty payment and return for the quarter ending 31st March 2020 7
    31st May 2020
  6. Payment of VAT, including VAT on Financial Services (VAT on FS) Interim Estimate for last six months of the Year of Assessment 2019/2020 (financial institutions which submit returns on year of assessment basis)8
                31st May 2020
  7. Transfer Pricing Disclosure Form for Year of Assessment 2018/20199
    31st May 2020Taxpayers who have submitted the Tax Return through e-service could upload the TPDF to the RAMIS system, and others are advise to e-mail a PDF copy of the TPDF to the below e-mail addresses;10
    Senior Commissioner (Tax Payer services): [email protected]
    Commissioner (CDMU) : [email protected]E-filing facility available through IRD Portal e-Services for taxpayers who wish to submit the VAT, ESC, PAYE returns and withholding schedules for above periods.
  8. Validity period of the Temporary Tax Clearance Certificates relating to Liquor Licenses (which will be expired before June 30, 2020) issued by the Inland Revenue Department to liquor license holders 11
    30th June 2020
  9. Validity of the extension letters (which will be expired before April 30, 2020) issued with regard to Credit Vouchers due against the VAT deferred under deferment facility 12
    One month from expiring date

ALTERNATIVE SYSTEMS AND PAYMENT METHODS

Alternative Tax Payment System (ATPS)

Inland Revenue Department (IRD) has introduced an Alternative Tax Payment System (ATPS) for making tax payments through Online Fund Transfer Facility, with the collaboration of specific banks, with effect from 8th April 2020.

The ATPS is available only with the online banking facilities of the following designated banks:

  1. Bank of Ceylon (BOC)
  2. People’s Bank
  3. Commercial Bank of Ceylon PLC
  4. Nations Trust Bank PLC (NTB)
  5. Sampath Bank PLC
  6. HSBC
  7. Cargills Bank Limited
  8. National Development Bank (NDB)
  9. Standard Chartered Bank (SCB)
  10. Seylan Bank PLC
  11. Hatton National Bank PLC (HNB)
  12. Citibank
  13. Deutsche Bank

The respective banks will provide to include relevant information for making online fund transfers for tax payments. Therefore, taxpayers are kindly requested to refrain from making online fund transfers in respect of tax payments through any other bank other than those listed above. In case tax payers attempt to make online tax payments through any other bank, such payments will not be posted to their ledger in IRD’s RAMIS.

A step by step guide is provided in the Notice.14

Tax Residency certificates

Taking in to account the prevailing situation in the country, the following temporary arrangements have been made to issue Tax Residency Certificates (TRC) by the Inland Revenue Department 15:

  1. A request for TRC should be made to Commissioner-International Tax Policy to the E-mail [email protected]
  2. The following details should be provided;
    • Name of the person
    • Type of person – Individual / Company / Partnership
    • Taxpayer Identification Number (TIN) issued by Inland Revenue
    • Current address
    • Official email address of the person, if any
    • Business activity of the person
    • Reason/s for applying for TRC
  3. If a TRC has already been issued for previous years, attach a scan copy of that certificate
    For any inquiries on TRC the following officers could be contacted;

    • Commissioner (International Tax Policy) – 075 674 0303
    • Deputy Commissioner (International Tax Policy) – 071 444 6368

1Can be accessed at; http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/241/PAYE_ud_15042020_E.pdf

2Guideline can be accessed at: http://www.ird.gov.lk/en/publications/APIT_Tax_Tables/2020-2021/Guideline/09.%20AIPT_2021_Guideline.pdf

3 Extension of Tax Return Submission Dates (PAYE, WHT, ESC, Stamp Duty, VAT on FS Interim Estimate and Transfer Pricing Disclosure Form – PN/Tax Returns/2020-01 dated 21st April 2020 can be accessed at http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/240/CMN21042020_E.pdf

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10Extension of submission date of Transfer Pricing Disclosure Form for the Year of Assessment 2018/2019 – Notice PN/IT/2020-04 dated 20th March 2020; can be accessed at
http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/222/TP20032020_E.pdf

11Extension of validity period of the Temporary Tax Clearance Certificates relating to liquor licenses – Notice PN/TC/ 2020-01 dated 29th March 2020; can be accessed at
http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/225/CLR29032020_E.pdf

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13Value Added Tax; Notice PN/VAT/2020-05 dated 28th April 2020; can be accessed at http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/242/VAT28042020_E.pdf

14Alternative Tax Payment System (ATPS) through Online Fund Transfer Facility – Notice PN/PMT/2020-1 dated 8th April 2020; can be accessed at
http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/232/PYMT08042020_E.pdf

15Tax Residency certificates – Notice PN/TC/2020-02 dated 6th April 2020 can be accessed at;
http://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/229/CLR06042020_E.pdf

Download Covid19 and Tax – Updated 30th April 2020 Document

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