1. Profit from Employment

Tax liability arises on total remuneration received by an employee in any form of services performed

  • Salary, wages, leave pay, overtime pay, fees, pensions, commissions, gratuities, bonuses, and other similar payments.
  • Personal allowance, including any cost of living, subsistence, rent, entertainment or travel allowance.
  • Payments providing discharge or reimbursement of expenses incurred by the employee or an associate of the employee.
  • Payments for redundancy or loss or termination of employment.
  • Retirement contribution made to a retirement fund on behalf of the employee and retirement payment received in respect of the employment.
  • Payments or transfers to another person for the benefit of the employee.
  • The fair market value of benefits received or derived by virtue of the employment by the employee or an associate person of the employee.
  • Other payments, including gifts, received in respect of the employment.
  • The market value of shares, at the time allotted, under an employee share scheme, including employee’s exercise of share options.

 

  1. Excluded Profits from Employment

  • Exempt amounts and final withholding payments.
  • A discharge or reimbursement of expenses incurred by the individual on behalf of the employer.
  • A discharge or reimbursement of an individual’s dental, medical or health insurance expenses where the benefit is available to all full-time employees on equal terms.
  • Payments made to or benefits accruing to employees on a non-discriminatory basis that, by reason of their size, type and frequency, are unreasonable or administratively impracticable for the employer to account for, or to allocate to the individual.
  • The value of a right or option to acquire shares at the time such shares are granted to an employee under an employee share scheme
  • Contributions made by an employer to an employee’s account with a pension, provident or savings fund approved by the Commissioner-General.
  1. Exempt Profits from Employment

  • Compensation or gratuity paid in lieu of personal injuries or death.
  • Pension received from the Sri Lankan Government or from a Department of the Government.
  • Amounts paid on retirement from any Provident Fund approved by the Commissioner General of Inland Revenue.
  • Amounts paid on retirement from any Pension Fund or the Employees’ Trust Fund, representing investment income earned for any period commencing on or after 1 April 1987.
  1. Aggregate Reliefs for Employment Income

In arriving at the taxable income from employment income following reliefs are available for resident individual for each year of assessment.

Personal relief of Rs. 500,000 

Relief of Rs. 700,000 up to the total of income from employment

Accordingly, any resident individual who receives remuneration in excess of Rs. 1,200,000 per annum or Rs. 100,000 per month is liable to withholding tax from employment income.

  1. Rates

Maximum rate of tax for employment has been increased from 16% to 24% and tax slab modified as follows,

Income from Second Employment (Including Directors Fees)

First Rs 50,000/- per month    – 10%

Balance                                    – 20%

 

  1. Non Cash Benefits

Residence Provided by the Employer

Value of benefits should be market value of benefit provided by the employer or value as specified below where market value cannot be ascertained.

Monthly Remuneration Monthly non Cash benefits
In Rated Area In Un rated area Estate Bungalows
If less than or equal to Rs 200,000/- 20,000 or 12.5% of remuneration whichever is less 15,000 or 10% of remuneration whichever is less 10,000 or 7.5% of remuneration whichever is less
If more than or equal to Rs 200,000/- 40,000 or 12.5% of remuneration whichever is less 30,000 or 10% of remuneration whichever is less 20,000 or 7.5% of remuneration whichever is less
If such residence is furnished 2.5% of remuneration or Rs 5,000/-  whichever is less

 

Where employer reimburse the expenses connected with apartment or house, full expenses shall be considered as benefits from employment.

 

Value of Transport Facility

 The value of vehicle benefit provided (fully or partly) for private use of an employees should be market value or value specified below where market value cannot be ascertained.

 

Engine

Non cash benefits per month
Vehicle Deriver Fuel
Not more than 1800 cc (Fuel/Hybrid)

Not more than 200 KW electric

 

30,000

 

20,000

 

20,000

More than 1800 cc & not more than 3,000 cc (Fuel/Hybrid)

More than 200 KW not more than 500 KW electric

 

50,000

 

20,000

 

30,000

More than 3,000 cc (Fuel/Hybrid)

More than 500 KW electric

75,000 20,000 40,000
Rs. 25/- & Rs 5- per kilometer for motor vehicle and motor bike will be considered respectively as the benefit of employment if the employer maintains accurate record of actual usage.

Value of benefit to an employee for (fully/partly) use of motor bicycle irrespective of engine capacity,

  1. With fuel –  Rs 5,000/- per month
  2. Without fuel – Rs 3,000/- per month 

 

Other Benefits 

Nature of Benefits Value of Benefits
Provision of Hotel facilities for expatriates

 

100% of cost
Loans on concessionary rate Difference between interbank rate or calculated according to SLFRS whichever is higher and concessionary rate
Provision of servants, Electricity, gas, free meal, insurance premium and Air ticket (other than official)

 

 

100% of cost

Reimbursement of medical, health insurance expenses where benefits is not available to all full time employees equally.

 

 

100% of the Cost

Payment of telephone bills including annual charges used for private purposes

 

50% of the cost
Payment of taxes

 

Amount paid

 

  1. Tax Tables for Tax Deductions from Employment Income

The applicable tax table for deduction of tax from remuneration effective from 1st April 2018 are as follows,

Table 1:          Regular profits from the employment, of any employee who has furnished a Primary Employment Declaration.

Table 2 :         A Lump-sum payment.

Table 3 :         Once-and-for-all payment (Terminal Benefits).

Table 4 :         Payment received by the non-citizens in Sri Lanka.

Table 5 :         Monthly regular profits of an employee from a primary employment is less than LKR 100,000 but the cumulative profits from the primary employment up to any month in the year of assessment exceeds LKR 1,200,000 due to payment of higher remuneration in certain months.

Table 6:          Payment or reimbursement of the employee’s tax liability on his income from employment by the employer.

Table 7:          Remuneration of any employee, who has not furnished a Primary Employment Declaration, or who has more than one employment.

Above Tables are available on the IRD website. Please visit www.ird.gov.lk and download the same.

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