IRD Announces Sweeping Tax Reforms Under New Act 📈

The Inland Revenue Department (IRD) has introduced extensive tax changes following the enactment of the Inland Revenue (Amendment) Act, No. 11 of 2026. Key changes include: • Individual & Employee Relief: Gains from selling personal motor vehicles are exempt from tax (retrospective from 1 April 2024). Salaried employees under full Advance Personal Income Tax (APIT) with no other income (or interest income under Rs. 5,000) are exempt from maintaining tax files or filing annual returns. • Professional Services WHT: The 5% Withholding Tax (WHT) on service fees over Rs. 100,000/month has been expanded to include professionals in ICT/BPM (IT and social media specialists), artists, dentists, and event organizers. • Capital Gains & Investments: Capital gains tax is revised to 15% for individuals/partnerships and 30% for trusts, unit trusts, and NGOs. Unit trusts must issue annual tax certificates or risk being taxed as companies. Life insurance proceeds are generally excluded from assessable income. • Cash Transaction Limits: Cash payments of Rs. 500,000 or more are non-deductible. Approved digital/bank methods must be used. • Administration & Enforcement: The Statement of Estimated Tax (SET) is abolished; quarterly tax is now based on the previous year's liability. The use of Taxpayer Identification Numbers (TIN) is expanded to bank accounts, vehicle/land registration, and share transfers. • Penalties & Relief: Failure to comply can lead to fines up to Rs. 400,000 and/or 6 months imprisonment. A late-payment interest waiver is available for liabilities up to 2024/25 if the principal is paid by 2 December 2026.