Withholding Tax to be increased to 10%

President Anura Kumara Dissanayake announced that the Withholding Tax will be increased from 5% to 10%.

Speaking in Parliament today (18), he said that the government agreed with the International Monetary Fund (IMF) to reduce tax on services exports from the existing 30% to 15%.

He said that an agreement was also reached to increase the Withholding Tax from 5% to 10%.

“Usually, elderly people, pensioners, deposit a certain amount of money in banks and live off the interest they earn. Usually, they are subject to tax if they earn Rs. 150,000 per month in interest. But what can happen through withholding tax is that even if it is less than Rs. 150,000, it can be subjected to withholding tax,” he said.

The President also noted that the government will open a new division in the Inland Revenue Department to address concerns regarding the tax. “Any citizen who thinks their bank account should not be subjected to this tax can go to the Inland Revenue Department, present their tax status, and avoid being included for that tax.”

He explained that pensioners and others with income below the Rs. 150,000 tax threshold and those paying income tax below the 10% tax rate will be able to apply for lower withholding tax rates and to be free from the tax, through the Inland Revenue Department.

Additionally, the President stated that the government had agreed, as part of the third review, to remove the Value-Added Tax (VAT) on local fresh milk and yogurt products to improve children’s nutrition. 

The President said, “The previous government had agreed to a 30 percent tax on service exports. We have agreed to reduce it to 15 percent.”