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1.1ÌýÌýÌýÌý Introduction: overview of the domestic payroll system

Upcoming changes to taxation in Sri Lanka 2024/2025

The Cabinet approved amendments to the personal income tax structure, taking effect from April 2025: .

1. Ìý

   •ÌýÌýÌýÌý the tax-free threshold will remain at LKR 1.2 million per annum

2. Ìý

   •ÌýÌýÌýÌý tax bands will increase from LKR 500,000 to LKR 720,000

3. Ìý

   •ÌýÌýÌýÌý the marginal tax rates at each band will be maintained

The tax rates and tax tables are changed accordingly and can be found here.

An intention to establish a new revenue authority in an effort to modernise and increase tax revenue collection was announced in the Budget for 2024.

Paying employees

The employee's salary must be paid to them directly unless consent is given by the employee to deduct advanced personal income tax (APIT) (Guideline on APIT). If consent is not given, then the salary must be paid without any deduction other than an authorised deduction such as:

1. Ìý

   •ÌýÌýÌýÌý any advance of money made to an employee by his employer