Parliament yesterday passed the Inland Revenue (Amendment) Act with several changes aimed at simplifying Sri Lanka’s tax system, broadening the tax base, and strengthening measures against tax evasion.
The government said the new legislation was introduced to modernize the country’s tax framework, reduce complexity in tax administration, and improve revenue collection without increasing tax rates across the board. Following a review by the Supreme Court, several amendments were incorporated during the committee stage before the bill was passed.
Opposition members sought reduced penalties and a longer grace period for settling fines, but those proposals were rejected by the government.
Mandatory TIN for Citizens Above 18
One of the most significant provisions in the new law is the requirement for all Sri Lankan citizens above the age of 18 to obtain a Taxpayer Identification Number (TIN), expected to come into effect from around April 2026 or once the Act is fully implemented.
The TIN will become compulsory for a wide range of everyday transactions and services, including opening or operating bank accounts, vehicle registration and renewal, land and property registration, approval of building plans, business registration, transfer of company shares, and applying for credit cards.
Failure to obtain a TIN could result in penalties and restrictions on accessing such services.
The move is expected to bring millions of citizens into the formal tax system for the first time.
Tougher Penalties
The Act also introduces stricter penalties for tax-related violations, including failure to register for a TIN, delayed tax filings, and failure to provide information requested by the Inland Revenue Department (IRD).
Fines can range up to Rs. 400,000, while serious offences may carry prison terms of up to six months.
Under the new provisions, individuals will generally receive a warning and a 30-day period to rectify issues before legal action is initiated.
Simpler Tax Procedures
The government says the amendments are also designed to make the tax system easier and fairer for compliant taxpayers.
Among the changes are simplified tax instalment calculations based on previous year income, reduced paperwork requirements, and clearer definitions on taxable income.
The amendments also provide concessions for certain taxpayers, including exporters, small businesses, senior citizens, and those willing to settle outstanding tax arrears promptly.
In addition, profits earned from the sale of personal vehicles are generally excluded from taxable income under the clarified provisions.
Faster Recovery of Unpaid Taxes
The Inland Revenue Department has also been granted broader powers to recover unpaid taxes through court procedures.
However, aggressive recovery measures will be restricted where legitimate appeals or reviews are pending, in line with observations made by the Supreme Court.
Impact on the Public
Individuals already complying with tax regulations are expected to benefit from simpler procedures and reduced administrative burdens.
However, citizens who have not previously engaged with the tax system will now be required to register and comply with the new regulations.
Business owners, freelancers, and professionals are also expected to face stricter record-keeping requirements, increased withholding taxes on certain payments, and tighter controls on large cash transactions exceeding Rs. 500,000.
How to Obtain a TIN
The Inland Revenue Department stated that obtaining a TIN is free of charge and can be completed online within minutes.
Applicants can register through the official IRD website by accessing the e-Services portal and completing the taxpayer registration process.
Required documents include the National Identity Card or a valid driving licence, while proof of address may also be requested if the address differs from the NIC.
Citizens may also apply in person at the IRD Head Office in Colombo or regional offices.
The IRD has advised the public to obtain their TINs early to avoid inconvenience when accessing banking, property, vehicle, and other government services in the future.
Officials say the amendments represent a major step toward creating a more transparent and efficient tax system in Sri Lanka, with greater emphasis on ensuring that all eligible citizens contribute fairly to government revenue.
