A withholding tax is an income tax that is charged from an individual or business based on the income they receive.
It requires the payer of the income, referred to as the ‘withholding agent’, to deduct a certain percentage of tax before paying the income receiver.
This amount is then paid to the government.
In this guide, we’ll break down the Withholding Tax rates for various payments in 2024.
Withholding Tax Rates For 2024
Here are the WHT rates for the year 2024:
| Payment Type | WHT Rate |
| Interest Payments | 5% |
| Dividends | 10% (Final Tax) |
| Rent | 10% |
| Fixed Deposits | 5% |
| Royalties | 10% |
| Savings Account | 5% |
| Treasury Bills | Exempt |
| Sale Of Shares | 2.3% (Final Tax) |
| Foreign Payments | 15% |
| Foreign Remittance | Depends On Type Of Payment Remit |
| Payments To Non Residents | 14% (Subject To Double Tax Treaties) |
| Capital Gains | 10% |
| Gambling Winnings | 40% |
| Equipment Rental | 10% |
| Commissions | 5% |
| Lottery Winnings | 10% (Final Tax) |
| Professional Fees | 5% |
| Consultancy Fees | 5% |
| Transport Services | 5% (Public Transport Exempt) |
| Sale Of Real Property | Exempt (Subject To Capital GainsTax) |
| Hospital Bills | Exempt |
| Hotel Accommodation | Exempt |
| Insurance | Exempt |
| Bank Transfers | Exempt |
| Airline Tickets | Exempt |
| Allowances | Subject to your Payee Tax (APIT) |
| Directors Fees | Subject to your Payee Tax (APIT) |
Source: Inland Revenue Act. No. 24 of 2017 as amendments made to 2023.
When & How To Pay Withholding Tax?
Withholding agents are required to deduct withholding tax from payments made in the current month and pay the withheld tax to the Inland Revenue Department (IRD) by the 15th day of the following month.
For example, WHT deducted during Jan 2024 has to be paid by the 15th of Feb 2024.
You can pay Withholding tax using the IRD paying slip which you can get at any bank.
Where;
You can download this Full IRD PDF here. (Direct download link. IRD uses HTTP)
The Tax code for WHT is 43 (interest) and 44 (other payments).
And the payment must be made to the Commissioner General of Inland Revenue.
Penalties For Violating WHT Rules
The Inland Revenue Act enforces strict penalties if you do not comply with withholding tax regulations on deduction, payment, or reporting.
Late Payments
If the withholding agent doesn’t settle the WHT within 15 days from the end of the month, they will face:
- A 20% penalty on the unpaid tax if paid between 15-30 days from the due date.
- A 10% penalty if installment payments are delayed beyond the due date.
However, late payment penalties could be excused for taxpayers who have received approval for an extension from tax authorities.
But this is as long as they settle their dues before the extension period expires.
Under-Payments
In case tax liability is understated intentionally or due to oversight in declarations, heavy fines can be imposed:
- Up to 75% penalty if underpaid tax exceeds LKR 10 million or 25% of total taxes for that period
- 25% in all other cases
False Statements
If you give tax officials false or incorrect information that leads to avoiding taxes of more than LKR 50,000, you could face financial penalties equivalent to the amount of taxes you tried to evade.
Yet, there might be cases where exceptions are considered.
This is especially true if the individual had no reasonable way of knowing about the inaccuracies in the information provided.