Sri Lankan migrant workers have no reason to fear taxation when they send legally earned overseas income home through the formal banking system, the Inland Revenue Department (IRD) says.
Senior Deputy Commissioner Hiran Meneripitiya made the statement on Ada Derana’s “BIG FOCUS” programme.
“There is no tax charged through the banking system simply because money is being remitted to Sri Lanka,” he said.
Tax residency is the deciding factor
Meneripitiya said an individual is treated as a tax resident of Sri Lanka if they meet the relevant criteria, and residents may be liable to tax on both Sri Lankan and overseas income.
If a person is not a tax resident of Sri Lanka for the relevant year of assessment, however, income earned outside the country would not be subject to Sri Lankan income tax, he said.
He stressed that residency status for the year of assessment is the key factor in determining whether overseas income is taxable — not the act of transferring money itself.
Urging workers away from informal channels
Meneripitiya said migrant workers are able to bring legally earned foreign income into Sri Lanka through formal channels and to invest those funds legally within the country.
He urged overseas workers to use the banking system rather than turning to informal or illegal channels because of concerns about taxation.
Remittances are among Sri Lanka’s largest sources of foreign exchange. Worker remittances reached $5.38 billion in the year to July, and the Sri Lanka Bureau of Foreign Employment recorded a monthly record for departures in July. Informal transfer systems such as undiyal and hawala divert those inflows outside the banking system, and have been the focus of recent enforcement action, including the arrest of four private bank managers over an alleged billion-dollar outflow.
