Are you planning to embark on a new journey outside Sri Lanka? Whether it’s for an exciting career opportunity, further studies, or a fresh start in another country, ceasing your tax residency in Sri Lanka is an important step. Follow this comprehensive guide to ensure a smooth transition and compliance with the legal requirements.
Determine Your Residency Status
The first step is to ascertain your tax residency status. According to Sri Lankan tax law, an individual is considered a tax resident if they stay in the country for 183 days or more within a tax year. Ensure you meet the criteria for ceasing tax residency by planning your departure accordingly.
Notify the Inland Revenue Department (IRD)
You are required to inform the Inland Revenue Department (IRD) of your intention to cease being a tax resident. This can be done by submitting a written notification or filling out the relevant forms provided by the IRD. Clearly state your departure date and reason for leaving.
Submit Final Tax Returns
Before you cease your tax residency, you must file all pending tax returns up to the date of your departure. Ensure all income earned in Sri Lanka is declared, and any outstanding taxes are paid. The final tax return should reflect your income up to the point of ceasing residency.
Settle Outstanding Taxes
Any outstanding tax liabilities must be settled before you can cease your tax residency. Ensure that you have paid all taxes due, including any penalties for late payment if applicable. Obtain a tax clearance certificate from the IRD to confirm that there are no pending tax obligations.
Close Local Bank Accounts and Financial Portfolios
If you have local bank accounts or financial portfolios, make arrangements to close or manage them from abroad. Inform the financial institutions of your change in residency status and ensure all transactions are in compliance with Sri Lankan law.
Retain Documentation
Keep all documentation related to your cessation of tax residency. This includes correspondence with the IRD, tax returns, payment receipts, and the tax clearance certificate. These documents may be required for future reference or by tax authorities in your new country of residence.
Legal References
- Inland Revenue Act, No. 24 of 2017
- Section 79 of the Inland Revenue Act
- IRD Guidelines on Tax Residency
Useful Links
