Q: Do I need to register as a taxpayer if I'm an independent contractor?
A: Yes, all independent contractors earning above the tax-free threshold must register with the Inland Revenue Department of Sri Lanka and obtain a Taxpayer Identification Number (TIN).
Q: How do I prove my business expenses are legitimate?
A: Keep all receipts, invoices, and payment records. For mixed-use expenses like internet and utilities, maintain a log showing business usage percentage. Documentation is crucial for all deductions claimed.
Q: Do I need to pay tax on income earned from foreign clients?
A: Yes, as a Sri Lankan tax resident, you must pay tax on your worldwide income, including payments from foreign clients. All foreign income must be converted to LKR for tax calculation purposes.
Q: How do I calculate my home office deduction?
A: Calculate the percentage of your home used exclusively for business (area of home office ÷ total home area). Apply this percentage to eligible expenses like rent, utilities, and repairs.
Q: What happens if I miss a quarterly tax payment?
A: Late payments are subject to interest penalties. The current penalty rate is 1.5% per month on the unpaid amount. It's important to make your quarterly payments on time to avoid these penalties.
Q: Can I deduct the full cost of my computer if I use it for work?
A: If the computer is used exclusively for business, you can deduct the full cost. If it's used partially for personal purposes, you should only deduct the business-use percentage. For expensive items, depreciation rules may apply.
Have more questions? Email us at: taxhelp@srilanka.com
Have more questions? Email us at: taxhelp@srilanka.com