July 19, Colombo (LNW): The Inland Revenue Department (IRD) has released a public notice outlining how the prosecution provisions introduced under the Inland Revenue (Amendment) Act, No. 11 of 2026 will be enforced, emphasising that the new measures are intended to address deliberate tax evasion while giving taxpayers an opportunity to correct instances of non-compliance before legal action is taken.
According to the Department, prosecution will only be pursued as a last resort. Before any case is filed in court, taxpayers who have failed to meet their obligations will receive a formal written notice informing them of the non-compliance. They will then be granted a mandatory 30-day period to rectify the issue by fulfilling their outstanding tax obligations.
The IRD warned that if the taxpayer does not comply within the 30-day grace period, legal proceedings may be instituted before a Magistrate’s Court. Convictions under the new provisions could result in a fine of up to Rs. 400,000, imprisonment for a period not exceeding six months, or both.
The Department explained that the prosecution provisions apply to a number of specified tax compliance failures. These include failing to register with the Commissioner General of Inland Revenue, neglecting to submit income tax returns, and failing to file mandatory annual statements, including Withholding Tax and Advance Personal Income Tax (APIT) returns.
The IRD stressed that its enforcement strategy is focused on individuals and businesses that intentionally avoid their tax obligations by failing to register, withholding required tax returns or concealing taxable income despite being liable to pay tax. It reiterated that the measures are not intended to penalise taxpayers who cooperate with the Department and take steps to comply with the law.
The notice also clarified that individuals who have no income tax liability and require only a Taxpayer Identification Number (TIN) will not be subject to prosecution under these provisions. Likewise, taxpayers who maintain an income tax file despite having no tax liability may request their respective regional IRD office to close the file by submitting the necessary information and supporting details.
The Inland Revenue (Amendment) Act, No. 11 of 2026 came into effect on 3 June 2026, introducing prosecution provisions for specified failures to comply with tax requirements.
Key points highlighted by the IRD are as follows:
- A formal written notice will be issued before any prosecution is initiated.
- Taxpayers will be given a mandatory 30-day period to rectify any non-compliance.
- Failure to comply within that period may result in prosecution before a Magistrate’s Court.
- Offenders may face a maximum fine of Rs. 400,000, imprisonment for up to six months, or both.
- The provisions apply to specified failures, including not registering for tax, failing to submit income tax returns and failing to file required annual statements.
- The enforcement measures are directed at deliberate tax evaders rather than taxpayers who cooperate with the Department.
- Individuals with no tax liability who require only a TIN will not face prosecution, while those with inactive income tax files may apply through their regional IRD office to have those files formally closed.