TIN Registration in Sri Lanka Explained:

The Tax Identification Number (TIN) has become a widespread topic of discussion across the country, and a considerable amount of misinformation is circulating on this matter. It’s essential to clarify that possessing a TIN doesn’t automatically imply liability for tax payment. Instead, it provides individuals with convenient access to numerous services offered by various state institutions without any complications. As of January 1, individuals failing to obtain a Taxpayer Identification Number (TIN) will face a penalty not exceeding Rs. 50,000, cautioned the Department of Inland Revenue.

In a recent update, the Ministry of Finance clarified the role of Tax Identification Numbers (TINs) in Sri Lanka, highlighting that possessing a TIN doesn’t automatically translate to income tax liability. The President’s Media Division (PMD) has reported that only individuals aged 18 and above with an income exceeding the annual tax exemption limit of Rs. 1.2 million are obligated to pay income tax.

Any Sri Lankan earning less than this amount is not required to pay tax. However, it is mandatory for individuals above the age of 18 by December 31, 2023, January 1, 2024, and upon reaching their 18th birthday to register and obtain a TIN. Additionally, individuals earning an income surpassing Rs. 1,200,000 during the fiscal year (from April 1 of one year to March 31 of the following year) are required to register for income tax. However, individuals with no TIN may face a fine under Article 177 of the Inland Revenue Act not exceeding Rs. 50,000.

Upon obtaining a TIN, individuals will be assigned a nine-digit number. Those paying income tax will receive an additional four numbers at the end of their TIN, while those paying VAT will have a TIN ending with the number 7000.

Despite this clarification, possessing a TIN is now mandatory for specific routine transactions starting from February 1. These activities include:

Opening a current account

Seeking building plan approval

Registering a motor vehicle

Renewing a license, and

Registering title deeds to land.

The Commissioner General of Motor Traffic, Nishantha Anuruddha Weerasinghe, emphasized that vehicle ownership or registration cannot proceed without the Taxpayer Identification Number (TIN). Urging the public to promptly obtain the TIN for required services, he further advised against visiting the Department without the necessary number to avoid unnecessary delays.

Boosting government revenue is crucial for Sri Lanka’s economic recovery, especially during the current crisis, aiming to establish a more sustainable economic environment. However, it is essential to ensure that the tax burden is borne by those with the capacity.

Personal Income Taxes (PIT) play a vital role in revenue generation and addressing inequality through effective redistribution. In Sri Lanka, PIT revenue has experienced a steady decline, dropping from 0.9% of GDP in 2000 to 0.2% in 2022—lower than similar low-income economies. To maintain fairness and prevent bracket creep caused by inflation, adjusting thresholds becomes essential. A well-founded approach to determining thresholds, tax slabs, and rates is necessary for increased revenue collection and equitable taxation.

Frequent changes to tax policies, such as the nine revisions to PIT slabs and five adjustments to the tax-free threshold since 2000, without a clear economic rationale make tax administration more complex and hinder compliance. With the country falling short of the first-quarter revenue targets set by the IMF’s Extended Fund Facility Program, enhancing income tax collection becomes pivotal. To meet revenue goals and ensure a fair distribution of the tax burden, it is essential to expand the tax base, emphasizing the importance of aligning with the program’s objectives.

How to obtain a TIN?

The public has the flexibility to register online at www.ird.gov.lk to acquire a Taxpayer Identification Number (TIN). For information, anyone can browse the comprehensive quick guide titled ‘How to register as a Taxpayer’ for a step-by-step walkthrough of the e-Services screens. Another option is to secure a TIN by personally visiting the Primary Registration Unit on the 2nd Floor of the IRD Head Office or any Regional Offices. Accuracy in providing your email address and mobile number is crucial during the TIN application process. Failure to adhere to these instructions may lead to registration by the department and a penalty.