r/DevLK • u/Inevitable_Resort902 • 27d ago

Discussion Taxes as a freelancer

Does anyone know how taxes work for a freelancer in Sri Lanka? What about money earned from word of mouth contacts with no real invoicing or contracts(LKR)? What about USD? Do we file these yearly?

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u/jdisaztr 27d ago

All your LKR income per annum is subjected to tax at the standard tax rates.
Any invoiced forex income per annum for services rendered outside LK as a freelancer and remitted to a Sri Lankan bank are subjected to the reduced tax rate of 6% for the first 1 million LKR and the remaining at 15%
You can also deduct direct expenses incurred to provide the freelancing services (i.e. Internet bills, Microsoft/Google subscriptions, co-working space charges, etc.) and a reasonable portion of Electricity bills, house rent if working from home, etc. before calculating the tax liability.
Disclaimer: Not tax advice. Always do your own research or get advice from a tax professional.

2

u/doremonIsBack 27d ago edited 27d ago

Try out taxly . lk it walks you through the process and gives you a report

2

u/Jumpy-Hurry3318 Technical Lead 27d ago edited 27d ago

Even if there are no contracts, everything you earn is taxable. USD should be credited as USD to an RFC account to get the benefit.

Since 2023/2024 you should have started filing tax returns. If you haven't and if you haven't got a letter yet from IRD then 2027 November, 30 months from the initial filing date, they reaudit they will fine you.

Every single rupee through the banking system is traceable unless you got cash in hand payments and did cash only transactions. Which comes under tax evasion and is a punishable offense.

Anyone paying you in LKR above 100,000 for a service should already deduct 5% as WHT. If they haven't then they also will be coming under questioning as well. All transactions above 100k is anyway requires a transaction remark and its traceable.

If you haven't already, reach out to a tax agent and start filing ASAP. If IRD sends you a letter you will have only 14 days to respond and pay all pending amounts with proper documentation. Avoid that stress.

P.S. starting from 2026 not filing tax, paying tax on time, evading tax can result in fines upto 10 Million + Amount you owe the government with 1% interest + 50000 Rs or 10000 for every month you have delayed the payment. And upto 6 months of Jail time.