IRD Strengthens Tax Compliance for High Net Worth Individuals

The Inland Revenue Department (IRD) announced the establishment of a dedicated High Wealth Individuals Unit (HWIU) to ensure tax compliance among Sri Lanka’s most affluent residents. This initiative aims to enhance fairness and public confidence in the nation’s tax administration system.

The HWIU, stationed at the department’s Large Taxpayer Office, will comprise a ten-member team. As a first step, the unit will contact a select group of high net worth individuals (HNWIs) to collaborate with them and their advisors in ensuring their tax return filings are up-to-date. Commissioner General W.A. Sepalika Chandrasekara elaborated on these efforts in a statement.

To guarantee that the wealthy contribute their fair share, the IRD will implement additional measures. These include:

• Conducting in-depth risk assessments and profiling of HNWIs.
• Prioritizing audits for high-risk cases.
• Partnering with domestic and international organizations to obtain information that assists the HWIU in identifying potential tax non-compliance.

Furthermore, the IRD will collaborate closely with banks, the Financial Intelligence Unit (FIU), and other tax administrations through their vast network of treaties with 45 countries. This collaboration aims to identify undisclosed banking records and assets belonging to HNWIs.

“We anticipate that this engagement strategy will foster a greater willingness among HNWIs to participate and contribute to the government’s revenue collection efforts,” the statement said. “This, in turn, will aid in addressing the nation’s pressing socio-economic challenges.”

As a current definition for HNWIs is not established, the IRD plans to initially target a group of 100 taxpayers with the highest reported income across various sources. This will be supplemented by reviewing data from third parties, including real estate records, FIU reports, bank account details, and information obtained through tax treaties. The department intends to expand this group for ongoing monitoring as this process advances.

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