Sri Lanka tax evasion may now trigger criminal prosecution, with offenders facing fines of up to Rs. 400,000 or six months in prison.
Sri Lanka tax evasion cases may now lead to criminal prosecution after the Inland Revenue Department announced tougher action against deliberate non-compliance by individuals and companies.
The department said the Inland Revenue (Amendment) Act, No. 11 of 2026, gives the Commissioner General of Inland Revenue full authority to begin legal proceedings under penal laws.
Offences That Can Trigger Prosecution
The IRD may initiate prosecution when a taxpayer deliberately fails to meet key legal duties. These include failing to register for income tax, failing to file required income tax returns and failing to submit annual declarations on withholding tax and advance personal income tax.
The department said the stronger process targets willful evasion rather than taxpayers who cooperate with officials.
Taxpayers Will Receive a 30-Day Notice
However, the IRD will use criminal action only as a last resort. Officials must first complete several preliminary legal steps before taking a case to court.
The department will issue an official notice giving the individual or company 30 days to meet the outstanding tax obligations.
If the taxpayer still fails to comply within that period, the IRD will treat the conduct as an offence. It may then file charges before the Magistrate’s Court.
Penalties for Sri Lanka Tax Evasion
A court may impose a fine of up to Rs. 400,000 on a convicted individual or company. The court may also order imprisonment for up to six months.
Depending on the case, the offender may face both the fine and imprisonment.
The IRD stressed that the procedure does not seek to punish honest or cooperative taxpayers. Instead, it focuses on those who intentionally commit tax fraud.
The department said it remains committed to strengthening tax compliance while protecting taxpayers who meet their obligations in good faith.
