IRD explains fines, jail terms under new tax prosecution law

Monday, 20 July 2026 05:28 - - {{hitsCtrl.values.hits}}

The Inland Revenue Department (IRD) has clarified how the prosecution provisions introduced under the Inland Revenue (Amendment) Act, No. 11 of 2026 will be enforced, stressing that criminal proceedings will be reserved for deliberate tax evaders and only after taxpayers are given an opportunity to regularise their affairs.

In a public notice, the IRD said prosecution will be treated as a measure of last resort. Taxpayers found to be non-compliant will first receive a formal written notice and be granted a mandatory 30-day period to fulfil their tax obligations before legal proceedings are initiated.

If the taxpayer fails to comply within that period, the offence may be prosecuted before a Magistrate’s Court, which may impose a fine of up to Rs. 400,000, imprisonment for up to six months, or both.

The department said the prosecution provisions apply to specified compliance failures under the amended law, including failing to register with the Commissioner General of Inland Revenue, failing to file income tax returns, and failing to submit required annual statements, including Withholding Tax and Advance Personal Income Tax (APIT) returns.

The IRD emphasised that the enforcement framework is intended to target individuals and businesses that intentionally evade tax by failing to register, neglecting to submit returns, or concealing taxable income despite having tax liabilities.

It stressed that the provisions are not aimed at taxpayers who cooperate with the Department or those who voluntarily rectify instances of non-compliance after receiving notice.

The Department also sought to allay concerns among individuals who hold Taxpayer Identification Numbers (TINs) but have no income tax liability, stating that they will not be subject to prosecution under the new provisions.

Taxpayers who have an income tax file but no longer have a tax liability may request their regional IRD office to close the file by submitting the required information, the notice added.

The Inland Revenue (Amendment) Act, No. 11 of 2026 came into force on 3 June, introducing prosecution provisions for specified tax compliance failures as part of broader efforts to strengthen tax administration and improve compliance.