IRD warns of fines and prison sentences for willful tax defaulters

The Inland Revenue Department (IRD) says it will initiate criminal proceedings against individuals and entities that willfully fail to fulfill their tax obligations.The Department stated that the authority to take legal action has been vested in the Commissioner General of Inland Revenue under the Inland Revenue (Amendment) Act, No. 11 of 2026.According to the IRD, legal action may be taken against those who fail to register for income tax, fail to file income tax returns or fail to submit annual declarations relating to Withholding Tax (WHT) and Advance Personal Income Tax (APIT).However, the Department emphasized that filing criminal cases will be treated as a last resort and that several legal procedures will be followed before initiating court action.Accordingly, a formal notice will first be issued to the relevant taxpayer, granting a 30-day grace period to comply with the outstanding obligations.If the required obligations are not fulfilled within that period, the failure will be treated as a legal offence, enabling the IRD to institute proceedings before a Magistrate's Court.The Department further stated that a person found guilty of such an offence may be liable to a fine not exceeding Rs. 400,000, imprisonment for a term not exceeding six months, or both.The IRD also clarified that this initiative is intended solely to target individuals and entities that deliberately evade taxes, and not those who cooperate with the department in fulfilling their tax obligations.