Did you know what the T10 form is and why it is mandatory to lodge that? The T10 form, also known as the Income Tax Deduction Certificate, is a modest but important document in the realm of Advance Personal Income Taxes (APIT). It may appear to be a simple document, but its significance cannot be understated. By adhering to tax regulations, verifying employee deductions, promoting transparency and accountability, facilitating tax audits, and enhancing the company’s reputation, T10 form becomes an important document. In this article, we will explore why every company should prioritize lodging a T10 form.
Employers are obligated to provide all employees with information about the tax deductions made during the year on the Certificate of Tax Deduction. This form must be issued before the 30th of April of the following year of assessment or, in the case of an employment termination during the year of assessment, not more than 30 days after the termination date. The Certificate of Income Tax Deductions is prescribed under section 87 of the Inland Revenue Act, No.24 of 2017.
These are the five reasons why every company in Sri Lanka should file a T10 form:
- Compliance with tax regulations:
One of the main reasons why every company operating in Sri Lanka needs to lodge a T10 form is to comply with tax regulations. Employers must provide correct and timely information on employee deductions to the tax authorities in accordance with the Inland Revenue Act.
Non-compliance with tax regulations will result in,
- Financial penalties and fines
- Legal consequences
- Increased evaluation from tax authorities
- Employee deductions verification:
Under current tax regulations, employers are required to withhold and pay taxes on behalf of their employees. Employers calculate and deduct taxes (APIT) from employees’ paychecks based on income, filing status, and allowances claimed. This helps companies to provide a clear record of employee deductions and to make timely transfers to the Inland Revenue Department. And importantly, it allows for cross-referencing and verification of the employer’s deductions which enables IRD to detect any discrepancies or potential errors, promoting transparency and ensuring fair and accurate tax reporting.
- Accountability and transparency:
Lodging a T10 form serves as a tool for promoting accountability and transparency in the employer-employee relationship. By completing this process, employers fulfill their statutory deduction duties and accurately report employee deductions to the Inland Revenue Department. This guarantees that employers are adhering to their obligations and establishing transparency in the tax reporting process.
Through accurate reporting, employers build trust and confidence with employees, ensuring that the appropriate tax amounts are deducted and reported accurately. This commitment to compliance and responsibility showcases the employer’s dedication to maintaining a fair and transparent working environment.
- Facilitating tax audits and compliance checks:
The proper lodging of the T10 form by companies plays a crucial role in facilitating compliance checks and tax audits while supporting the government’s efforts to ensure accurate tax collection. By accurately completing and submitting the T10 form, companies actively contribute to providing reliable financial data, assisting in efficient compliance checks and audits. This responsible action showcases the company’s commitment to supporting the country’s tax system, ensuring that tax income is collected correctly.
By actively supporting the Inland Revenue Department in tax collection, companies give valuable contributions to the welfare of the country and help maintain economic stability. This, in turn, can lead to companies experiencing enhanced support from the government, creating a favorable business environment.
- Strengthening the reputation of the company:
Lodging a T10 form reflects positively on the reputation of the company. It demonstrates the company’s commitment to compliance, transparency and responsible financial management. This can enhance the company’s reputation among employees, stakeholders and the wider business community.
Strengthen reputation of companies helps to,
- Build credibility
- Gain a competitive advantage over rivals
- Qualify for government tax incentives and grants
In conclusion, lodging the T10 form for every company in Sri Lanka. By prioritizing compliance with tax regulations, verifying employee deductions, promoting accountability and transparency, facilitating tax audits and compliance checks, and strengthening the company’s reputation, businesses can actively contribute to a transparent and accountable environment. And, by actively participating in the T10 lodging process, companies contribute to maintaining economic stability and promoting the welfare of the country. We hope this article has provided a clear understanding of the importance of the T10 form and its benefits, empowering companies to navigate the tax obligation effectively.