Consequences on non compliance with the provisions of withholding tax

Withholding agents are required to deduct withholding tax at the relevant rates and remit to the Department of Inland Revenue in accordance with the provisions of the Inland Revenue Act. If any withholding agent does not complied with such provisions, he has to face following consequences.

• If the relevant withholding tax is not deducted, the withholding agent is required to pay the relevant withholding amount to the Department of Inland Revenue.
• If the relevant withholding tax has not been paid to the Department of Inland Revenue, withholding agent is not permitted to deduct the relevant expenses such as rent, interest, service fee, and royalty etc. when arriving at the adjusted profit in computing the income tax liability.
• If the tax is not paid by the due date, withholding agent is liable for an interest equal to 1.5% per month or part month.

• If a person who fails to pay all or part of a tax  due for a tax period within fourteen days of the due date, shall be liable to a penalty equal to twenty per cent of the amount of tax due but not paid.