Consultants Are Almost Always Self-Assessed

Unlike salaried employees, independent consultants — management, HR, financial, marketing, or technical — don’t have an employer deducting APIT. You are responsible for calculating, declaring, and paying your own tax, usually on a quarterly basis.

1. Withholding Tax on Consultancy Fees

When a company pays a registered consultant for professional services, it may be required to deduct Withholding Tax (WHT) at source before paying you. This WHT is not your final tax — it’s an advance credit against your total annual tax liability, which you claim back when filing your return. Keep every WHT certificate your clients issue; you’ll need them.

2. Calculating Your Taxable Income

Your taxable consultancy income is your gross fees minus legitimate business expenses — travel to client sites, a proportionate share of home office costs, professional subscriptions, business insurance, and equipment. The net figure is then taxed at the standard progressive individual rates: 0% up to LKR 1,800,000, then 6% through 36%.

3. Quarterly SET Instalments

If your estimated annual tax liability exceeds LKR 6,000, you must pay quarterly Statement of Estimated Tax instalments rather than settling everything at year-end. This is the single most commonly missed obligation among independent consultants — many only find out about it when the IRD charges interest.

4. Consultants Working with Foreign Clients

If you provide consultancy services to overseas clients and receive payment in foreign currency through the banking system, a concessionary maximum rate of 15% may apply instead of the standard progressive bands — worth checking carefully if a meaningful share of your income is international.

5. Sole Consultant vs. Registered Company

As your consultancy income grows, it’s worth periodically reassessing whether operating as an individual or incorporating a company makes more tax sense. Companies face a standard 30% corporate rate (with possible reduced rates for qualifying SMEs) but offer different expense and liability treatment than individual self-assessment.

Calculate Your Tax

Estimate your liability with our Income Tax Calculator, and plan your instalments with our Quarterly SET Calculator.