With freelancing, remote work, and digital entrepreneurship booming across Sri Lanka, one question keeps coming up:

👉 “Who pays more tax — freelancers or employees?”

Many believe employees pay more because APIT is deducted monthly.
Others think freelancers pay more because they have no employer to manage tax.

But the truth is more complex.

The tax burden depends on:

• Your annual income
• Your income category (employment vs business income)
• Allowances and benefits
• Whether you earn in foreign currency
• Your tax planning
• How you calculate your tax

In this guide, we compare freelancers and employees using real numbers — and show how the 360 Accountants Sri Lanka Tax Calculator helps both groups understand their true tax liability instantly.

⭐ 1. First, Understand the Key Difference

✔ Employees pay APIT (Advance Personal Income Tax)

Tax is deducted monthly by the employer. You receive take-home salary after tax.

✔ Freelancers pay income tax annually

No employer deducts tax. You must calculate your own taxes and pay IRD.

Both groups are taxed under the same personal income tax slabs, but the way tax is applied — and the opportunities to reduce tax — differ significantly.

⭐ 2. Do Employees Pay More Tax?

Employees may pay more tax if:

• Their employer miscalculates APIT
• Their taxable allowances are high
• Their bonuses push them into higher tax brackets
• They don’t use deductions properly
• They never estimate their tax beforehand

However…

Employees also have advantages such as:

✔ Predictable income
✔ Automatic APIT deduction
✔ No need to calculate or file manually (in most cases)
✔ HR takes responsibility for compliance
✔ Easier budget planning

But the biggest risk for employees is:

👉 They don’t know their real take-home salary until the payslip comes.

Using the 360 Accountants Tax Calculator removes this uncertainty.

⭐ 3. Do Freelancers Pay More Tax?

Freelancers may pay more tax if:

• They underestimate annual income
• They forget to calculate tax monthly
• They convert USD incorrectly
• They mix business and personal expenses
• They fail to file returns
• They calculate tax manually and get it wrong

But freelancers also enjoy benefits employees don’t have:

✔ Ability to deduct business expenses
✔ More flexibility in tax planning
✔ High-income potential
✔ Foreign income diversification
✔ No APIT — pay tax once or quarterly

A freelancer who manages income wisely can legally reduce tax burdens.

⭐ 4. Tax Comparison: Freelancer vs Employee (Example)

Let’s compare two people earning the same amount:

Scenario: LKR 250,000 per month

Employee vs Freelancer

🔵 Employee Taxation (APIT)

An employee must pay APIT based on:

• Basic salary
• Allowances
• Bonuses
• Overtime
• EPF-non-qualifying payments

If the Rs. 250,000 includes taxable allowances, APIT can be significant.

Net take-home salary might be reduced by tax + EPF.

You can calculate the exact figure with the 360 Accountants tool.

🔵 Freelancer Taxation

A freelancer receiving Rs. 250,000 monthly (local clients or foreign USD earnings converted to LKR):

• Must calculate annual personal income tax
• Can deduct business expenses (office rent, software, equipment, utilities, etc.)
• Pays tax only once the annual return is filed

Thus, freelancers often end up paying less tax due to allowable deductions.

⭐ 5. Biggest Tax Advantage: Freelancers Can Deduct Expenses

Employees cannot deduct:

• Travel to office
• Internet bills
• Training costs
• Laptop purchases
• Software
• Office space
• Utility bills

But freelancers can, if used for business.

This reduces taxable income legally.

Example:

Freelancer monthly income = Rs. 250,000
Business expenses = Rs. 50,000
Taxable income = Rs. 200,000 (not 250,000)

Employees do NOT have this benefit.

⭐ 6. Biggest Employee Advantage: Zero Stress and Guaranteed Compliance

Employees often avoid trouble because employer handles:

• APIT
• Payslips
• IRD submissions
• Income categorization
• Annual statements

Freelancers must do all the following themselves:

• Maintain records
• Track monthly income
• Convert foreign currency
• Estimate taxes
• Calculate annual tax
• File returns
• Avoid penalties

This is why freelancers should use the 360 Accountants Tax Calculator monthly to avoid surprise bills.

👉 https://360accountants.lk/tool/taxcalculator

⭐ 7. Who Actually Pays More Tax? (Honest Breakdown)

✔ Employees pay more tax if:

• They have high allowances
• They receive bonuses
• Their APIT is not optimized
• Their salary crosses higher tax brackets
• They don’t negotiate net salary

✔ Freelancers pay more tax if:

• They do not track expenses
• They fail to calculate tax monthly
• They underreport income
• They forget to file returns
• Their income jumps significantly without planning

✔ Overall:

Freelancers usually pay less tax if they manage bookkeeping + expenses properly.

Employees usually pay more tax because everything is taxed at source.

⭐ 8. Why Both Groups Should Use the 360 Tax Calculator Monthly

Whether you are a freelancer or employee, the calculator helps you:

✔ Estimate annual tax
✔ Calculate monthly APIT
✔ Understand tax brackets
✔ Know your true take-home pay
✔ Avoid miscalculations
✔ Compare income structures
✔ Check if your employer deducts correct APIT
✔ Avoid penalties at year-end

It’s the simplest and most accurate way to plan your finances.

👉 Calculate your tax now:
https://360accountants.lk/tool/taxcalculator

⭐ 9. Final Verdict — So Who Pays More?

There is no single answer.

Employees pay more tax by default

Because APIT applies monthly and no deductions are allowed.

Freelancers pay less tax if they manage expenses

Because they can deduct allowable business costs.

Employees enjoy convenience

Tax is handled automatically.

Freelancers enjoy flexibility

Tax is managed strategically.

But in both cases, what matters most is:

👉 Understand your real tax liability, not guess it.
👉 Use updated tools to avoid errors.

And the easiest way to do that is with the 360 Accountants Sri Lanka Tax Calculator.