Sri Lanka Targets Digital Income with New 18% VAT
Monday, 07 July 2025 - 7:36 pm
The gove ment has announced that Value Added Tax (VAT) at 18% will be imposed on income ea ed through online services provided by foreign individuals and platforms to users in Sri Lanka, effective October.
This move follows the issuance of an extraordinary gazette notification by the Commissioner General of Inland Revenue, Rukdevi Himali Fe ando, aimed at regulating and taxing the growing sector of cross-border digital services.
Under the new regulation, the VAT will apply to a wide range of services, including but not limited to:
- Software as a Service (SaaS)
- Online stores and marketplaces
- Digital advertising and marketing
- Cybersecurity and IT support services
- Video, music, and live-streaming platforms
- Online banking and financial tech services
- Social media and on-demand platforms
- Hotel booking and ticket reservation apps
- Online gaming platforms
The regulation also clarifies that any other digital service provided via an electronic platform from outside Sri Lanka to individuals residing in the country will be subject to VAT, even if not explicitly listed.
Foreign service providers are required to register for VAT if their supply of services exceeds Rs. 60 million annually or Rs. 15 million in the past three months. Prior to registration, such non-residents must also obtain a Taxpayer Identification Number (TIN).
This development comes amid growing debate over taxing foreign exchange ea ers and aims to expand the country’s tax base in the digital economy.
