Tax rate by region Sri Lanka

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Sri Lanka applies an 18% standard Value Added Tax (VAT) on digital products and electronic services supplied by non-resident businesses via electronic platforms, managed by the Inland Revenue Department (IRD). Following an initial postponement, the specialized digital framework mandates local VAT registration once a foreign supplier’s turnover in Sri Lanka surpasses LKR 60 million annually or LKR 15 million in a single calendar quarter. Under these rules, non-residents must report transactions on a quarterly cycle—submitting electronic declarations through the IRD portal by the final day of the month following the quarter’s end—while the accompanying tax payments remain due by the 20th day of that same month.

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Sri Lanka

Sri Lanka extended VAT to non-resident providers of digital services effective 1 October 2025 at 18%. Non-resident persons supplying services via electronic platforms to consumers in Sri Lanka must register for VAT, and charge 18% VAT.

Official government link: Inland Revenue Department (IRD)

18.00%

E-products and services VAT/Sales tax rate

Tax applicable for

B2B and B2C

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Once 12-month turnover exceeds LKR 60 million OR 3-month turnover exceeds LKR 15 million

Online registration possible

Yes 

Local representative needed

Not mandatory

Registration procedure

Register with IRD; obtain TIN; electronic VAT return filing required

List of digital and electronic services liable for tax

Services supplied via electronic platforms

Registration threshold

LKR 60.000.000 annual OR LKR 15.000.000 quarterly

Filing interval

Quarterly

Filing deadline

20th day of the month following the end of the taxable period

E-invoicing requirements

Mandatory

Record keeping

5 years 

How-To Guides: Sri Lanka SaaS VAT

Step: 1 Threshold

On Aril 11, 2025, Sri Lanka adopted Value Added Tax (Amendment) Act No 04 of 2025, which, among other things, requires non-resident digital services providers to register for and collect VAT effective October 1, 2025. The Act empowers the Commissioner General of Inland Revenue (CGIR) to prescribe the procedure for registration, payment, and compliance requirements.

 

On July 1, 2025, Sri Lanka published Notification No. 2443/30 outlining VAT procedures for non-resident providers of digital services through electronic platforms. Non-resident entities must register for VAT and charge 18 percent VAT on digital services sold to Sri Lankan consumers.

 

Registration is mandatory if the value of services exceeds LKR 60 million in the past 12 months or LKR 15 million in the past three months.  The Notification lists examples of taxable digital services, including streaming, cloud computing, and online marketplaces. Registered suppliers must obtain a taxpayer identification number (TIN), issue VAT-compliant invoices, retain records for five years, and file VAT returns electronically. Penalties apply for noncompliance, and the order also outlines procedures for cancellation of registration.

 

On September 3, 2025, Sri Lanka’s Cabinet approved the postponement of the non-resident VAT digital services rules from October 1, 2025 to April 1, 2026.

 

Registration is mandatory for foreign digital service providers exceeding this threshold (B2C).

 

Step: 2 Business Registration

Register via the Inland Revenue Department (IRD) e-Services portal. Foreign entities usually do not need a local fiscal representative but must apply for a TIN and VAT registration online.

Step: 3 TIN/VAT Number

Upon registration, businesses shall receive a TIN (Taxpayer Identification Number).

Step: 1 Standard Rate

Standard VAT (IVA) in Sri Lanka is 18%. 

Step: 2 Rate Formula

To calculate your tax amounts, use the following formula:

 

Tax Amount = Net Price x 18%

 

Step: 3 Reverse Charge (B2B)

Yes. For B2B transactions, general imported-services / reverse-charge principles may continue to apply, but the 2025 non-resident digital services regime is primarily framed around supplies to consumers.

Step: 1 Selling B2C

Charge 18% VAT on digital services (e.g., software, streaming, data processing) sold to Sri Lankan consumers.

 

 

Step: 2 Selling B2B

Do not charge VAT. Validate the customer’s TIN and indicate “Reverse Charge” on the invoice.

Step: 3 Invoice Requirements

Invoices must generally include:

 

• Supplier Name & Address
• Buyer Name & TIN (for B2B)
• Invoice Date & Number
• Description of Services
• VAT Amount (or Reverse Charge reference).

Step: 1 Filing Interval

Taxes are filed quarterly.

Step: 2 Filing Deadline

The filing deadline is by the 20th day of the month following the end of the quarter (e.g., April 20 for Q1).

Step: 3 Submission

File electronically via the IRD e-Services portal. Payments are generally made via bank transfer to the Commissioner General of Inland Revenue.

Step: 4 Record Keeping

Records must be kept for 5 years.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Sri Lanka’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

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