The Government of Sri Lanka has announced that Value Added Tax (VAT) will be imposed on digital services effective from October 1, 2025.
According to a special gazette (No. 2443/30) issued by the Inland Revenue Department on July 1, 2025, guidelines have been released to implement the new tax under the Value Added Tax (Amendment) Act No. 4 of 2025.
Under this new regulation, foreign service providers offering digital services to individuals in Sri Lanka through electronic platforms will be required to register for VAT if their supply of services exceeds Rs. 60 million over the past 12 months, or Rs.15 million in the last quarter.
The following categories of digital services will be subject to the 18% VAT:
- E-commerce Services
- Cloud Computing
- Software as a Service (SaaS)
- Cybersecurity Services
- Digital Marketing & Advertising
- IT Support & Managed Services
- Streaming Services
- FinTech Solutions
- Subscription & Membership Websites
- E-commerce Platforms
- Social Media Platforms
- On-Demand Service Platforms
- Content Sharing Platforms
- Cloud Collaboration Platforms
- Online Marketplaces
- Gaming Platforms
- Blockchain & NFT Platforms
- Apps for Hotel Bookings and Ticket Reservations
This move is part of Sri Lanka’s broader effort to expand its tax base by including digital economy participants and aligning with international taxation trends.