Sri Lanka to tax digital services from October 1, 2025
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The Sri Lankan Government has decided to impose Value Added Tax (VAT) on digital services provided to Sri Lanka, starting from October 1, 2025.
In accordance with the Value Added Tax (Amendment) Act No. 04 of 2025, VAT will be charged on these digital services.
The Inland Revenue Department has issued guidelines on the new digital service tax through Extraordinary Gazette Notification No. 2443/30, published on July 1, 2025.
Non-residents who provide services to individuals in Sri Lanka through electronic platforms will be required to pay tax on such digital services.
Registration for VAT will be mandatory for those who have provided services exceeding Rs. 60 million during the past 12 months or Rs. 15 million in the last quarter.
The following services supplied through an electronic platform are treated as taxable supplies (but are not limited to):
- Cloud Computing: Hosting, storage, and computing power services
- Software as a Service (SaaS): Web-based applications
- E-commerce Services: Online stores, payment gateways, and order fulfilment services
- Digital Marketing and Advertising: SEO, social media marketing, PPC ads, and email marketing
- Cybersecurity Services: Threat detection, firewall protection, and data encryption
- IT Support and Managed Services: Remote tech support, IT consulting, and helpdesk solutions
- Streaming Services: Video, music, and live content platforms
- Financial Technology (FinTech): Online banking, payment processors (e.g., PayPal, Stripe), and cryptocurrency exchanges
- E-commerce Platforms
- Social Media Platforms
- On-Demand Service Platforms
- Content Sharing Platforms
- Cloud Collaboration Platforms
- Marketplace Platforms
- Gaming Platforms
- Blockchain and NFT Platforms: OpenSea, Binance, Ethereum-based apps
- Subscription to Membership Websites
- Use of Apps for Hotel Reservations and Ticket Bookings
Accordingly, the provision of the above-mentioned digital services will be subject to an 18% VAT rate starting from October 1, 2025.
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