News Today: Sri Lanka VAT on non-resident digital service providers 2025 explained

The Inland Revenue Department of Sri Lanka has announced that, starting October 1st, 2025, an 18% Value Added Tax (VAT) will apply to digital services provided by non-resident digital service providers to Sri Lankan consumers via electronic platforms.

This move, formalized through a gazette notification signed by the Inland Revenue Commissioner General, aims to bring foreign digital service providers into the local tax net, aligning Sri Lanka with global practices for taxing the digital economy.

According to the regulation, non-resident service providers must register for VAT if their supplies to Sri Lankan consumers exceed Rs. 60 million within the preceding 12 months, or Rs. 15 million within the preceding 3 months. This requirement ensures that large and medium-scale providers who significantly benefit from the Sri Lankan digital market contribute fairly to the country’s tax revenue.

The gazette clearly lists the types of taxable services covered under this policy:

• 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 fulfillment.

• Digital Marketing & Advertising: SEO, social media marketing, PPC ads, and email campaigns.

• Cybersecurity Services: firewall protection, data encryption, and threat detection.

• IT Support & Managed Services: remote support, consulting, and helpdesk solutions.

• Streaming Services: platforms for music, video, and live broadcasts.

• FinTech services: online payment processors, cryptocurrency exchanges, and e-commerce platforms.

• Blockchain & NFT Platforms: OpenSea, Binance, Ethereum-based apps, and membership sites.

• Online booking and reservations: apps and platforms used for hotel reservations and ticketing.

This change is expected to have significant implications for global giants like Netflix, Amazon, Meta, Google, Spotify, Binance, and Airbnb, along with niche SaaS and digital marketing providers serving Sri Lankan users.

The Inland Revenue Department encourages non-resident providers to comply promptly to avoid penalties. This decision represents Sri Lanka’s commitment to modernizing tax laws to include the rapidly growing digital services sector, ensuring fair taxation and supporting public revenue.