Sri Lanka VAT digital services delay to July 2026

Third delay to 1st July 2026 non-resident sellers & marketplaces subject to 18% VAT on B2C digital & electronic services

Sri Lanka’s Cabinet has delayed its Value Added Tax (Amendment) Act No. 04 of 2025. This means imposing VAT on non-resident providers of digital services to consumers from 1 July 2026 – instead of 1 April. Guidance on registration, collections and compliance will be issued next year.

The Act includes bringing foreign providers of digital services to local consumers into the VAT net. This would level the playing field for local providers who are already subject to VAT since 1 January 2024. This reform brings the country into line with over 120 countries that impose VAT on non-resident digital services.

The Inland Revenue Department will include broad e-services as well as short-term ride and accommodation platforms. The local VAT registration threshold is LKR 60 million pa (approx. $185,000).

B2B will probably use zero-rating reverse charge.

Sri Lankan VAT rose to 18% on 1 January 2024.

What digital services are liable to Sri Lankan VAT

Income from the following services are likely to become liable to VAT collections

• 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 & Managed Services: Remote tech support, IT consulting, and helpdesk solutions,
• Streaming Services: Video, music, live content platforms,
• Financial Technology (FinTech): online banking, payment processors (PayPal, Stripe, and crypto currency exchanges),
• E-commerce Platforms,
• Social Media Platforms,
• On-Demand Service Platforms,
• Content Sharing Platforms,
• Cloud collaboration platforms,
• Marketplace Platforms,
• Gaming Platforms,
• Blockchain & NFT Platforms: OpenSea, Binance, Ethereum-based Apps,
• Subscription to membership websites,
• Use of apps for hotel reservation, ticket booking.

Electronic marketplaces VAT obligations

As well as direct sellers of digital services, facilitating electronic marketplaces will likely become liable for reporting VAT on their third-party sellers. This excludes payment providers offering not service with promotion, terms & conditions or delivery of the services.

Asia Pacific VAT on digital services