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Sri Lanka VAT on digital services proposals

Proposals to subject non-resident sellers and marketplaces to VAT on B2C digital and electronic services

The South Asian island country of Sri Lanka is bringing forward proposal to bring 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 would bring the country into line with over 100 countries that impose VAT on non-resident digital services.

The Inland Revenue Department is expected to bring together proposals by Spring 2024. It is expected to 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

  • Streaming music and video
  • Apps
  • Images
  • Online gaming
  • Automated e-learning
  • Search engines
  • Online advertising
  • SaaS or cloud-based software
  • Ride and home sharing app’s

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

Comments (click for details) Rate Date Threshold Comments
Australia 10% Jul 2017 AUD $75,000
Azerbaijan 12% Jan 2017
Armenia 20% Jan 2022 AMD 115million
Bangladesh 5% - 15% Jul 2019 B2B and B2C
Bhutan 7% Jul 2021 Nu 5million
Cambodia 10% Mar 2022 KHR 250m
China 6%-13% N/a Nil Withholding VAT; B2B and B2C
Fiji 9% TBC FJD 300,000
India 18% Jul 2017 -
Indonesia 11% Aug 2020 IDR600m or 12k customers
Japan 10% Oct 2015 JPY 10 million
Kazakhstan 12% Jan 2022 Nil
Kyrgyzstan 12% Jan 2022 Nil
Laos 10% Feb 2022 LAK 400m
Malaysia 6% Jan 2020 RM500,000
Nepal 13% Jul 2022 Rupees 2m Also 2% DST
New Zealand 15% Oct 2016 NZD 60,000
Pakistan 2% Sep 2021 Nil Marketplace Withholding VAT
Palau 10% Jan 2023 $300,000
Philippines 12% Jan 2024 ? P 3million
Singapore 9% Jan 2020 S$ 100,000
South Korea 10% Jul 2015 Nil
Sri Lanka 18% 2025? LKR 60m Proposals only
Taiwan 5% May 2017 NTD 480,000
Tajikistan 14% Jan 2021
Thailand 7% Sep 2021 1.8m Baht
Uzbekistan 12% Jan 2020 Nil
Vietnam 10% Dec 2020

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