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 | 8% | 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 | $300,000 | |
| Philippines | 12% | 2024 ? | P 3million | |
| Singapore | 9% | Jan 2020 | S$ 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 | – |
