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Sri Lanka VAT guidelines

FACTSHEET
Country codeLK
Tax nameValue Added Tax (VAT)
Tax AuthorityInland Revenue Department (IRD)

Overview​

Sri Lanka levies Value Added Tax under the Value Added Tax Act, No. 14 of 2002, administered by the Inland Revenue Department (IRD). The standard rate is 18%, in effect since 1 January 2024. [1]

The most recent major amendment is the Value Added Tax (Amendment) Act, No. 14 of 2026, certified on 30 June 2026 and published as a supplement to the Gazette of 3 July 2026. It brings non-resident digital services into VAT from 1 July 2026, raises the financial-services rate to 20.5%, and tightens invoicing and compliance rules. [2]

TIN and VAT registration​

  • Every taxpayer first obtains a Taxpayer Identification Number (TIN) — a 9-digit number — from the IRD, which can be requested through the IRD e-Services (RAMIS) portal. [1] [2]
  • After obtaining a TIN, the taxpayer registers for VAT as a tax type (mandatorily once over the threshold, or voluntarily), with documentary proof of taxable supplies. [2]
  • A Temporary VAT registration is available for import/export activities via Sri Lanka Customs for persons without a permanent VAT registration, and a Simplified VAT (SVAT) scheme operates for exporters and other specified categories. [2]

Registration threshold​

Registration is mandatory when the value of taxable supplies of goods or services (other than financial services) exceeds:

  • LKR 15 million per quarter, or
  • LKR 60 million per 12-month period (with effect from 1 January 2024). [1]

The 2026 Budget proposed cutting the annual threshold to LKR 36 million from 1 July 2026 (VAT (Amendment) Bill No. 65, gazetted 29 April 2026), but the cut was dropped before enactment — the VAT (Amendment) Act No. 14 of 2026 keeps the threshold at LKR 60 million. [2] [3]

Source snapshot — Parliament of Sri Lanka bill-status page (G6427) for the VAT (Amendment) Act No. 14 of 2026 Source snapshot captured 19 July 2026 — original (Parliament of Sri Lanka)

Rates​

RateApplies to
18% (standard)Most taxable supplies of goods and services, since 1 January 2024 [1]
20.5%Supply of financial services, for taxable periods commencing on or after 1 July 2026 (18% for periods ending on or before 30 June 2026) [2]
0% (zero-rated)Exports of goods [1]

Source snapshot — IRD VAT page: 18% standard rate, LKR 15M/quarter and 60M/12-month thresholds, exports zero-rated Source snapshot captured 19 July 2026 — original (Inland Revenue Department)

VAT on non-resident digital services​

From 1 July 2026, 18% VAT applies to services supplied by a non-resident person through an electronic platform to a person in Sri Lanka. The charge was originally legislated by the VAT (Amendment) Act No. 04 of 2025 with effect from 1 October 2025, was postponed twice, and the VAT (Amendment) Act No. 14 of 2026 fixed the statutory effective date at 1 July 2026. [1] [2] [3]

Key rules under the new Chapter IIIC of the VAT Act: [1]

  • Registration threshold: supplies exceeding LKR 60 million (or equivalent in another currency) in the 12 months then ending, or LKR 15 million in a quarter, on or after 1 July 2026. Application is made electronically within three months.
  • Location of the customer: a recipient is deemed to be in Sri Lanka when two or more of these indicators are met — billing/residential/business address in Sri Lanka; payment made through a bank or financial institution in Sri Lanka; payment instrument issued in Sri Lanka; IP address of the device located in Sri Lanka.
  • B2B carve-out: the tax is not charged where the recipient is a VAT-registered person; the non-resident instead files a simplified statement of such supplies (penalty up to LKR 50,000 for non-compliance).
  • Compliance: returns are filed electronically for each taxable period, and tax is paid by electronic remittance in Sri Lankan rupees or a permitted foreign currency, directly or through an appointed representative.

E-invoicing status​

  • The IRD announced a National e-Invoicing System under the 2026 Budget (notice of 4 May 2026), enabling real-time transmission of VAT invoice data from taxpayers' ERP systems to the IRD's RAMIS platform via Web API. A pilot began 1 May 2026 with tea brokers transmitting Colombo Tea Auction invoice data; Phase 1 covers export-oriented VAT-registered businesses (tea and garments) and Phase 2 is targeted to extend to all VAT-registered persons by end-2026. [1] [2]
  • A revised, legally binding tax invoice format applies to all VAT-registered persons from 1 July 2026 (Gazette Extraordinary No. 2481/22 of 27 March 2026; IRD Circular SEC/2026/E/03 of 20 May 2026), superseding the prior format under Gazette No. 2463/05, which was withdrawn from that date. [3]

Mandatory tax invoice format (from 1 July 2026)​

Every VAT invoice must display, at minimum: [3]

  • A prominent "TAX INVOICE" header, distinguishing it from quotations, proforma invoices, or receipts.
  • Supplier details exactly as per the VAT registration certificate: 9-digit TIN, registered business name, and registered address.
  • Purchaser details, where the purchaser is VAT-registered: TIN, name, and address.
  • A unique invoice serial number in the structure YYMMM_QQQQ_XXXXX — YY (year), MMM (month), a 1–15 character QQQQ classification code (branch/department/customer/invoice type, letters and/or numbers), and a sequential numeric XXXXX suffix — with no spaces and a maximum of 40 characters overall.
  • Two separate dates: the invoice date (when issued) and the date of supply (when ownership/service passes), used to determine the correct VAT period.
  • A three-line value/VAT breakdown in LKR to two decimal places: value of supply excluding VAT, VAT amount charged, and total value including VAT (plus LKR-equivalent figures, converted at the Central Bank's selling rate, for invoices issued in an approved foreign currency).

Businesses that obtain the Commissioner-General's approval before 1 July 2026 to integrate their ERP with RAMIS via Web API for real-time transmission of invoice data may treat the YYMMM_QQQQ_ prefix as optional, provided the integration is completed by 31 December 2026. Non-compliant invoices risk rejection for input VAT credit. [3]

Recent changes​

  • 2026-07-03 — VAT (Amendment) Act No. 14 of 2026 (certified 30 June 2026) published as a Gazette supplement: it retains the LKR 60 million annual registration threshold (dropping Bill No. 65's proposed cut to LKR 36 million) and sets the non-resident digital-services registration trigger at LKR 60 million per 12 months / LKR 15 million per quarter. (Inland Revenue Department) — see issue
  • 2026-07-01 — 18% VAT on digital services supplied by non-residents through electronic platforms came into force, and the VAT rate on financial services rose from 18% to 20.5%. (Inland Revenue Department) — see issue
  • 2026-05-20 — IRD Circular SEC/2026/E/03 made the revised tax invoice format (Gazette Extraordinary No. 2481/22 of 27 March 2026) mandatory for all VAT-registered persons from 1 July 2026, with an ERP–RAMIS Web API integration alternative until 31 December 2026. (Inland Revenue Department)
  • 2026-05-04 — IRD announced the National e-Invoicing System for VAT under the 2026 Budget (notice SEC/PN/VAT/2026-03): pilot from 1 May 2026, Web API integration with RAMIS, full rollout to all VAT-registered persons targeted by end-2026. (Inland Revenue Department) — see issue
  • 2026-04-29 — VAT (Amendment) Bill No. 65 gazetted, proposing 18% VAT on non-resident digital services from 1 July 2026, a financial-services rate rise from 18% to 20.5%, and a registration-threshold cut from LKR 60 million to LKR 36 million (the threshold cut was later dropped at enactment). (Parliament of Sri Lanka) — see issue

Frequently Asked Questions​

What is the VAT registration threshold in Sri Lanka?​

Registration is mandatory once taxable supplies exceed LKR 15 million in a quarter or LKR 60 million in a 12-month period (in effect since 1 January 2024). [1] The 2026 Budget proposal to cut the annual threshold to LKR 36 million was dropped before enactment — the VAT (Amendment) Act No. 14 of 2026 keeps it at LKR 60 million. [2]

Do foreign providers of digital services have to register for VAT in Sri Lanka?​

Yes. From 1 July 2026, 18% VAT applies to services supplied by non-residents through electronic platforms to persons in Sri Lanka. A non-resident digital service provider must register once such supplies exceed LKR 60 million (or equivalent) in the preceding 12 months or LKR 15 million in a quarter, applying electronically within three months. A recipient is deemed to be in Sri Lanka when two or more indicators are met: Sri Lankan billing/residential/business address, payment through a Sri Lankan bank, a payment instrument issued in Sri Lanka, or a Sri Lankan IP address. [1]

Are B2B digital services supplied by non-residents subject to Sri Lankan VAT?​

No. VAT is not charged where the recipient is a VAT-registered person in Sri Lanka (section 25N of the VAT Act, inserted by the VAT (Amendment) Act No. 14 of 2026). The non-resident must instead file a simplified statement of supplies made to registered persons (date, recipient TIN and name, value, invoice number, description); non-compliance can attract a penalty of up to LKR 50,000. VAT wrongly charged and already remitted is treated as deductible input tax for the registered recipient. [1]

What is the VAT rate on financial services in Sri Lanka?​

20.5% for taxable periods commencing on or after 1 July 2026 (18% applied from 1 January 2022 to 30 June 2026), under section 25C of the VAT Act as amended by the VAT (Amendment) Act No. 14 of 2026. The standard 18% rate on other supplies is unchanged. [1]

Is e-invoicing mandatory in Sri Lanka?​

Not yet as a universal mandate. The National e-Invoicing System announced on 4 May 2026 is rolling out in phases — a pilot from 1 May 2026, Phase 1 for export-oriented VAT-registered businesses, and Phase 2 targeted to reach all VAT-registered persons by end-2026 via Web API integration with RAMIS. [1] Separately, a revised mandatory tax invoice format applies to all VAT-registered persons from 1 July 2026, with an exemption from the prescribed invoice-number structure for businesses approved to integrate their ERP with RAMIS by 31 December 2026. [2]