Sri Lanka’s IRD now requires all non-resident digital service providers to register for 18% VAT if they exceed Rs. 60 million in revenue. Learn how the new tax rules affect global platforms doing business with Sri Lankan customers.
In a move to tighten oversight and boost state revenue, Sri Lanka’s Inland Revenue Department (IRD) has announced that non-resident service providers operating through digital platforms must register for Value Added Tax (VAT) if their local revenue crosses a defined threshold.
According to the latest gazette notification detailing digital services liable for VAT, non-resident providers must register if their supply of services to customers in Sri Lanka exceeds Rs. 60 million in the last 12 months or Rs. 15 million over the most recent three months, as outlined in the amended VAT Act.
This 18% VAT will apply to all qualifying non-resident digital service providers, including those offering software as a service (SaaS), cloud computing, streaming platforms, online marketplaces, fintech tools, gaming, and booking apps used by Sri Lankan customers.
Once eligible, non-resident digital providers are legally required to collect and remit the 18% VAT to the Inland Revenue Department by the 20th of the following month after each taxable period ends. In addition, they must submit quarterly VAT returns, with deadlines falling on the last day of the month following the close of each quarter.
Before applying for VAT registration, non-resident persons must first obtain a Taxpayer Identification Number (TIN). The IRD has made it easier by providing both TIN registration and VAT application options online through their official portal at www.ird.gov.lk.
This policy, effective from October 1, 2025, is seen as a step toward creating a level playing field for both foreign and local businesses, while ensuring fair tax contributions from global digital companies benefiting from Sri Lanka’s growing e-commerce and digital consumption landscape.
Authorities hope the regulation will strengthen digital tax compliance, reinforce the country’s tax net, and maximize public revenue from international service providers who previously operated without local tax obligations.
