From cloud computing to Netflix and crypto apps, Sri Lanka’s Inland Revenue Department announces sweeping 18% VAT on a wide range of digital services under the new tax regime effective October 1, 2025.
Sri Lanka’s digital economy is about to face a significant fiscal overhaul. A new gazette notification confirms that the government will impose an 18% Value Added Tax (VAT) on a wide range of digital services beginning October 1, 2025, under the Value Added Tax (Amendment) Act No. 04 of 2025.
The announcement was made official by the Inland Revenue Department (IRD), with Commissioner General Ms. Rukdevi Perpetua Himali Fernando publishing the operational guidelines through Extraordinary Gazette No. 2443/30 on July 1, 2025.
The tax will be levied on an extensive list of digital services categorized as taxable supplies. While the list is not exhaustive, it includes, but is not limited to:
- Cloud Computing Services: Hosting, storage, and computing power
- Software as a Service (SaaS): Web-based applications
- E-commerce Services: Online stores, payment gateways, and fulfillment solutions
- Digital Marketing: SEO, social media marketing, PPC advertising, email campaigns
- Cybersecurity Solutions: Threat detection, firewall protection, data encryption
- IT Support & Managed Services: Remote support, helpdesk, IT consulting
- Streaming Platforms: Video, music, and live content services
- FinTech Platforms: Online banking, crypto exchanges, payment processors like PayPal and Stripe
- E-commerce Marketplaces
- Social Media Platforms
- On-Demand Service Apps
- Content Sharing Networks
- Cloud Collaboration Tools
- Digital Marketplaces
- Gaming and Esports Platforms
- Blockchain and NFT Platforms: OpenSea, Binance, Ethereum-based apps
- Paid Membership or Subscription Sites
- Apps for Hotel Reservations and Ticket Bookings
The Gazette further clarified that even if a specific service is not listed, it may still fall under the VAT scope if it meets the general criteria of taxable digital supply.
This policy is part of Sri Lanka’s broader push to enhance tax revenue through digital channels and modernize its fiscal regime to keep pace with the expanding digital economy.
