Sri Lanka’s 18% VAT on Digital Services Isn’t New — It’s Just Finally Being Enforced

COLOMBO (News 1st); Sri Lanka will begin imposing an 18% Value Added Tax (VAT) on services provided by non-resident individuals via electronic platforms to Sri Lankan users, starting October 1, 2025. The decision, debated in Parliament, aims to level the playing field between local and foreign service providers.

What’s Changing?

The VAT will apply to digital services used within Sri Lanka, regardless of where the provider is based. This includes platforms like Uber, which operates internationally, and PickMe, a local competitor already subject to VAT.

“This is not a new tax,” clarified Dr. Anil Jayantha, Deputy Minister of Economic Development. “It’s part of the existing VAT Act. We’re simply enforcing it fairly across all providers.”

Originally scheduled for April 1, the implementation was delayed due to legal challenges. With court proceedings now concluded, the government is moving forward.

Why It Matters?

Fair Competition: Local platforms have been paying VAT, while foreign platforms have not.

Revenue Generation: VAT is a key source of income for the national budget.

Digital Economy Regulation: The move signals tighter oversight of cross-border digital transactions.

“Whether the service is provided from within Sri Lanka or abroad, it should be taxed if used locally,” said Dr. Anil Jayantha, Deputy Minister of Economic Development.

On e-commerce loopholes he said, “We’ve seen parcel-splitting to avoid taxes under the de minimis threshold. Customs is now intervening.”
What Is ‘De Minimis’?

The de minimis rule exempts low-value imports from tax. However, some importers have reportedly split shipments to exploit this threshold.