The VAT threshold in Sri Lanka
| Business | Per quarter | Per 12 months |
|---|---|---|
| Goods and services (general) | Rs 15,000,000 | Rs 60,000,000 |
| Financial services | Rs 3,000,000 | Rs 12,000,000 |
| Non-resident digital service providers (from 1 July 2026) | Rs 15,000,000 | Rs 60,000,000 |
Value Added Tax Act No. 14 of 2002, section 10, as amended; thresholds in force since 1 January 2024. Digital services: VAT (Amendment) Act No. 14 of 2026, section 10 (new section on electronic platforms).
The 2026 budget proposed lowering the general threshold to Rs 36 million a year (Rs 9 million a quarter). In June 2026 the Government announced it would retain Rs 60 million, and the VAT (Amendment) Act No. 14 of 2026, certified on 30 June 2026, left the general threshold unchanged. The same Act raised the rate on financial services to 20.5% from 1 July 2026 and brought non-resident digital platforms into VAT from the same date.
Count taxable supplies only: exempt supplies (for example most unprocessed food, education, health and public transport) do not count toward the threshold. Once you cross it you must apply within 15 days.
The VAT rate
- 18% standard rate on goods and services since 1 January 2024 (15% from September 2022 to December 2023).
- 20.5% on financial services from 1 July 2026 (18% before).
- 0% on exports of goods and on services supplied to a person outside Sri Lanka and paid for in foreign currency.
Who has to register
- Any person, company or partnership carrying on a taxable activity whose supplies exceed the threshold.
- Importers: registration is required to clear goods through Customs regardless of turnover in some cases; Customs runs a TIN/VAT registration unit for this.
- Non-resident businesses supplying digital services (streaming, software, apps, online marketplaces) to consumers in Sri Lanka above the threshold, from 1 July 2026. They do not charge VAT to Sri Lankan customers who are themselves VAT-registered.
Voluntary registration. A business under the threshold may apply to register voluntarily. It makes sense if most of your customers are VAT-registered (they can reclaim the VAT you charge) or you have large input VAT on purchases. It rarely makes sense for a business selling to the public.
How to register for VAT
- Have a TIN for the business (sole proprietors use their personal TIN).
- Log in to IRD e-services, open Registration and add VAT as a tax type. You will need the business registration certificate, proof of the business address, bank details and turnover figures for the last 12 months.
- Submit. The IRD issues a VAT registration certificate showing your VAT number and your taxable period (monthly or quarterly).
- Display the certificate at your place of business and start issuing tax invoices from the effective date.
A temporary VAT registration is available for importers whose imports are small and irregular; the Government Information Centre and Customs publish the eligibility limits.
Filing VAT returns
Returns are filed online through e-services (mandatory since 1 July 2025) on or before the last day of the month after the end of each taxable period. Pay any VAT due by the same date. Keep tax invoices for six years; input VAT can only be claimed against a valid tax invoice from a registered supplier.
Do not forget SSCL
The Social Security Contribution Levy is a separate 2.5% turnover tax with its own threshold, which was cut to Rs 36 million a year from 1 July 2026. Many businesses that stay under the VAT threshold are now over the SSCL one. See the SSCL guide.