Sri Lanka Postpones Digital Services Tax to 2026

Sri Lanka has postponed the introduction of an 18% VAT on digital services by non-resident companies to April 1, 2026. The delay follows requests from digital service providers citing practical challenges. VAT applies to various digital and e-commerce services with significant turnover.

Sri Lanka has announced a postponement of the new 18% levy on digital services offered by non-resident firms until April 1, 2026. The decision was made public on Thursday, citing requests from international digital service providers for more preparation time due to practical challenges.

The Value Added Tax (VAT) amendment, originally scheduled to be implemented on October 1, 2025, is part of Act No 4 of 2025. This legislation mandates non-resident digital service providers to register for VAT within the country, as per a gazette from July.

The affected services include e-commerce, cloud computing, cybersecurity, and various digital platforms like social media and gaming. However, only businesses with a turnover exceeding Rupees 60 million annually or Rupees 15 million over the past three months are required to comply.

(With inputs from agencies.)