Sri Lanka to Enforce 18% VAT on Wide Range of Digital Services from October 2025

The Sri Lankan government has issued a new Gazette notification announcing that a Value Added Tax (VAT) of 18% will be imposed on a broad range of digital services, effective October 1, 2025. This move falls under the Value Added Tax (Amendment) Act No. 04 of 2025, and was formally announced in Extraordinary Gazette No. 2443/30, published on July 1, 2025.

Commissioner General of the Inland Revenue Department (IRD), Rukdevi Perpetua Himali Fernando, stated that this tax will apply to both foreign and local digital service providers offering services to Sri Lankan consumers.

The digital services to be taxed include, but are not limited to:

Cloud Computing: Hosting, storage, and computing power.

Software as a Service (SaaS): Online/web-based software.

E-commerce Services: Online stores, payment gateways, order fulfillment.

Digital Marketing & Advertising: SEO, PPC, social media marketing, email campaigns.

Cybersecurity Services: Threat detection, firewalls, encryption.

IT Support & Managed Services: Remote tech support, consulting, helpdesks.

Streaming Services: Video, audio, and live content platforms.

FinTech Services: Online banking, crypto exchanges, digital wallets.

Online Marketplaces & Platforms: E-commerce, social media, on-demand services, content sharing, collaboration tools, and gaming.

Blockchain & NFT Platforms: Including OpenSea, Binance, Ethereum-based apps.

Online Subscriptions: Membership sites and digital subscriptions.

Mobile Applications: Hotel reservations, airline ticketing, and other on-demand apps.

The gazette also notes that any other digital service not explicitly listed but falling within the described scope will still be subject to VAT.

This change signals a significant step in the government’s approach to expanding the tax net into the digital economy, aligning Sri Lanka with global trends of taxing online services and cross-border e-commerce.