- Introduction of VAT for Foreign Digital Service Providers: Starting April 1, 2025, non-resident providers of digital services will be required to charge, collect, and remit an 18% VAT on electronic services supplied to customers in Sri Lanka, aligning with similar measures in other Asian countries.
- Budget Plan and Tax Reform Considerations: The 2025 Budget Plan, along with the proposed tax reforms, including the VAT levy for foreign digital service providers, is confirmed by the Sri Lankan Parliament.
- Implications for Stakeholders: The new VAT system will necessitate the development of a technical framework for tax registration and collection by authorities, potentially leading to higher prices for consumers and increased compliance costs for service providers. Additionally, the Ministry of Finance has proposed introducing Corporate Income Tax (CIT) for these foreign service providers.
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