KPMG Experts Discuss SVAT Abolition and Sri Lanka’s Tax Transition

• Sri Lanka is abolishing the Simplified Value Added Tax scheme effective 1 October 2025, replacing it with a risk-based VAT refund mechanism under the Value Added Tax Act
• KPMG experts warn that the new refund-based VAT system could severely impact businesses and the economy if not implemented efficiently, despite representing modernization of the VAT regime
• Under the new system, exporters with over 50 percent zero-rated supplies will receive refunds within 45 days, while those with less than 50 percent exports must wait six months for refunds
• Small and medium enterprises and indirect exporters face new cash flow challenges as they must now charge VAT upfront and settle invoices inclusive of VAT, tightening liquidity
• Taxpayers must maintain strict compliance to fall within low or medium risk categories for timely refunds, as high-risk entities will undergo pre-verification processes before receiving refunds

Source: ft.lk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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