- 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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