VAT refund scheme aims to turn Colombo into a regional shopping centre

Minister of Finance and Mass Media Mangala Samaraweera believes that the Tourist VAT Refund Scheme (TVRS), launched yesterday, will play a crucial role in enhancing the attraction of Colombo as a destination.

“Today most tourists tend to bypass Colombo for attractions outside the capital city. But with the opportunity for VAT free shopping, tourists will have more reason to spend time in Colombo.”

Under this scheme, the Inland Revenue Department (IRD) will refund foreign tourists the 15% Value Added Tax (VAT) they pay on goods purchased in Sri Lanka when they leave the island. A special counter has been set up for this purpose at Bandaranaike International Airport (BIA) Departure Lounge.

Samaraweera pointed to the popularity of destinations such as Thailand and Singapore, which have similar schemes in place.

“Neighbouring countries including Thailand and Singapore have become regional shopping centres, and utilising VAT-free shopping has been an impetus to this. Year round, tourists would visit increasingly for the sole purpose of shopping, and international retailers have as a result invested heavily in these countries.”

A total of 23.2 million tourists visited Bangkok in 2017, while Singapore’s arrivals total was 17.6 million.

He pointed out that trends in other cities show that tourists who visit destinations for the sole purpose of shopping tend to spend significantly more than their counterparts that visit the rest of the country and tend to stay at the destination longer than traditional tourists.

“Therefore, I believe that this would be the first step in unlocking a major potential for Sri Lanka.”

He added that he expects the TVRS to provide a significant incentive for luxury retail operators in Sri Lanka.

“There are already a number of shopping destinations with major global brands beginning to establish in Sri Lanka – and this trend can only benefit and further expand with the tourist VAT refund mechanism. We look forward to seeing enhanced investments from this sector.”