The introduction of the digital services value added tax (VAT) and increase of financial services VAT, are to take effect from 1 July, by way of a VAT amendment, a government gazette released by the Ministry of Finance, Planning and Economic Development recently said.

The amendments that are to come into effect include a reduction of the threshold of registered persons viable for taxation too. Accordingly, VAT will be imposed on services provided through electronic platforms starting from 1 July 2026. Provisions will also be introduced for the registration and payment of VAT on digital services.

Furthermore, the VAT rate on financial services is proposed to be increased from 18% to 20.5%. The amendments also include a reduction in the threshold for the registration of persons liable for taxation under Section 10 of the principal Act, which will also be effective from the same date.

Under the new provisions, at the end of any taxable period, a person must have supplied taxable goods or services or a combination of both within Sri Lanka exceeding a total value of Rs. 9 million during that period to be required for tax registration.