Sri Lanka: Amendments to VAT provisions
The Value Added Tax Act No 44 of 2022 (Amendment) was certified by the Speaker
The Value Added Tax Act No 44 of 2022 (Amendment) was certified by the Speaker
The Value Added Tax (VAT) Act No 44 of 2022 (Amendment) was certified by the Speaker on 14 December 2022. The Act will come into operation with effect from specific dates referred to under specific sections.
VAT rate
VAT rate revisions of 12% and 15% introduced with effect from 1 June 2022 and 1 September 2022 respectively via the following Gazette Notifications:
VAT rate |
Applicable period |
Gazette Notification No. and date |
12% |
1 June 2022 – 31 August 2022 |
2282/26 dated 31 May 2022 |
15% |
1 September 2022 onwards |
2295/08 dated 31 August 2022 |
KPMG observation
The VAT rate revisions have been already implemented via the above Gazettes issued under Section 2A of the VAT Act.
VAT threshold
The registration threshold of Rs. 300mn (Rs 75mn per quarter) is reduced to Rs. 80mn per annum (Rs 20mn per quarter) with effect from 1 October 2022.
KPMG observation
However, the requirement to register for VAT arises from 14 December 2022 (the date of certification by the Speaker). Thus, the requirement to register arises only from the 14 December 2022 for taxpayers with taxable supplies of LKR 80mn per annum and/or LKR 20mn for the tax period. An application to register needs to be made no later than 15 days from the date on which a taxpayer is liable to be registered so any person who is exceeding the revised threshold after 1 October 2022, would have to register for VAT on or before 28 December 2022.
VAT exemption removal
The exemption provided for the supply of any condominium residential accommodation will be removed with effect from 31 December 2022. Supply of condominium residential accommodation will be liable to VAT with effect from 1 January 2023.
KPMG observation
The removal of exemption provided for the supply of any condominium residential accommodation was proposed to be removed in the VAT Bill from 30 September 2022 while the same was deferred to 30 November 2022 by way of the Supreme Court Special Determination. However, as per the VAT Amending Act, the exemption is withdrawn with effect from 31 December 2022. Notwithstanding the withdrawal of the exemption applicable to the residential condominium units, other residential accommodation continues to appreciate the exemption.
Read a December 2022 report [PDF 271 KB] prepared by the KPMG member firm in Sri Lanka
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.