Sri Lanka: Value Added Tax (Amendment) Act No 04 of 2025 enacted
The bill to amend the VAT (Amendment) has been enacted with certain Committee Stage Amendments.
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April 21, 2025
The bill to amend the Value Added Tax (VAT) Act 14 of 2002 issued on February 21, 2025 (read TaxNewsFlash), has been enacted as the Value Added Tax (Amendment) Act No 04 of 2025 with certain Committee Stage Amendments and was certified by the Speaker on April 11, 2025.
The Department of Inland Revenue (DIR) issued a notice PN/VAT/2025-01 (revised) on April 17, 2025, providing the salient features of the Amending Act. The latest amendments to the VAT Act include:
- Introduction of 18% VAT on services supplied by a nonresident person via electronic platforms—effective October 1, 2025
- Repeal of the simplified VAT (SVAT) scheme and replacement with VAT refund scheme—effective October 1, 2025
- Value of certain supplies to be treated as zero—effective January 1, 2024
- Input credit on supply of staff meals and transport
- Introduction of VAT exemptions for (1) supply or import of chemical naphtha to the Ceylon Electricity Board by the Ceylon Petroleum Corporation for the generation of electricity, and (2) supply of locally produced liquid milk and locally manufactured yogurt—effective April 11, 2025
- Repeal of VAT exemption for import of aircraft engines or aircraft spare parts—effective April 11, 2025
- Definition for “unprocessed agricultural products”
- Mandatory VAT registration
- Format of the tax invoice
- Mandatory electronic filing of VAT return—effective July 1, 2025
- Increase in contribution to VAT refund fund from 6% to 10%—effective October 1, 2025
- Recovery of undeclared and unpaid taxes
Read an April 2025 report prepared by the KPMG member firm in Sri Lanka