The Cabinet has decided to postpone the imposition of VAT on digital services until April 1 next year.
This decision responds to requests from non-resident digital service providers for additional time to comply with VAT requirements on value-added digital services. Under the amended Value Added Tax Act No. 4 of 2025, which takes effect from October 1, 2025, VAT is applicable to digital services supplied by non-residents.
Although VAT collection was initially planned to start on October 1 this year, the start date has now been revised to April 1, 2026. The necessary procedural amendments are being drafted to align with this revised timeline, following proposals presented by the Minister of Finance, Procurement, and Economic Development, Anura Kumara Dissanayake.
The VAT will apply to a wide range of digital services, including cybersecurity, software services, digital marketing, IT services, e-commerce, social media platforms, online marketplaces, and on-demand services.
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