Sri Lanka Enacts VAT on Non-Resident Digital Service Providers

After several postponements, Sri Lanka has officially enacted VAT on digital services supplied by non-resident providers which took effect on July 1, 2026. Non-resident digital service providers are now required to register for Sri Lankan VAT, collect VAT on B2C digital services, and comply with electronic registration, filing, and payment obligations, as per Value Added Tax (Amendment) Act, No. 14 of 2026. The legislation also introduces clear place-of-supply rules to determine when a customer is considered to be located in Sri Lanka based on indicators such as billing address, payment details, or IP address. Additionally, the new rules include a B2B carve-out wherein digital services supplied to persons registered for VAT in Sri Lanka are not subject to VAT. The enactment brings Sri Lanka in line with the growing global trend of requiring non-resident providers of digital services to participate in the local VAT system.