Sri Lanka VAT Calculator & Guide

What is the VAT rate in Sri Lanka in 2026?

The standard VAT rate in Sri Lanka in 2026 is 18%. It has applied since 1 January 2024 and covers most goods, services and commercial imports. Exports and some other supplies are zero-rated (0%). Some basic services are exempt. Financial services pay a separate VAT of 20.5% on their value addition, from 1 July 2026.

The Inland Revenue Department (IRD) runs VAT under the Value Added Tax Act No. 14 of 2002 and its amendments.

1. Standard VAT rate (18%)

The standard rate is 18%, from 1 January 2024, under the VAT (Amendment) Act No. 32 of 2023. It applies to:

• goods made, assembled or sold in Sri Lanka;
• services supplied in Sri Lanka, unless they’re zero-rated or exempt;
• commercial imports through Sri Lanka Customs.

Source: IRD VAT page (rates: from 01.01.2024, 18%), checked 27 Sep 2026.

2. Financial services VAT (20.5%)

From 1 July 2026, financial services are taxed at 20.5% under the VAT (Amendment) Act No. 14 of 2026 (section 25C(3)(h) of the VAT Act, as amended). The Act was certified on 30 June 2026.

This works differently from the 18% rate:

• It isn’t added to invoices. Financial services are listed as exempt supplies in the First Schedule to the VAT Act (Part III, item (viii)), so they don’t carry 18% VAT on each bill. Instead, licensed commercial banks, specialised banks and licensed finance companies pay VAT on their value addition under a separate chapter of the Act.
• It has its own thresholds: Rs 3 million a quarter or Rs 12 million in 12 months.
• It has its own IRD computation rules.
• It is exempt from SSCL. The IRD’s notice on the 2026 amendment says financial services taxed at 20.5% are exempt from the Social Security Contribution Levy under Item 25 of Part II of the First Schedule to the SSCL Act No. 25 of 2022.

Why our calculator has no 20.5% option: financial services VAT is worked out on value addition, not added to a price. A 20.5% “add VAT” result would give you the wrong number.

Source: VAT (Amendment) Act No. 14 of 2026, section 7 (amending s.25C(3)), ird.gov.lk (PDF); IRD notice SEC/PN/VAT/2026-03 of 3 Jul 2026, items 7 and 15, ird.gov.lk (PDF); consolidated VAT Act (First Schedule, Part III); IRD VAT page (financial services thresholds). Checked 27 Sep 2026.

VAT rate history in Sri Lanka

VAT on financial services was 15% before 1 January 2022 and 18% from that date. It is 20.5% for taxable periods from 1 July 2026.

Source: IRD VAT page (VAT Rates: standard rate and supply of financial services), checked 29 Sep 2026; 20.5% from VAT (Amendment) Act No. 14 of 2026.

VAT rates at a glance

Is SSCL the same as VAT?

No. The Social Security Contribution Levy (SSCL) is a separate levy on turnover, with its own rules. The IRD charges it at 2.5% of liable turnover, and you must register for it once turnover passes Rs 15 million in a quarter or Rs 60 million over four quarters in a row. Financial services taxed at 20.5% VAT are exempt from SSCL. See the IRD SSCL page for details.

Source: IRD SSCL page (rate 2.5%; registration threshold), checked 27 Sep 2026.

Who must register for VAT in Sri Lanka?

You must register for VAT if your taxable sales reach, or are likely to reach, Rs 15 million in a calendar quarter or Rs 60 million in any 12 months. Financial services use lower limits: Rs 3 million a quarter or Rs 12 million a year. Importers and exporters must register whatever their turnover.

VAT registration threshold (most businesses)

Under the VAT (Amendment) Act No. 32 of 2023 (from 1 January 2024), you must register if your taxable sales meet, or are likely to meet, either limit:

• Quarterly: Rs 15,000,000 (Rs 15 million) in a calendar quarter.
• Yearly: Rs 60,000,000 (Rs 60 million) in any 12 months in a row.

If you cross either limit, you must apply to the IRD for VAT registration.

Financial services registration thresholds

If you supply financial services, separate limits apply:

• Quarterly: Rs 3,000,000 (Rs 3 million) in any taxable period.
• Yearly: Rs 12,000,000 (Rs 12 million) in any 12 months in a row.

Who must register whatever their turnover

These businesses must register before they start, at any turnover:

• Commercial importers: anyone importing goods for business must register before customs clearance (Section 10(2)).
• Exporters: must register to zero-rate their exports and claim input VAT back.
• Manufacturers of taxable goods: manufacturers whose supplies pass, or are expected to pass, the limits, or who use imported raw materials.

Source: IRD VAT page (registration threshold; "All persons importing or exporting goods for commercial purposes will be required to register under the VAT Act, regardless of turnover thresholds or exemptions"), checked 27 Sep 2026.

Voluntary registration

Under Section 10(5) of the VAT Act No. 14 of 2002, a business below the Rs 15M / Rs 60M limits can still apply to the Commissioner General of Inland Revenue to register voluntarily.

Suppliers who sell to other businesses often do this. Their corporate customers want a proper tax invoice so they can claim the VAT back as input tax.

Non-resident digital services

From 1 July 2026, non-resident businesses that sell digital services to people in Sri Lanka must register for VAT. Examples include cloud software, streaming and e-commerce platforms. The rules are in Chapter IIIC (section 25L), added by the VAT (Amendment) Act No. 14 of 2026. The threshold is Rs 60 million in 12 months or Rs 15 million in a quarter. Providers must apply online, in the form the Commissioner-General specifies, within 3 months of becoming liable to register (or within 3 months of the IRD publishing that form, if that comes later).

Source: VAT (Amendment) Act No. 14 of 2026, section 8 (new s.25L(1) and (2)), ird.gov.lk (PDF); IRD notice SEC/PN/VAT/2026-03, item 4. Checked 27 Sep 2026.

How to register for VAT in Sri Lanka

Get a Taxpayer Identification Number (TIN) from the IRD first. Then submit Form TPR_005_E to the IRD Tax Registration Unit or a regional IRD office. You must apply no later than 15 days after you become liable to register. Attach your TIN certificate, business registration, ID and sales records. After registering, file returns online.

1. Check that you must register. Use the limits above: Rs 15M a quarter or Rs 60M in 12 months. Importers and exporters register at any turnover. You can also register voluntarily.
2. Register your business and get a TIN. If you haven’t yet, register your business first. Then get a TIN from the IRD through RAMIS.
3. Collect your documents:
   • TIN certificate
   • Business registration certificate or company incorporation certificate
   • Memorandum and Articles of Association and the list of directors (companies)
   • NIC copies of the directors, partners or owner
   • Monthly sales figures
   • Bank statements
4. Submit Form TPR_005_E (Tax Type Registration) to the IRD Tax Registration Unit (2nd floor, Inland Revenue Headquarters) or the nearest regional office, within 15 days of becoming liable.
5. Start filing and paying. Once registered, display your VAT registration certificate at your business premises, and file your VAT returns online through the IRD e-Services system. Online filing has been compulsory for periods from 1 July 2025. Pay VAT by the 20th of the next month.

Hiring staff as well? Our EPF and ETF calculator shows what you pay as an employer.

Source: IRD VAT page, "Registration for VAT", "Documents required for Registration" and "Responsibilities of a Registered Person" (form TPR_005_E, 15 days, document list, certificate display, e-Services from 1 Jul 2025), ird.gov.lk, checked 27 Sep 2026.

How to calculate VAT in Sri Lanka

There are two ways to work out VAT. It depends on whether you start from a net price (before VAT) or a total price (with VAT).

1. Adding 18% VAT (Exclusive → Inclusive)

For a quotation, an invoice or a wholesale price list, start with the net price and add 18%:

• VAT amount = Net amount × 0.18
• Total price = Net amount + VAT amount (or Net amount × 1.18)

Example. You sell IT equipment to a company for Rs 100,000 net:

• VAT = Rs 100,000 × 0.18 = Rs 18,000
• Total payable = Rs 100,000 + Rs 18,000 = Rs 118,000

2. Removing 18% VAT (Inclusive → Exclusive)

A common mistake is to take 18% off a price that already includes VAT. The 18% was charged on the net amount, not the total, so that gives a figure that’s too low.

To find the VAT inside a total, use the tax fraction 18/118 (about 15.2542%):

• Net amount = Total ÷ 1.18
• VAT inside the total = Total − Net amount (or Total × 18/118)

Example. A shop receipt totals Rs 118,000:

• Net amount = Rs 118,000 ÷ 1.18 = Rs 100,000.00
• VAT inside the total = Rs 118,000 × 18/118 = Rs 18,000.00

3. VAT-inclusive vs VAT-exclusive prices

• VAT-exclusive (net): common between businesses (B2B). A quote says, for example, “Rs 100,000 + 18% VAT”. A VAT-registered buyer can claim the VAT back as input tax.
• VAT-inclusive (gross): common in shops and restaurants (B2C). The price shown is usually the full amount the customer pays.

Worked examples at 18%

VAT categories

Every sale of goods or services falls into one of three groups under the VAT Act.

1. Standard-rated supplies (18%)

This is most of the VAT system. A registered business charges 18% VAT to the customer, collects it for the government, deducts the VAT it paid on its own business purchases (input VAT), and pays the balance to the IRD.

Examples: consumer electronics, clothing, legal and engineering services, commercial leases, dining, and hotel rooms.

2. Zero-rated supplies (0%)

Under Section 7 of the VAT Act, zero-rated supplies carry a VAT rate of 0%. The supplier charges no tax on the sale, but can still claim back, as a refund or credit, all the input VAT it paid to make that supply.

• Direct exports of goods: tea, rubber, coconut, spices and garments shipped out of Sri Lanka.
• Services used outside Sri Lanka: IT, software, architecture, legal and BPO services for foreign clients, as long as payment comes in foreign currency through a licensed commercial bank in Sri Lanka.
• International transport: carrying passengers or cargo by air or sea in international traffic.

3. Exempt supplies (no VAT)

Exempt supplies are listed in the First Schedule to the VAT Act. There’s no VAT on them, but the supplier can’t claim back any input VAT paid on the goods or services used to make them.

• Basic healthcare: hospital rooms, outpatient consultations and diagnostic tests at registered medical facilities.
• Education: tuition and courses at government-recognised schools, universities and vocational institutes.
• Public passenger transport: ordinary bus and train services (not luxury charters or vehicle hire).
• Unprocessed farm produce: fresh paddy, rice, fruit, vegetables and fresh milk.

The full list of exempt goods and services is in the First Schedule to the VAT Act (Part III for periods from 1 January 2024). See the IRD VAT page.

Source: IRD VAT page (exempt supplies as listed in the First Schedule); consolidated VAT Act, First Schedule, Part III. Checked 27 Sep 2026.

Comparison: standard vs zero-rated vs exempt supplies

VAT deadlines, invoices and penalties

Once registered, you must pay VAT every month, file returns on time and issue correct tax invoices.

1. When is VAT payment due?

Pay the VAT for each month on or before the 20th of the next month. For example, VAT for January is due by 20 February. Pay at an authorised bank using the IRD payment voucher (tax type: VAT), or online through RAMIS.

Source: IRD VAT page, "VAT Payments"; IRD Tax Calendar 2026. Checked 27 Sep 2026.

2. When is the VAT return due?

VAT returns (Form VAT 10) may be monthly or quarterly, depending on your registration. You must file them online through the IRD e-Services system. This has been compulsory for periods from 1 July 2025.

• Quarterly returns: due on or before the last day of the month after the quarter ends.
• Monthly returns: due on or before the last day of the following month. For example, the September 2026 return is due by 31 October 2026.

Source: IRD VAT page, "Furnishing VAT Returns" (due on or before the last day of the month after each taxable period, which may be monthly or quarterly; e-Services compulsory from 1 Jul 2025); IRD Tax Calendar 2026, ird.gov.lk (PDF). Checked 27 Sep 2026.

VAT due dates for 2026

Worked out from the payment and return rules above, and matching the IRD Tax Calendar 2026.

Source: IRD Tax Calendar 2026 (VAT payment and VAT return rows), checked 27 Sep 2026.

3. What must a VAT tax invoice show?

Only a VAT-registered person can issue a tax invoice (Section 20, VAT Act). If you’re not registered, you must not issue tax invoices or show VAT on your bills.

What a tax invoice must show (from 1 October 2026, Gazette 2481/22):

• The title “TAX INVOICE”.
• Supplier’s and purchaser’s TIN: the nine-digit Taxpayer Identification Number of each, with the name and address as on the VAT registration certificate (telephone number optional).
• A set serial number format: YYMMM_QQQQ_XXXXX, where YY is the year, MMM the month in capitals (for example OCT), QQQQ your own code for a branch, unit or invoice type (1 to 15 characters), and XXXXX a running number with digits only. No spaces, and no more than 40 characters in total. Example: the first invoice from branch BR03 in October 2026 could be 26OCT_BR03_1.
• Two dates: the date of the invoice and the date of supply, both in MM/DD/YYYY format.
• Description and quantity of the goods or services.
• Amounts in LKR with cents: the value before VAT, the VAT amount and the total including VAT, each to two decimal places. (Some reports said “without cents”; the gazette says inclusive of cents.)
• Only VAT-taxable supplies: exempt or out-of-scope supplies don’t go on a tax invoice, unless they form part of the taxable supply and are shown separately.
• Optional fields: place of supply, the total amount in words, and the mode of payment (cash, bank transfer, cheque, card, mobile or online). You may add your logo and extra rows or columns.

Before 1 October 2026 (Section 20(2) of the VAT Act): invoices issued before the new format started had to show:

• The words “TAX INVOICE” at the top
• The supplier’s name, address and VAT registration number
• The customer’s name and address (and VAT number, if registered)
• A unique serial number and the date of issue
• Description, quantity and unit price of the goods or services
• The value of the supply before VAT
• The VAT rate (18%) and the VAT amount
• The total amount payable, including VAT

Source: Gazette 2481/22, Annexure I (Tax Invoice Specification); Gazette 2500/106 (effective date 1 Oct 2026); Circular SEC/2026/E/03; consolidated VAT Act, s.20(2). Checked 2 Oct 2026.

4. What are the penalties for paying VAT late?

Under Section 27 of the VAT Act No. 14 of 2002 (penalty for default):

• First penalty: 10% of the unpaid VAT, added when the tax goes into default.
• Each extra month: another 2% for every month (or part of a month) the VAT stays unpaid after the last day of the month following the default.
• Cap: total penalties can’t exceed 100% of the unpaid tax. The Commissioner-General may waive or reduce the penalty for special reasons.

Source: Value Added Tax Act No. 14 of 2002, consolidated text incorporating amendments up to 31 Dec 2025, section 27, ird.gov.lk (PDF). Checked 27 Sep 2026.

What changed in VAT in 2026?

The main change is the VAT (Amendment) Act No. 14 of 2026. From 1 July 2026, it set a 20.5% VAT on financial services and required non-resident digital service providers to register. The standard rate (18%) and the Rs 60M / Rs 15M registration threshold did not change. The IRD’s notice of 3 July 2026 confirms that a proposed cut to the threshold was abandoned.

Source: VAT (Amendment) Act No. 14 of 2026, ird.gov.lk (PDF); IRD notice SEC/PN/VAT/2026-03 (3 Jul 2026); IRD notice PN/VAT/2025-01 (Revised, 17 Apr 2025), ird.gov.lk (PDF); IRD VAT page; Gazettes 2481/22 and 2500/106. Checked 27 Sep 2026.

The laws behind Sri Lankan VAT

• VAT Act No. 14 of 2002: the main law.
• VAT (Amendment) Act No. 32 of 2023: set the standard rate at 18% from 1 January 2024, and the Rs 15M / Rs 60M thresholds.
• VAT (Amendment) Act No. 14 of 2026: certified 30 June 2026. Covers financial services VAT, non-resident digital services (Chapter IIIC) and secured POS machines (s.64B).

Official links

• IRD VAT page: rates, thresholds, registration form and documents.
• VAT (Amendment) Act No. 14 of 2026 (PDF)
• Consolidated VAT Act No. 14 of 2002, amendments up to 31 Dec 2025 (PDF)
• RAMIS / e-Services: TIN, online returns and payments.
• Ministry of Finance (Treasury): gazettes.