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Economy

Govt to impose 18% VAT on cross-border digital services provided via electronic platforms

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The government will introduce an 18% Value Added Tax (VAT) on digital services provided by non-resident companies to local consumers, effective October 1, 2025.

Accordingly, foreign service providers are required to register for VAT in Sri Lanka and collect the tax on their services.

The VAT law was updated through the VAT (Amendment) Act No. 4 of 2025, which implemented VAT on digital services.

The Inland Revenue Department has also published detailed guidelines through the Gazette Notification 2443/30, on this new digital tax.

Accordingly, the new VAT rules define terms such as “electronic platform” and “non-resident person,” and impose obligations on foreign digital service providers to charge and remit VAT on various services, including streaming, online gaming, and software as a service (SaaS).

Electronic marketplace facilitators may also be liable for VAT reporting on third-party sales.

According to the guidelines, the non-resident must first obtain a Tax Identification Number (TIN) before proceeding to acquire VAT registration. VAT registration is required only if the value of supply in the last 12 months exceeds Rs. 60 million per annum or Rs. 15 million in the last three months.

Non-compliance with registration requirements could also lead to penalties from the Inland Revenue Department, according to the new regulations.

With the enforcement of new regulations following services are likely to become liable to VAT collections:

  • E-commerce Services
  • Cloud Computing
  • Software as a service (SaaS)
  • Cybersecurity Services
  • Digital Marketing & Advertising
  • IT support & Managed Services
  • Streaming Services
  • Fin Tech
  • Subscription & Membership Website
  • E-commerce Platforms
  • Social Media Platforms
  • On Demand Service Platforms
  • Content Sharing Platforms
  • Cloud Collaboration Platforms
  • Market Place Platforms
  • Gaming Platforms
  • Blockchain & NFT Platforms
  • Apps for hotel bookings and ticket reservations

Economy

Sri Lanka literacy hits record 97.4%, gender gap closes for first time

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Sri Lanka has achieved a historic education milestone, with literacy rising to 97.4% in 2024, up from 95.7% in 2012.

For the first time since 1881, the literacy gender gap has closed, with males at 97.9% and females at 97.0%.

Digital literacy has reached 67.6%, while computer literacy stands at 34.7%, highlighting Sri Lanka’s growing digital transformation.

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Economy

$ 900 m in four months: Port City Colombo signals new investment era

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From November 2025 to March, Port City Colombo secured approximately $ 900 million in investments, an almost unprecedented surge for a project that had seen gradual traction in its early years amid broader macroeconomic challenges. The timing is not accidental.

After a prolonged period marked by the Easter Sunday attacks, the global shock of the COVID-19 pandemic, and Sri Lanka’s economic collapse, the project remained largely in a holding pattern.

 International marketing efforts began to gain momentum from late 2025 onwards, as conditions began to stabilise.

“The macro story had to align first,” Aluwihare explained. “You cannot market a country when the fundamentals are unstable. Now, we are seeing recovery, policy alignment, and growing confidence, and we are finally seeing the results.”

From real estate to a ring-fenced financial ecosystem

Port City Colombo’s most significant transformation has been conceptual rather than physical. Originally envisioned as a waterfront real estate development, it has evolved into a fully ring-fenced services export Special Economic Zone (SEZ), enabled by the Colombo Port City Economic Commission Act.

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Economy

Sri Lanka’s Official Reserves fall 3.5%in March – CBSL

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Sri Lanka’s Official Reserve Assets have decreased by 3.5% to USD 7,019 million in March 2026, according to the latest data of the Central Bank of Sri Lanka.

The CBSL states that the decrease is from USD 7,270 million reported in February 2026.

The CBSL further states that the figure for March includes the swap arrangement with the People’s Bank of China.

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