Explore the requirements and rules that apply to indirect taxes in Sri Lanka.
What supplies are liable to the standard rate?
All supplies of goods or services that do not come under zero-rated or exempt supplies are liable at the standard rate.
Are there any reduced rates, zero- rates or exemptions and if so, what do they apply to?
Zero-rated supplies include exports of goods and certain services that are specified in the VAT Act.
Exempt supplies comprise specified goods and services and certain imported goods, including wheat; wheat flour; drugs; medicines; aids and implements used by disabled persons; ayurvedic preparations; locally developed software, etc.
A reduced rate of 5 percent is applicable to the importation of certain goods.
A special rate of 7 percent has been introduced for the period from 1 June 2019 to 31 March 2020 for hotels and tour operators registered with the Sri Lanka Tourism Development Authority.
Is voluntary registration possible?
Is voluntary registration available for an overseas company or a fiscal representative?
No; note that specific regulations are applicable to overseas companies.
There are specific rules governing input tax credit claims. For example, input tax incurred in relation to exempt supplies and on expenses in relation to vehicles used for travelling cannot be claimed.
Can an overseas company recover VAT if it is not registered?
How long does it typically take to obtain a VAT refund following a return filing?
As per the law, a refund should be received within 3 years of filing of the VAT returns, although in practice, this is not always the case and the process can take a substantial time.
Yes, a tax invoice shall set out the following:
It should be noted that the Inland Revenue Department (“IRD”) does not allow input tax credit claims if the invoice is not issued in the prescribed format.
All information within this guide is provided by KPMG professionals in Sri Lanka and based on information available as of September 2019.