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Proposed legislation published on February 21, 2025, would introduce the following value added tax (VAT) changes:

• Introduction of 18% VAT on nonresident digital service providers to Sri Lankan consumers—effective April 1, 2025
• Repeal of simplified VAT (SVAT) scheme and replacement with VAT refund scheme—effective October 1, 2025
• Increase in contribution to VAT Refund Fund from 6% to 10%—effective October 1, 2025
• Mandatory electronic filing of VAT returns—effective July 1, 2025
• Introduction of VAT exemptions for (1) supply or import of chemical naphtha to the Ceylon Electricity Board by the Ceylon Petroleum Corporation for the generation of electricity, and (2) supply of locally produced liquid milk and locally manufactured yogurt—effective from date of enactment
• Repeal of VAT exemption for import of aircraft engines or aircraft spare parts—effective from date of enactment

Some of these proposed changes were included in proposals presented to Parliament by the president on December 18, 2024. Read TaxNewsFlash

Read a  prepared by the ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø member firm in Sri Lanka

In addition, proposed legislation published on February 21, 2025, would introduce the following income tax changes:

• Introduction of concessionary corporate income tax rate of 15% on foreign service providers—effective April 1, 2025
• Increase in corporate income tax (CIT) rate from 40% to 45% on gains and profits from betting and gaming, manufacture and sale or import of any liquor or tobacco products—effective April 1, 2025
• Increase in rate of advance income tax (AIT) on interest from 5% to 10%—effective April 1, 2025
• Reduction in time period to claim income tax refund or credit to 30 months—effective for tax years beginning from April 1, 2024
• Various individual (personal) income tax changes

Some of these proposed changes were also included in proposals presented to Parliament by the president on December 18, 2024. Read TaxNewsFlash

Read a  prepared by the ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø member firm in Sri Lanka