Proposed Tax Reforms Summary - Part 1
Value Added Tax ("VAT")

Proposed Tax Reforms Summary - Part 1 Value Added Tax

The Press Release dated 31.05.2022 was issued by the Media Division of Prime Minister’s Office setting out several proposals revising the VAT regime. A summary of salient features of such proposals is set out below:

Current Proposed Effective Date
1. Changes in Tax Rate
8% 12% With immediate effect (i.e., 01.06.2022)
2. Reduction of Threshold
LKR 300 Mn, p.a. or LKR 75 Mn, per quarter LKR 120 Mn, p.a. 01.10.2022
3. Removal of Exemptions
Exempt Following exemptions to be removed:

• Condominium Residential Apartments;
• Certain unproductive exemptions based on economic benefits (specific details to be specified).
0% Removal of 0% rate on supply of services by a hotel, guest house, restaurant or other similar businesses providing similar services, registered with the Sri Lanka Tourism Development Authority, if 60% of the total value of the inputs are sourced from local supplies/sources.

Upon introduction, these will be subject to VAT at 12%.