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Tax Consolidation Breakdown
Comparison of tax components before and after July 1, 2026
Primary Sources
No increase: 20.5% VAT to replace VAT + SSCL for financial sector
May 4, 2026 at 2:54 PM Sri Lanka’s Deputy Minister of Economic Development Nishantha Jayaweera has sought to clarify confusion over a 20.5% Value Added Tax (VAT) rate set to apply to banks and financial institutions from July 1, stressing that the move is not a tax increase but a consolidation of existing levies. In a statement, Jayaweera said the new 20.5% VAT reflects the merging of the current 18% VAT and the 2.5% Social Security Contribution Levy (SSCL) into a single tax, in line with government efforts to simplify the tax structure. He noted that under the revised system, financial institutions will no longer be required to pay the SSCL separately, nor submit separate tax filings, reducing administrative burdens. The Deputy Minister rejected claims circulating on social media that VAT is being raised to 20.5%, describing such reports as misleading. (Newswire) 2026-05-04
VAT Rate Hike To 20.5% Hits Financial Services -
VAT rate on financial services is set to rise to 20.5% from July 1, 2026, with new registration thresholds and digital tax rules. The VAT rate applicable to financial services is set to increase from 18% to 20.5% under new amendments published in the Government Gazette. The bill to amend the Value Added Tax Act No. 14 of 2002 has been published as directed by the Minister of Finance, Planning and Economic Development. The proposed amendment is scheduled to come into effect from July 1, 2026. The move is expected to draw close attention from businesses, banks, finance companies, digital service providers, and taxpayers, as the changes go beyond the headline tax increase and introduce wider adjustments to VAT registration, digital services, tax collection, refunds, and the phasing out of the SVAT scheme. Follow The Morning Telegraph WhatsApp Channel Get breaking updates, instant alerts, and exclusives. Join Now Under the new amendments, the VAT rate on financial services will rise from 18% to 20.5%. This raises concerns about the cost impact on financial sector operations and whether the change could eventually be felt by customers through service charges, fees, or other indirect costs. The annual turnover thresholds for mandatory VAT registration have also been revised, with the new thresholds taking effect from July 1, 2026. Accordingly, businesses with a taxable period turnover exceeding Rs. 9 million or an annual total turnover exceeding Rs. 36 million will be required to register for VAT. This means more businesses may have to assess their turnover carefully to determine whether they fall within the mandatory VAT registration requirement under the amended law. Taking into account modern technological trends, the provisions for charging VAT on services provided through electronic platforms have also been extended until July 1, 2026. A new chapter has been added to the Act for the registration and tax payment of digital services. This signals a stronger focus on digital economy taxation as more services are delivered through electronic platforms. New provisions have also been introduced regarding the use of point of sale machines. These measures are aimed at streamlining tax collection and improving accounting practices. However, questions remain over how quickly businesses will adapt to these compliance requirements, particularly smaller operators that may face additional administrative pressure. The amendments also provide an opportunity to...
Sri Lanka Increases VAT on Financial Services to 20.5% and Lowers Eligibility Threshold - FINANCIAL CHRONICLE
FINANCIAL CHRONICLE – The government of Sri Lanka has put forward proposed changes to its Value Added Tax (VAT) legislation, which includes increasing the tax rate on financial services from the current 18% to 20.5%. Additionally, the threshold ...
VAT on Financial Services 20.5% VAT 18% APIIT 36% Corporate ...
14 hours ago ... ... services should be liable to income tax and SSCL in addition to VAT". No ... - Financial Services: VAT rate increased to 20.5%. - Refunds & Compliance ...
