Swift Records Accounting

🇱🇰 Major Tax Changes Coming to Sri Lanka in 2026 – What Businesses Must Know

Sri Lanka’s tax system is undergoing significant changes from July 2026, affecting businesses, professionals, and consumers.

🔹 Key Updates Include:

✅ VAT & SSCL Registration Threshold Reduced
Businesses with annual turnover above Rs. 36 million (previously Rs. 60 million) must now register for VAT and SSCL.

✅ Digital VAT Introduced
Foreign digital service providers such as streaming platforms, software services, and online training providers will be subject to VAT in Sri Lanka.

✅ Real-Time VAT Reporting
VAT-registered businesses will be required to use approved POS systems for real-time transaction reporting.

✅ Higher Tax Penalties
Stronger penalties and fines will apply for tax non-compliance and fraud-related offences.

✅ Capital Gains Tax Increased
CGT rate will increase from 10% to 15%.

✅ Simplified Income Tax Installments
Installment tax payments will now be calculated based on the previous year, making compliance easier.

📌 Businesses should start preparing early by:
• Reviewing VAT registration requirements
• Upgrading accounting and POS systems
• Understanding digital tax obligations
• Planning tax compliance strategies

At Swift Records Accounting, we help businesses stay compliant and prepared for changing tax regulations.

📞 Contact us for professional support in:
✔ Tax Compliance
✔ VAT Registration
✔ Accounting & Bookkeeping
✔ Financial Advisory Services

Call now to connect with business.

🚨 Tax Reminder – 4th Installment Payment Due 🚨

The Inland Revenue Department has announced that the 4th installment for the Year of Assessment 2025/2026 must be paid on or before 📅 15 May 2026.

🔹 Applicable Taxes:
✔ Corporate Income Tax (CIT)
✔ Individual Income Tax (IIT)
✔ Partnership Income Tax (PIT)

📌 Payment Period Code: 25264

⚠ Please ensure timely payment to avoid penalties and interest charges for late payment.

💻 Payments can be made through the Online Tax Payment Platform (OTPP) or at any branch of Bank of Ceylon.

At Swift Records Accounting, we are ready to assist you with:
✅ Tax Payments & Compliance
✅ Income Tax Return Preparation
✅ Bookkeeping & Accounting Services
✅ Business & Tax Consultation

📞 Contact us today for professional assistance and stress-free tax compliance.

Notice to the VAT Registered Person

📢 VAT Increase? No Real Impact on Financial Sector Profits!

Recent insights from First Capital Research reveal an important update on Sri Lanka’s tax changes:

👉 The proposed VAT on financial services will increase to 20.5%
👉 BUT the 2.5% SSCL (Social Security Contribution Levy) will be removed

💡 What does this mean?
✔ The previous structure (18% VAT + 2.5% SSCL) is now replaced by a single VAT system
✔ Overall tax burden remains almost unchanged
✔ No significant impact on financial sector profitability

📊 In simple terms:
This is a structural change, NOT a tax increase in real terms

📅 Expected to be effective from 1 July 2026 (subject to approval)

🔍 Other key highlights:
• VAT registration threshold reduced to Rs. 36 million annually
• VAT to be applied on non-resident digital services
• Stronger compliance & disclosure requirements

💬 Our View:
This reform improves tax clarity and efficiency without putting extra pressure on financial institutions.

📌 Follow Swift Records Accounting for more simple tax updates & insights
📊 Your financial statements, our priority

📢 **Sri Lanka VAT Update – New Tax Invoice Format (Effective 01 July 2026)**

The new Tax Invoice format has been officially introduced under **Extraordinary Gazette Notification No. 2481/22 dated 27 March 2026 (issued on 28 April 2026)**.

This will be **effective from 01 July 2026**, applicable to tax invoices issued under the **Value Added Tax Act No. 14 of 2002 (as amended)**.

🔎 **Key Highlights:**
✔ Revised guidelines and updated invoice requirements
✔ Enhanced clarity on tax invoice disclosures
✔ Rescission of previous requirements under Gazette No. 2463/05 dated 17 November 2025 (issued on 03 December 2025)

Businesses are advised to **review their invoicing systems and ensure compliance** ahead of the implementation date to avoid any disruptions.

Stay updated and ensure your accounting processes are aligned with the latest regulatory channge

📢 **VAT Amendments – Key Highlights (Sri Lanka)**

Summary of key proposals published in the Gazette Extraordinary dated **24 April 2026** and issued on **29 April 2026**, to amend the Value Added Tax Act, No. 14 of 2002.

🔹 **VAT Registration Threshold (From July 1, 2026)**
• Rs. 9 Mn per quarter OR Rs. 36 Mn per year
• Mandatory registration if thresholds are expected to be exceeded

🔹 **Deemed Input Tax for Traders (From April 1, 2026)**
• VAT claim allowed on unsold stock at registration
• Proper records must be maintained

🔹 **POS Machines Requirement**
• Mandatory use of secured POS systems for VAT taxpayers
• Applies within 3 months of CGIR notice

🔹 **VAT on Digital Services (From July 1, 2026)**
• Non-resident digital service providers will be subject to VAT

🔹 **Colombo Port City Exemption**
• VAT exemption for approved strategic businesses

🔹 **Entertainment Tax Adjustment**
• Deduction allowed when calculating VAT on cinema tickets

🔹 **Garment Buying Offices**
• Zero-rating only if registered & paid in foreign currency

🔹 **Disallowable Input Tax**
• No claim if deferred import taxes not properly settled

🔹 **Tsunami Relief Projects**
• Tax defaults to be written off under specific conditions

🔹 **VAT on Financial Services**
• Rate increased to **20.5% (from July 1, 2026)**

🔹 **Other Clarifications**
• Employment income definition refined for VAT calculations
• Dividend income excluded from VAT on financial services (with conditions)

⚠️ *This update is provided for general information purposes only and does not constitute professional advice.*

📌 Follow **Swift Record Accounting** for more updates & tax insights!

Happy Sinhala & Hindu New Year! 🌞🙏
සුබ සිංහල සහ හින්දු අලුත් අවුරුද්දක් වේවා! 🌞🙏

May this Sinhala and Tamil New Year mark a fresh chapter of growth, clarity, and success.

wishes you and your family a prosperous and harmonious season. May the year ahead bring sound decisions, strong foundations, and continued confidence in every financial step you take.

Here’s to new beginnings, trusted partnerships, and a future built with integrity and excellence.

Eid Mubarak! 🌙
Wishing you and your loved ones joy, success, and prosperity on this special occasion.
May this Eid bring new opportunities and continued growth.

🔔 **ශ්‍රී ලංකාවේ සේවායෝජකයන් සඳහා වැදගත් APIT දැනුම්දීමක් 🇱🇰**

දේශීය ආදායම් දෙපාර්තමේන්තුව (IRD) විසින් **Advance Personal Income Tax (APIT)** වාර්තා කිරීම සම්බන්ධයෙන් සේවායෝජකයන් අවධානය යොමු කළ යුතු වැදගත් දැනුම්දීමක් නිකුත් කර ඇත.

📌 **ප්‍රධාන යාවත්කාලීන කිරීම**

**2025/2026 ආදායම් වර්ෂයෙන්** ආරම්භව, **APIT Annual Statement – Schedule 01** ඉදිරිපත් කරන විට සෑම සේවකයෙකුගේම **Taxpayer Identification Number (TIN)** ඇතුළත් කිරීම **අනිවාර්ය** වේ.

⚠️ **මෙය වැදගත් වන්නේ ඇයි**

Schedule 01 තුළ **TIN අංකය නොමැතිව සේවක වාර්තාවක් ඉදිරිපත් කළහොත් RAMIS පද්ධතිය එම වාර්තාව ප්‍රතික්ෂේප කරයි.**
එම අවස්ථාවේදී අදාල සේවකයාට **තමාගේ පුද්ගලික ආදායම් බදු ප්‍රකාශය (Individual Income Tax Return) ඉදිරිපත් කරන විට APIT credit එක ලබා ගැනීමට නොහැකි වේ.**

✅ **දැන් සේවායෝජකයන් කළ යුතු දේ**

• සියලු සේවකයන් **දේශීය ආදායම් දෙපාර්තමේන්තුවේ ලියාපදිංචි වී ඇතිදැයි තහවුරු කිරීම**
• සෑම සේවකයෙකුගේම **TIN අංකය ලබාගෙන පරීක්ෂා කිරීම**
• **වැටුප් හා බදු වාර්තා නිවැරදිව පවත්වාගෙන යාම**
• **APIT Annual Statement ඉදිරිපත් කිරීමට පෙර HR සහ Payroll පද්ධති යාවත්කාලීන කිරීම**

📊 මෙය **Payroll, HR සහ Finance කණ්ඩායම් සඳහා අත්‍යවශ්‍ය බදු අනුකූලතා (Tax Compliance) අවශ්‍යතාවයකි.**
ඒ අනුව ආයතන දැන්ම සූදානම් වීම මඟින් **RAMIS පද්ධති ප්‍රතික්ෂේප හා සේවකයන්ට ඇතිවිය හැකි බදු ගැටළු වලක්වා ගත හැක.**

—
**Swift Records Accounting**

📢 Tax positions evolve. Court decisions set the direction.

A recent Court of Appeal ruling has provided much-needed clarity on VAT on Financial Services (VAT on FS) — reinforcing a key principle every taxpayer should note:

✅ VAT must be computed on actual values, not notional figures.

⚖️ Key takeaway from the decision:
• Notional interest on staff loans is NOT required to be added back when calculating VAT on Financial Services
• This directly challenges the earlier IRD position
• Taxpayer appeal rights remain fully intact

📌 What this means for businesses & financial institutions:
• More accurate VAT on FS computations
• Reduced exposure to disputed notional adjustments
• Stronger reliance on judicial precedent over administrative practice

At Swift Records Accounting, we break down complex tax rulings into practical, actionable insights — helping you stay compliant while protecting your rights as a taxpayer.

🔍 More updates on tax appeals, landmark judgments, and regulatory changes coming soon.
Stay informed. Stay compliant.