Global Daily Tax News, Sri Lanka To Substantially Broaden VAT Base, (Nov 14, 2023)

Sri Lanka will maintain a value-added tax exemption only for certain health and education services and for a limited basket of foodstuffs, the Government has announced.

The announcement comes following confirmation that the value-added tax base would be broadened and the headline rate of value-added tax raised to 18 percent, as part of an upcoming austerity Budget being developed by the Government in negotiations with the International Monetary Fund.

The standard rate increase represents the third hike in two years, after the rate was raised from eight percent to 12 percent from June 1, 2022, and to 15 percent from September 1, 2022.

Alongside various other measures, including corporate tax hikes, the doubling of the VAT rate is intended to resolve the country's debt crisis, with support from the International Monetary Fund, after several factors left the territory with a record low tax-to-GDP ratio of just 8.1 percent in 2020.