VAT Registration Threshold Sri Lanka — Changing July 2026
From July 1, 2026, the VAT and SSCL registration threshold in Sri Lanka drops from LKR 60 million to LKR 36 million per year (LKR 9 million per quarter). Thousands of SMEs and professionals who were previously exempt will now be required to register for VAT.
Use our free VAT Registration Threshold Checker (click the 📝 VAT Threshold tab) to instantly see if your business must register now or from July 2026.
VAT Threshold Changes at a Glance
| Period | Annual Threshold | Quarterly Threshold |
|---|---|---|
| Until 30 June 2026 | LKR 60,000,000 | LKR 15,000,000 |
| From 1 July 2026 | LKR 36,000,000 | LKR 9,000,000 |
Who Is Affected?
If your annual taxable turnover is between LKR 36 million and LKR 60 million, you are currently below the threshold but will need to register for VAT before July 1, 2026. This includes:
- Professional service firms (law firms, accounting firms, consultants)
- IT and software companies
- SME manufacturers and traders
- Medical and healthcare providers
- Education businesses (non-exempt)
What Happens After VAT Registration?
- Must charge 18% VAT on all taxable supplies
- Must file monthly VAT returns by the last day of the following month
- Can claim input tax on business purchases
- Must issue VAT-compliant tax invoices to customers
- Must maintain VAT records for 5 years
FAQs
What if I exceed the VAT threshold but don’t register?
Failure to register for VAT when required carries significant penalties under the VAT Act, including backdated VAT liability, penalties and interest. The IRD can also assess VAT on all unregistered supplies retroactively.
Can I voluntarily register for VAT below the threshold?
Yes. Voluntary VAT registration is available for businesses below the threshold. This can be beneficial if you have significant input VAT on purchases that you want to claim back.
📊 Check your VAT registration obligation →
📅 Get VAT registration assistance →
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