Sri Lanka's new Rs 36 million VAT threshold (2026)

If your turnover is somewhere between Rs 36 million and Rs 60 million a year, 2026 changed things for you. The VAT registration threshold in Sri Lanka was lowered, and many businesses that were comfortably under the old line are now required to register.

This guide explains the change in plain terms and what to do about it. It is general information, not tax advice, so confirm your own position with the Inland Revenue Department (IRD) or your accountant.

What actually changed

From 1 July 2026, the annual turnover threshold for VAT registration was reduced from Rs 60 million to Rs 36 million a year, which works out to about Rs 9 million per quarter.

In practice, you must register for VAT if either of the following is true:

• Your taxable supplies in a single taxable period pass Rs 9 million, or
• Your taxable supplies over any 12-month period pass Rs 36 million

If that describes your business, VAT is now part of how you invoice and file.

Who is affected

The lower threshold pulls a large group of small and medium businesses into the VAT system for the first time. If you were sitting just under the old Rs 60 million line, you are the business this change was aimed at.

Being newly VAT registered means three things become part of your routine:

• You charge VAT at 18% on taxable supplies
• You issue tax invoices that meet the required format
• You keep VAT-compliant records and file returns on time

None of this is dramatic on its own, but it does mean your invoicing has to be tidy and consistent from day one.

What to do next

A simple sequence to get compliant without stress:

1. Check your last 12 months of turnover and your recent quarters against the new limits
2. If you cross the threshold, register for VAT with the IRD
3. Update your invoice template so every invoice is a proper tax invoice, with your TIN, VAT number, VAT at 18%, and totals in LKR
4. Set up a reliable way to number invoices and keep records, so filing is a report rather than a scramble
5. Talk to your accountant about return dates and input VAT

The businesses that handle this well are the ones that fix their invoicing and record-keeping early, before the first return is due.

Turn a compliance task into a tidier business

Registering for VAT is a good moment to move off scattered spreadsheets and document templates. Once you are issuing tax invoices every week, you want numbering, VAT, customer records, and payment status in one place rather than spread across files and chats.

That is the gap Myn is built for. It keeps invoices, customers, and payment tracking together so VAT-compliant invoicing is the default. See how it works on our [home page](/), and for the invoice format details read our guide on the new Sri Lanka tax invoice format. If you are comparing tools before you commit, our comparison of invoicing software for Sri Lankan SMEs walks through the options.

Thresholds and rules can change, so use this as a starting point and check the latest guidance from the IRD before you act.