Sri Lankan VAT on Stripe Digital Services in QuickBooks

A software company in Denver sells a $30 monthly plan. It has a few hundred subscribers in Colombo and Kandy, and until this summer that meant nothing for its tax filings. Since 1 July 2026 it can. Sri Lanka now charges VAT on services that a non-resident supplies "through an electronic platform to a person in Sri Lanka," and once those sales pass a rupee threshold, the seller has to register with the Inland Revenue Department, charge 18 percent and file quarterly.

The start date moved twice. The rule was written into the VAT Act in 2025 to begin on 1 October 2025, and the VAT (Amendment) Act No. 14 of 2026, certified on 30 June 2026, substituted "with effect from July 1, 2026." The same Act added a new chapter, sections 25L to 25Q, that sets out how foreign digital sellers register, pay and file. This guide works through it: the two thresholds, which customers count, the business-customer exclusion and its paperwork, the quarterly calendar, paying from abroad, a worked quarter, and what reaches QuickBooks.

It is bookkeeping guidance, not tax advice. Quotations are from the English texts the Inland Revenue Department publishes. The Act says the Sinhala text prevails if the versions differ.

Acodei brings Stripe Tax amounts into QuickBooks, so the Sri Lankan VAT you collect is already in a liability account when the quarter closes. Start a free trial.

Two thresholds: LKR 60 million a year or LKR 15 million a quarter

Section 25L(1) requires a non-resident supplying "digital services" to register if either test is met:

"(a) on or after July 1, 2026, the total value of the supply of such services, within the twelve months period then ending has exceeded sixty million rupees or an equivalent to that in any other currency; or (b) for any quarter commencing on or after July 1, 2026, the total value of the supply of such services, for a quarter exceeds or is likely to exceed fifteen million rupees or its equivalent in any other currency."

Two details in that text matter more than the numbers.

The quarterly test looks forward. It is met when a quarter's sales exceed, or are "likely to exceed," LKR 15 million. If your Sri Lankan revenue is growing toward the line, you can be inside the rule before the quarter ends.

Stripe watches only one of the two. Stripe's Sri Lanka entry lists the threshold as "RS 15 million per rolling 3 months," and its threshold monitoring tracks "B2C sales of digital products" against it. The LKR 60 million twelve-month test isn't on Stripe's page. Keep a running twelve-month total next to Stripe's alert, so both halves of section 25L are covered.

Once either test is met, section 25L(2) gives you three months to apply, electronically, "from the date on which such person is required to be registered." The IRD's procedural order, Gazette Extraordinary No. 2443/30, adds that you first need a Taxpayer Identification Number, and that both the TIN and the VAT registration are done "through the e-service" on the IRD's web portal.

Our guide to registration thresholds covers how Stripe's monitoring works across countries.

Which customers count: two of four signals

Sri Lanka decides where a customer is with a combination test. Section 25L(5) deems a recipient "to be a person in Sri Lanka" where "two or more of the following conditions are satisfied":

1. "the billing, residential or business address of the recipient is in Sri Lanka";
2. "the payment for such digital services is made through a bank or financial institution in Sri Lanka";
3. "the payment instrument used for the transaction is issued in Sri Lanka"; or
4. "the internet protocol address of the device used by the recipient is located in Sri Lanka."

Compare Georgia, where any one of four signals is enough. Sri Lanka needs two to agree. A tourist in Colombo using a foreign card with a foreign billing address meets only the IP condition, so the sale isn't caught.

Stripe uses a single address. Its customer location rules take the first usable item from a list that starts with shipping and billing addresses and ends with the IP address. For most subscribers the two approaches give the same answer, because a Sri Lankan billing address usually comes with a Sri Lankan card. The cases to review each quarter are the mismatches. A card issued by a Sri Lankan bank, used with a foreign billing address, can meet conditions 2 and 3 together. That is enough under section 25L(5), even though Stripe, working from the billing address, treats the customer as foreign. The itemized tax export shows the country Stripe taxed, and the charge records the card's issuing country.

Our place of supply entry covers the general concept.

Which services: SaaS in, online courses out

The Act defines an electronic platform broadly, as "any online system, website, mobile application, or other digital interface operating through the internet that enables one or more service providers to supply services to service recipients." The IRD gazette gives a list of examples it says is "not limited to" those named. It includes "Cloud Computing," "Software as a service (SaaS): Web-based applications," "Digital Marketing and advertising," "Streaming Services" and "Subscription to membership websites," and adds that a service not on the list "may still be subject to VAT" if it fits the general description.

Two categories are carved out. The 2026 Act adds to the First Schedule, the list of exempt supplies, two kinds of service supplied through an electronic platform by a non-resident:

• "educational services including online courses, seminars, training, digital education platforms, virtual classrooms, learning management systems and courses in marketplaces";
• "healthcare services including online consultations, digital prescriptions, AI-assisted diagnostic, digital health tracking and telemedicine."

If you sell a course platform or a telehealth app, those sales are exempt. The Act doesn't say whether exempt sales count toward the threshold, so ask an adviser before you leave them out of your running totals.

In Stripe, the switch is the product tax code. Stripe says it "only supports collecting VAT for digital services" in Sri Lanka and calculates only for digital products. If you sell both software and courses, check that each product carries the code that matches how Sri Lanka treats it, and look at a test invoice to Sri Lanka for each one.

Business customers: excluded, with a statement to file

Section 25N(1) says the tax "shall not be charged on or collected for the supply of services made by a non-resident person through an electronic platform, where the recipient of such services is a registered person under this Act." This is an exclusion, not a reverse charge. The customer has to be VAT-registered in Sri Lanka. A Sri Lankan company that isn't registered is charged VAT like a consumer.

Stripe's tax ID table lists lk_vat, "Sri Lanka VAT number," with the example format 123456789-1234 and "Impact in Tax Calculation" marked Yes. Its footnote says Stripe Tax "won't apply tax if this tax ID is provided, in line with the relevant laws." Collect the number at checkout or before the first invoice. Our customer tax ID entry covers where Stripe stores it.

Two follow-on rules in section 25N are easy to miss:

• If you charged VAT anyway, you "shall refund the tax so charged or collected to the recipient." If it has already gone to the Commissioner-General, the customer can treat it as input tax, using your invoice if it "separately specifies the Value Added Tax charged."
• You report the excluded sales. Section 25N(2) requires "a simplified statement containing particulars of supplies made to registered persons," limited to six fields: the payment or invoice date, the customer's TIN, its name, the value, the invoice number and a description of the service. Failing to file it carries a penalty of up to fifty thousand rupees.

Every field on that list is on a Stripe invoice, so the statement can come from an export. Filter the invoices where Stripe applied no tax because an lk_vat ID was present, and keep the export with the return.

The rate, and the tax fraction for inclusive prices

The VAT Act sets the rate "for any taxable period commencing on or after January 1, 2024 at the rate of eighteen per centum (of which the tax fraction is 9/59)." The gazette confirms that the "currently applicable VAT rate is 18%," and says the value of the supply "should clearly indicate whether VAT is included or added separately."

On an exclusive price, the tax is 18 percent on top: a $30 plan becomes $35.40. On an inclusive price, use the fraction: a LKR 5,900 price contains LKR 900 of VAT (5,900 × 9/59), not LKR 1,062. Stripe does the arithmetic when the price's tax behavior is set correctly. Our guide to inclusive and exclusive tax in QuickBooks shows how each choice posts.

The quarterly calendar: pay by the 20th, file by month end

The Act's quarterly taxable periods begin on "the first day of January, the first day of April, the first day of July and the first day of October." The gazette sets two deadlines for each one, in an order that catches people out. Payment comes first:

• Section 2.4: collect and remit VAT "not later than the twentieth day of the month following the end of the taxable period."
• Section 2.5: file the return "not later than the last day of the month after expiry of each taxable period (Quarterly basis)."

Quarter	Pay by	File by
July to September	20 October	31 October
October to December	20 January	31 January
January to March	20 April	30 April
April to June	20 July	31 July

The gazette was issued in July 2025 for the original October start, and no replacement was published for July 2026 that we could find on the IRD site. Its deadlines match the Act's quarters, but check the e-service for any updated instructions before your first return. Section 25Q(1) requires every return to be filed "by an electronic means," and section 25Q(2) says notices will be served the same way, so keep the portal's contact email monitored.

Records. The gazette says records "may be maintained outside the territory of Sri Lanka" but "must be retained for a minimum period of five (5) years," and that they should include the information in the IRD's "VAT schedule 01 (Output tax)." Section 25Q(3) adds that you "shall maintain accounts for the tax charged under this Act on an invoice basis." Export each quarter's itemized tax data when you file.

Paying from abroad

Section 25P(1) sets the method. You pay "by electronic remittance through the online system of the Department of Inland Revenue" or another approved electronic facility, "in Sri Lankan rupees or in such foreign currency as may be permitted by the Commissioner-General, remitted to a bank account designated for that purpose," and "either directly by the non-resident digital service provider or through a representative appointed for that purpose." A local representative is an option, not a requirement. The gazette words the currency rule as "Sri Lankan Rupees (LKR) or any other approved currencies by Central Bank of Sri Lanka."

Section 25Q(4) has a useful rule for foreign sellers: "Any variation arising from the conversion of foreign currencies into Sri Lanka rupees shall be disregarded for the purpose of submission of returns," and is not treated "as a tax in default or refund." A small rounding difference between your dollar figures and the rupee return won't turn into an underpayment notice.

Check the IRD portal for the currencies currently accepted before the first payment. If dollars are accepted, a USD QuickBooks file clears the liability with no exchange line. If you pay in rupees, the dollar cost of the transfer will differ from the dollar liability, and the gap is an exchange gain or loss.

Refunds: an open question

The new chapter doesn't say how a non-resident handles a refund or a credit note to a Sri Lankan consumer. The only refund rule in section 25N is the one for VAT wrongly charged to a registered business. The general VAT Act has its own adjustment rules, but whether and how they apply to a non-resident registered under section 25L isn't spelled out in the texts the IRD publishes. If you expect more than an occasional refund, ask the IRD through the e-service before your first return and keep the answer.

Cancelling the registration

Section 25M(1) requires the Commissioner-General to cancel a registration where "the supplying of services has ceased for more than six months," or where sales don't exceed the section 25L values "for two consecutive taxable periods." You can also ask for cancellation "within thirty days" of either event. If your Sri Lankan sales fall back below LKR 15 million a quarter, watch the twelve-month total too, since it is the other half of the test.

A worked quarter for a software company

The Denver company sells one plan at $30 a month, priced in USD and exclusive of tax. For illustration, take an exchange rate of 300 rupees to the dollar. Use the actual rate on the day for your own test.

1. The threshold. In July to September 2026 it has 600 Sri Lankan consumer subscribers: 600 × $30 × 3 = $54,000, or about LKR 16.2 million. That exceeds LKR 15 million for the quarter, so it registers through the e-service within three months and adds the registration in Stripe.
2. The next quarter, consumers. From October to December, the same 600 subscribers are charged 18 percent: $5.40 on each $30 invoice, $9,720.00 for the quarter on $54,000 of sales.
3. Business customers. Ten Sri Lankan companies give their lk_vat numbers at checkout. Stripe charges them no tax, and their 30 invoices go on the simplified statement under section 25N(2).
4. A refund. One consumer is refunded a full month through a credit note: $30.00 of sales and $5.40 of tax reversed in Stripe. Treat the return position as the open question above.
5. Payment and return. $9,714.60 is paid through the IRD's online system by 20 January 2027, and the return is filed by 31 January 2027.

Whether the July to September sales themselves carry VAT, before the company was registered and before Stripe was charging it, is a question for the adviser. Raise it rather than letting it sit.

What reaches QuickBooks, and what you book yourself

Acodei syncs the tax Stripe Tax calculated, so Stripe Tax has to be active in your Stripe account and your Sri Lankan registration has to be set up in Stripe first.

For a US QuickBooks company, Acodei's method is the Tax Product: a non-inventory "Sales Tax" product mapped to a liability account, with all Stripe Tax amounts on a sale rolled into one line on the QuickBooks invoice or sales receipt. QuickBooks' Sales Tax Center doesn't let third parties create official tax rates for US companies, which is why the product approach is the one that works there. It needs Stripe Tax used with Stripe Invoicing or Stripe Checkout. Each $30 subscription in item 2 arrives with one $5.40 tax line, and the $9,720.00 builds up in the liability account over the quarter. You then use Stripe's tax reports to file and pay from that account.

For a QuickBooks company outside the US, Acodei can map individual Stripe tax rates to QuickBooks tax codes you set up. Sri Lanka has one rate for these services, so one code at 18 percent is enough, and the Sri Lankan VAT sits in its own line of QuickBooks' tax reporting.

The business sales, item 3. Stripe charged no tax on them, so there is no Sri Lankan VAT on them to reach the liability account. They still belong on the simplified statement.

Refunds, item 4. Acodei's documentation says a refund issued through a credit note carries the line-level tax breakdown. A refund made on the payment alone may not show how much was tax, and that case can need a manual adjustment in QuickBooks. Use credit notes for Sri Lankan refunds.

The payment, item 5. Debit the tax liability and credit the bank for the amount paid, with any wire fee to bank charges and, if you paid in rupees, any difference to exchange gain or loss. The same liability account holds US sales tax and any other foreign tax from Stripe Tax, so note the Sri Lankan slice each quarter. Our guide to reconciling the Stripe Tax report in QuickBooks covers the liability side, and the itemized export lets you filter on country_code LK.

Common mistakes with Sri Lankan VAT on Stripe sales

• Watching only Stripe's alert. Stripe monitors the LKR 15 million quarter. The LKR 60 million twelve-month test is yours to check.
• Waiting for the quarter to end. The quarterly test includes sales "likely to exceed" the line.
• Paying with the return. Payment is due by the 20th, about ten days before the return.
• Charging registered businesses. Store their lk_vat number. If you charged them by mistake, the Act says refund it.
• Skipping the simplified statement. Excluded business sales still have to be reported, with a penalty of up to fifty thousand rupees.
• Taxing online courses. Educational and healthcare services supplied through a platform by a non-resident are exempt.
• Assuming a local agent is required. Section 25P allows payment directly or through a representative, your choice.

Frequently Asked Questions

Do foreign SaaS companies have to register for VAT in Sri Lanka?

Yes, once their sales to Sri Lanka pass a threshold. Since 1 July 2026, a non-resident supplying services through an electronic platform must register if sales exceed LKR 60 million in the twelve months then ending, or exceed or are likely to exceed LKR 15 million in a quarter. The application is made electronically within three months.

What is the VAT rate on digital services in Sri Lanka?

18 percent. The VAT Act sets the rate for taxable periods from 1 January 2024 at eighteen per centum, with a tax fraction of 9/59 for working out the VAT inside a tax-inclusive price. Educational and healthcare services supplied through a platform by a non-resident are exempt.

How often do non-resident providers file Sri Lankan VAT returns?

Quarterly, in periods starting 1 January, 1 April, 1 July and 1 October. The IRD's order requires payment by the 20th of the month after the quarter and the return by the last day of that month, filed electronically.

Does Stripe charge Sri Lankan VAT to business customers?

Not if you store their Sri Lanka VAT number. Stripe lists lk_vat as affecting the calculation and won't apply tax when it is present. The Act excludes supplies to registered persons from the tax, but you must report those sales on a simplified statement.

Can I pay Sri Lankan VAT in US dollars?

Possibly. The Act allows payment in rupees or in a foreign currency the Commissioner-General permits, by electronic remittance, directly or through a representative. Check the IRD portal for the currencies currently accepted. Currency conversion differences are disregarded on the return.

The short version

Eighteen percent from 1 July 2026, two thresholds, quarterly returns with the payment due first. Sri Lanka catches foreign digital sellers whose consumer sales pass LKR 15 million in a quarter or LKR 60 million in a year, counts a customer as Sri Lankan when two of four signals agree, excludes registered businesses but asks you to list them, and exempts online education and healthcare. Our guides to Indian OIDAR tax, Georgian VAT and the countries that register you from the first sale cover the pattern elsewhere.

Acodei syncs Stripe Tax into QuickBooks, so each Sri Lankan quarter starts from the liability account instead of a spreadsheet. Start a free trial.