Minister Defends 15% Tax on Service Exports, Says No Unfair Impact on Digital Service Providers

Minister of Labour and Economic Development Anil Jayantha stated that the imposition of a 15% tax on service exports does not cause any injustice to service export providers. Addressing concerns, he emphasized that under Sri Lanka’s income tax policy, every individual is required to pay income tax, and digital service export providers receive significant tax concessions compared to ordinary taxpayers.

In a special statement, the minister highlighted that while ordinary taxpayers are subject to income tax rates of up to 36%, digital service export providers benefit from a preferential tax structure. According to the new taxation policy:

• The first Rs. 150,000 earned by digital service exporters is completely exempt from income tax.
• A reduced tax rate of 6% applies to the next Rs. 85,000.
• Any additional income will be subject to a maximum 15% tax rate.

Additionally, Minister Jayantha clarified that digital service exporters would not be taxed in Sri Lanka if they have already paid a 15% tax in the foreign country where their services were provided. If the foreign tax rate is lower than 15%, Sri Lanka will only charge the difference, ensuring compliance with the double tax relief policy.

He further explained that as per the tax framework of the Organisation for Economic Co-operation and Development (OECD), a minimum global tax must be imposed by the income-generating country. This global taxation principle ensures fairness in tax policies while preventing tax avoidance.

The government’s stance is that this tax measure aligns with international best practices and provides a balanced approach, ensuring Sri Lanka receives fair tax revenue while still supporting the growth of digital service exports.