IRD introduces major changes to VAT law to boost compliance

Friday, 18 April 2025 00:14 - - {{hitsCtrl.values.hits}}

VAT will be applied to digital services provided by non-resident entities via e-platforms from 1 October
All VAT refunds must be filed electronically starting from 1 July
SVAT scheme will be replaced by Risk-Based Refund Scheme starting from October 2025
Exporters and registered businesses supplying over 50% of their goods or services eligible for refunds within 45-days
All commercial importers and exporters require to register under VAT Act irrespective of turnover thresholds or exemptions
Revokes VAT exemption on import of aircraft engines and spare parts, classified under specific HS codes, from 11 April

The Inland Revenue Department (IRD) recently announced significant changes to the Value Added Tax (VAT) Act No. 14 of 2022, following the official certification of the Value Added Tax (Amendment) Act No. 04 of 2025 on 11 April.

Under the new amendments, effective from 1 October 2025, VAT will be applied to digital services provided by non-resident entities through electronic platforms to consumers.

The IRD stated that the Commissioner-General will soon issue detailed guidelines for registration, payment and compliance for these foreign service providers.

Another major change is that all VAT refunds must be filed electronically starting from 1 July 2025. It noted that manual submission will only be accepted under exceptional circumstances and only with prior approval from the IRD Commissioner-General.

One more key alteration is the removal of the Simplified VAT (SVAT) Scheme, which will be replaced by a Risk-Based Refund Scheme starting from October 2025.

According to the Department, exporters and registered businesses that supply over 50% of their goods or services to strategic or specified projects will be eligible for refunds within 45-days of submitting their VAT returns, provided all necessary documents are in order.

In addition, all commercial importers and exporters will now be required to register under the VAT Act, regardless of their turnover levels or previously applicable exemptions. This measure is expected to improve oversight and broaden the tax base.

Meanwhile, the VAT exemption on the import of aircraft engines and spare parts, classified under specific Harmonised System (HS) codes, has been revoked with effect from 11 April.