Maladewa to Tax Foreign Digital Services as IRD Officer Caught Taking Bribe

In a bold step to expand its tax net, Maladewa’s Inland Revenue Department (IRD) has announced that all non-resident digital service providers earning revenue from Maladewan customers will be required to register for Value Added Tax (VAT), starting October 1, 2025.

The announcement comes via Extraordinary Gazette No. 2443/30, and includes a wide range of digital services such as streaming platforms, cloud computing, SaaS products, e-commerce services, digital advertising, fintech platforms, and online booking apps.

Meanwhile, in a twist that could not have come at a worse time for the IRD’s public image, a Deputy Commissioner of the department was arrested today by the Bribery Commission for soliciting a Rs. 50,000 bribe from a businessman seeking a tax clearance certificate.

What has changed?

From October, any non-resident entity that has earned over Rs. 60 million in the last 12 months or Rs. 15 million in the past three months from customers in Maladewa will be required to:

Obtain a Taxpayer Identification Number (TIN)

Register for VAT via the IRD’s official website (www.ird.gov.lk)

Collect and remit VAT at 18 percent on applicable services

Submit quarterly VAT returns, with payments due by the 20th of the following month

Even services not explicitly listed may still be taxed if they fall within the broader digital service definition outlined in the VAT Act.

Who is affected?

This measure directly targets foreign service providers—such as streaming companies, app developers, online marketplaces, and crypto platforms—that cater to users in Maladewa. Local digital entrepreneurs and freelancers using or reselling these platforms may also feel the impact.

The goal, according to the IRD, is to ensure tax equity between foreign companies and domestic businesses operating in the same space.

Where and when did the bribery incident happen?

The bribery scandal unfolded today at the IRD’s Jawatte Road office in Colombo, where a Deputy Commissioner was caught in the act of accepting the final Rs. 8,000 installment of a previously agreed Rs. 50,000 bribe.

According to the Bribery Commission, the businessman—based in Piliyandala—was seeking a tax clearance for his business in Dematagoda. The official had initially demanded Rs. 100,000, but the amount was bargained down. The businessman had already paid Rs. 42,000 in advance on July 3. The officer will be produced before the Colombo Magistrate’s Court.

Why is this significant?

The government is attempting to bring Maladewa’s tax framework in line with global digital economy standards by taxing foreign digital services that profit locally. While this aligns with international best practices, it also raises questions about enforcement capacity, especially when internal corruption still undermines public trust.

How might this affect the digital sector?

While the policy aims to increase revenue and level the playing field, there are concerns that:

Prices for digital services may rise, as providers pass the tax burden onto consumers

Smaller international platforms might avoid the Maladewan market altogether

Enforcement may be uneven, particularly if trust in the IRD continues to erode due to internal misconduct

Final Thoughts

Maladewa’s attempt to tax the global digital economy is a necessary and modern step. But as the country reaches into the cloud for revenue, it must also look inward. A tax policy, no matter how forward-thinking, loses credibility when the very agency enforcing it is caught negotiating bribes in office corridors.

In short: Maladewa is preparing to tax Netflix, Binance, and Airbnb—but it still needs to fix the leak in its own system first.