Many entrepreneurs are surprised to learn that certain businesses require VAT registration before they can effectively commence operations. This is particularly common in industries such as cargo clearance, freight forwarding, logistics, imports, exports, construction, and business-to-business services.

This guide explains who should register for VAT, the documents required, and how newly incorporated companies can apply even if they do not yet have three months of trading history.

What is VAT?

Value Added Tax (VAT) is an indirect tax charged on the supply of goods and services in Sri Lanka. Businesses registered for VAT are required to charge VAT on taxable supplies and remit the tax to the Inland Revenue Department (IRD).

Who Must Register for VAT?

A business is generally required to register for VAT when its taxable supplies exceed the prescribed threshold under the VAT Act.

However, some businesses seek VAT registration voluntarily because:

• Their customers require VAT invoices.
• They deal with government institutions.
• They operate in import/export sectors.
• They provide services to corporate clients.
• Business operations cannot practically commence without VAT registration.

Can a Newly Registered Company Apply for VAT?

Yes.

A newly incorporated company may apply for VAT registration even if it has not completed three months of operations.

In such cases, the company should provide supporting documents demonstrating its intention to conduct taxable business activities, including:

• Business Registration Certificate.
• Articles of Association.
• Director details.
• Business address documents.
• Customer agreements or purchase orders.
• Business plans or service contracts.
• Request letter explaining the need for VAT registration.

Documents Generally Required

The Inland Revenue Department may request:

• VAT Application Form (TPR_005_E).
• Request Letter.
• Business Registration Certificate.
• Company Forms issued by the Registrar of Companies.
• Director identification documents.
• Bank statements.
• Address verification documents.
• Sales schedules and invoices.
• Supporting business contracts or agreements.

Additional documents may be requested depending on the nature of the business.

VAT Registration for Cargo Clearance and Logistics Companies

Cargo clearance and logistics businesses frequently require VAT registration from the beginning of operations because:

• Clients often expect VAT invoices.
• Customs-related transactions may require VAT registration.
• Corporate customers generally prefer dealing with VAT-registered service providers.
• Many industry stakeholders require VAT registration details during onboarding.

Accordingly, newly incorporated cargo clearance companies often submit a detailed request letter explaining why VAT registration is necessary before substantial business transactions can commence.

What If the Company Does Not Have Three Months of Bank Transactions?

This is a common issue for newly incorporated companies.

The company should explain in its request letter that:

• The company was recently incorporated.
• Business operations have not yet fully commenced.
• VAT registration is necessary before trading activities can begin.
• Supporting documents such as contracts, quotations, purchase orders, and business plans are attached.

The IRD may consider the application together with the supporting evidence provided.

Need Assistance With VAT Registration?

MAPA Corporate Services Pvt Ltd assists startups and established businesses with:

• Company Incorporation
• VAT Registration
• TIN Registration
• Tax Advisory Services
• Company Secretarial Services
• Accounting and Compliance Support

For professional assistance with VAT registration in Sri Lanka, contact our team for a consultation.