What is VAT on imported vehicles in Sri Lanka?
Value Added Tax — applied at 18% in Sri Lanka's vehicle import stack on the cumulative base of CIF×1.10 + CID + Surcharge + Excise + Luxury. VAT is the final tax line before business costs and is often the second-largest contributor to landed price after excise duty.
Also known as: Value Added Tax, 18% VAT
What is VAT on imported vehicles?
Value Added Tax (VAT) on motor vehicle imports in Sri Lanka is currently 18%, applied at the final step of the import tax cascade.
VAT base calculation
The VAT base is not simply the CIF — it’s a cumulative figure that includes every preceding tax line:
VAT base = (CIF × 1.10) + CID + Surcharge + Excise + Luxury tax
The 1.10 multiplier on CIF accounts for the 10% mark-up that customs treat as taxable margin. VAT is then 18% of this base.
Worked example (2020 Toyota Aqua, 1,500 cc petrol hybrid, CIF LKR 1.29M)
| Line | Amount (LKR) |
|---|---|
| CIF × 1.10 | 1,419,000 |
| + CID (20% of CIF) | 258,000 |
| + Surcharge (50% of CID) | 129,000 |
| + Excise (1,500 × 1,500) | 2,250,000 |
| + Luxury (CIF below threshold) | 0 |
| VAT base | 4,055,000 |
| VAT (18%) | 730,000 |
VAT is collected at customs clearance in LKR, and like the rest of the stack uses the CBSL indicative exchange rate of the day. There is no concession or zero-rating available for personal-use motor cars.
The full landed-price math, including how VAT compounds with excise on luxury vehicles, is in pricing.md.
Related terms
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CIF
Cost, Insurance, Freight — the value of a vehicle when it arrives at the Sri Lankan port, before any local taxes are applied. CIF is the base on which all Sri Lanka import taxes (CID, surcharge, VAT, excise, luxury) are calculated.
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CID (Customs Import Duty)
Customs Import Duty — the first line in Sri Lanka's vehicle import tax stack, set at 20% of the declared CIF value. CID is followed by a 50% surcharge (effectively 10% of CIF), then excise duty, then VAT, then luxury tax where applicable.
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Customs surcharge
A 50% surcharge applied on top of Customs Import Duty (CID) — effectively 10% of CIF — added to Sri Lanka's vehicle import tax stack effective February 2025. The surcharge is the second line in the tax cascade after CID and before excise duty.
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Excise duty
A per-cubic-centimetre or per-kilowatt tax applied to motor vehicles imported into Sri Lanka, set by fuel type and engine band. Effective February 2025, excise rates range from LKR 1,000/cc for small petrol PHEVs to LKR 11,000/cc for large petrol engines, plus age surcharges for vehicles older than 3 years.
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Luxury tax
A 100% tax applied to the portion of CIF exceeding fuel-specific thresholds. Effective April 2025 (Gazette 2434/04), the threshold is LKR 5M for petrol and diesel, LKR 5.5M for hybrids and PHEVs, and LKR 6M for EVs. Luxury tax is the single largest line on premium vehicles like the Vellfire, Land Cruiser and BMW 7 Series.
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