Sri Lanka’s 2026 Budget faces scrutiny after experts warn it lacks essential provisions for taxing cryptocurrency, raising concerns over revenue loss and unclear compliance rules within the country’s growing digital finance landscape.
A Major Oversight in a Transforming Financial Landscape
Sri Lanka’s 2026 national budget has sparked renewed debate over the country’s readiness to regulate the rapidly expanding digital economy, with leading tax experts warning that the absence of cryptocurrency taxation represents a significant missed opportunity. As global markets tighten oversight of digital assets, Sri Lanka’s omission has prompted calls for urgent legislative reform to ensure clarity, compliance and fair revenue collection.
Budget 2026 Under Fire for Ignoring Cryptocurrency Taxation
KPMG Sri Lanka’s Head of Tax and Regulatory, Suresh Perera, has criticised the new budget for failing to address gaps in the taxation of cryptocurrency and other untaxed sectors.
“The 2026 national budget does not have any provisions for the taxing of cryptocurrency and other areas which are not being taxed,” he noted, emphasising that the current system “should not be taxing the same people”. Perera stressed that several untapped sectors remain outside the tax net, with cryptocurrency ranking among the most significant.
Speaking during a recent KPMG panel discussion on Budget 2026, Perera warned that the existing framework misses the chance to broaden the taxpayer base. “One such area is cryptocurrency,” he said, highlighting the urgent need for new legislation to support effective tax collection.
Calls for Amendments to the Inland Revenue Act
Perera insisted that Sri Lanka requires legislative updates to create a robust and efficient structure for taxing crypto transactions.
“A slight amendment is needed in the Inland Revenue Act to ensure that there will be a proper and efficient manner in which taxes on cryptocurrency can be collected. I expected this to be part of Budget 2026 but I do not see this expressively,” he stressed.
While the budget outlines new enforcement mechanisms—such as clearer interpretations of tax-related crimes, prosecution procedures, and penalties—Perera described these proposals as vague. He expressed hope that explicit legislation for cryptocurrency taxation would soon be incorporated into the Inland Revenue Act to guide taxpayers on compliance expectations.
A Growing Body of Advocacy for Clear Crypto Tax Legislation
Perera has repeatedly argued for a comprehensive legal framework to regulate crypto taxation. In a recent E-tax Forum post, he wrote:
“Sri Lanka’s existing tax framework, while comprehensive for traditional assets and income sources, lacks the specificity and agility required to regulate crypto effectively.”
He further warned that ambiguous definitions, missing thresholds and inconsistent reporting obligations risk fostering “more opportunities for evasion or misclassification”.
According to Perera, a “dedicated crypto tax legislation would not only enhance legal certainty but also signal Sri Lanka’s readiness to embrace digital finance responsibly”.
Sri Lanka Lags Behind Global Best Practices
As previously reported, Sri Lanka currently lacks any legal structure governing cryptocurrency or virtual assets. Perera reiterated that Sri Lanka should adopt tailored frameworks similar to those in the UK, Australia and India. Such a system, he argued, should identify taxable events, valuation mechanisms, exemptions and penalties aligned with international standards.
“This would empower the Inland Revenue Department to build capacity, issue guidance and collaborate with the Central Bank and Financial Intelligence Unit on anti-money laundering and countering financing of terrorism framework integration,” he wrote.
Crypto Still Prohibited as a Payment Method
Sri Lanka maintains strict restrictions on cryptocurrency use. Crypto and virtual assets remain prohibited for payments, while the Central Bank continues to caution investors due to “extreme price volatility”.
With digital assets gaining global traction, experts say Sri Lanka’s regulatory silence may widen the governance gap—leaving taxpayers uncertain and the government without a share of rapidly growing digital revenues.
