Merchant of Record In Sri Lanka
Joshua D'Costa
Growth & Marketing
Jul 1, 2025
|
5
min
Sri Lanka recently imposed an 18% VAT on digital services supplied by foreign companies, meaning any Sri Lankan SaaS selling online must register and collect VAT.
At the same time, local payment infrastructure remains limited – only 14 banks and 3 finance companies issue credit cards in Sri Lanka. Popular global tools like Stripe aren’t offered in Sri Lanka, and even PayPal’s services here come with restrictions (limited local support, currency conversion fees, etc.).
These challenges consume valuable time and resources that founders would rather spend on product and growth.
A Merchant of Record (MoR) can solve this by handling payments and compliance on your behalf, letting Sri Lankan startups scale globally without getting bogged down in regulations.
Source: Wikipedia
What a Merchant of Record Does
The Merchant of Record appears as the merchant on the customer’s statement, not your company. This means the MoR handles all operational aspects of the sale on your behalf.
The MoR:
It sets up merchant accounts across countries to accept payments in multiple currencies and methods. For instance, an MoR will handle USD, EUR, INR transactions and support cards, wallets, UPI, etc.
It calculates, collects, and remits all applicable sales taxes or VAT (including new digital services taxes) per region.
It bears the legal liability for payment disputes, basically takes on chargebacks, refunds, and fraud prevention.
Outsourcing these responsibilities to an MoR, companies can avoid hiring in-house experts for every country’s payment and tax rules.
Why Sri Lanka Needs an MoR
Sri Lankan SaaS founders in particular stand to benefit from a Merchant of Record due to several local challenges:
Sri Lanka’s 2025 tax reforms have imposed additional burdens on digital exporters. New laws impose an 18% VAT on foreign digital services sold to Sri Lankan consumers.
This requires any non-resident SaaS provider to register in Sri Lanka and file local tax returns. Other changes (mandatory e-filing, updated VAT schemes) add paperwork and risk of penalties. Manually tracking each country’s rules would overwhelm a small team.
Major global payment platforms are not easily accessible. For example;
Stripe does not operate in Sri Lanka, so startups cannot simply plug into a global gateway. PayPal is technically available but comes with caveats (limited services and high fees).
Local gateways (LankaPay, etc.) often only accept Sri Lankan rupee transactions or domestic cards, making it hard to sell abroad.
In short, without an MoR, founders might have to juggle multiple banks or middlemen to reach international customers, which is inefficient and error-prone.
Ways An MoR Can Help Sri Lankan SaaS Founders
Partnering with a Merchant of Record brings several concrete benefits:
Automates Tax Compliance
Calculates and remits VAT, GST, and digital service taxes across jurisdictions
Sends payments directly to each country’s tax authority
Removes the need for foreign tax consultants or local subsidiaries
Expands Payment Options
Accepts global credit/debit cards and popular digital wallets (Apple Pay, Google Pay)
Supports regional methods like India’s UPI and other local rails
Offers diverse payment choices like QR codes, e-wallets, and more for maximum conversion
Eliminates Need for Foreign Entities
A MoR acts as the legal seller in each market, so you don’t need overseas bank accounts or companies
Handles all local registrations, licensing, and merchant accounts
Let's you invoice customers in USD, EUR, or INR without setting up a US or EU entity
Protects Against Fraud & Chargebacks
Built-in fraud detection and risk scoring for cross-border transactions
Manages all dispute resolutions, refunds, and chargeback processes
Shield your team from complex foreign bank procedures
Simplifies Revenue Flow
Collects subscription revenue in multiple currencies and holds funds until you’re ready
Pays out net proceeds (after taxes) directly to your Sri Lankan bank account
Provides clear, centralized reporting for effortless reconciliation
Choosing the Right MoR
Sri Lankan businesses should look for a platform that:
Process payments in all major markets, enabling you to reach customers in the US, EU, Asia, and beyond without setting up separate operations.
It should have in-house tax teams or partnerships to automatically handle evolving regulations like Sri Lanka’s digital VAT.
Supporting a wide range of payment methods, including global credit cards and popular local options, this will boost your conversion rates.
Regional payment choices should be available so users can pay using the methods they trust.
An effortless checkout experience needs multi-currency billing and local-language interfaces to build customer trust and meet local regulations.
Pricing must be fully transparent with clearly stated fees and no hidden charges.
Integration should be straightforward, backed by solid APIs, plugins, and comprehensive documentation.
Dodo Payments Is the Right Fit
Dodo Payments is specifically built for emerging-market SaaS companies, making it a great match for Sri Lankan SaaS founders.
As a Merchant of Record platform, we actively work on expanding coverage (over 30+ markets) and adding local payment methods.
A software founder in Sri Lanka, for instance, can use Dodo to sell an app subscription to a Vietnamese customer without dealing with Vietnamese dong. Dodo handles the currency conversion and tax filing.
As the Merchant of Record, Dodo Payments literally sells on your behalf and forwards the net revenue to you. This means no overseas legal entities, no separate Stripe accounts, and no hiring of tax lawyers abroad – just a single partnership that unlocks global growth.
Final thoughts
If you’re a Sri Lankan founder aiming to scale internationally, Dodo Payments offers a turnkey Full-Stack MoR solution: automated tax compliance, global payment acceptance, and fraud/chargeback management all in one platform.
You can grow your SaaS business on day one without getting tangled in cross-border complications.
Simplify your international payments and get started with Dodo Payments to unlock seamless global billing and compliance for your SaaS business.
