Sri Lanka overhauls Port City incentives

SLASHES TAX HOLIDAYS IN NEW REGULATIONS

- By NISHEL FERNANDO

The government has introduced a significantly revised and less generous incentive framework for investors in the Colombo Port City Special Economic Zone (SEZ), slashing lengthy tax holidays and raising investment thresholds.

The new regulations, gazetted on September 20, 2025, signal a major policy shift aimed at balancing investment promotions with the country’s fiscal consolidation goals under its IMF programme.

The new rules, cited as the “Colombo Port City (Guidelines on the Grant of Exemptions or Incentives to Businesses of Strategic Importance) Regulations, No. 1 of 2025,” were issued by President Anura Kumara Dissanayake in his capacity as the Finance Minister. They replace the previous, more liberal regulations which expired in August 2025. These new regulations will remain in force for a period of five years.

According to Dushyantha Perera, Partner at Sudath Perera Associates, the previous regulations offered “extremely broad” exemptions for up to 25 years, a stark contrast to the tiered and truncated benefits in the new framework.