Monday Nov 10, 2025
Monday Nov 10, 2025
Monday, 10 November 2025 05:17 - - {{hitsCtrl.values.hits}}
President and Finance Minister Anura Kumara Dissanayake
The Government has moved to slash long-term tax concessions granted under the Strategic Development Projects (SDP) Act, with the publication of the Strategic Development Projects (Amendment) Bill, 2025 in the Gazette issued on 7 November.
The amendments seek to limit tax holidays to 10 years from the previous 25 years, strengthen oversight, and introduce transparency measures for investment-related tax expenditures.
Under the proposed law, the Board of Investment (BOI) will continue to identify projects as SDPs but must now refer each proposal to the Ministry of Finance for an ex-ante cost-benefit analysis.
The Finance Ministry is required to issue a recommendation within one month, and the BOI, having regard to that recommendation, may grant tax holidays or other prescribed concessions. The final decision must be communicated to the Minister in charge, who, with Cabinet concurrence, will publish the order in the Gazette.
The Bill introduces ex-post monitoring, requiring the BOI to evaluate SDP performance and submit reports to the Ministry of Finance, which must disclose fiscal impacts and outcomes on its official website.
Where a project fails to meet approved performance indicators, the BOI may restrict, suspend, or revoke tax benefits, or impose administrative penalties. Entities must be given a written notice and an opportunity to show cause before any sanctions take effect.
The Amendment also requires every SDP entity to file tax returns under the Inland Revenue Act, pay income tax on withholding payments, and ensure employment income of both resident and non-resident employees is subject to taxation.
Tax holidays will commence on the certified date of commercial operations and cannot be extended.
The Finance Ministry must publish an annual report on tax expenditures for all SDPs and may, after five years from the commencement of the amendment, review the relevance and efficiency of existing concessions.
Regulations made by the Minister must be presented to Parliament for approval within three months of publication.
Existing tax holidays and concessions granted prior to the amendment will remain valid for their original duration, provided conditions are met.
As a prelude to the Gazette, on Friday, President and Finance Minister Anura Kumara Dissanayake in his presentation of 2026 Budget indicated the move.
He said the informal and biased culture that Sri Lanka has maintained so far regarding the investments has now changed. Accordingly, “We are building a new environment where cronyism, racketeering, and nepotism are replaced by credibility, discretion by predictability, and privilege by partnership. This kind of environment helps attract quality investments. Provide the strength required for the recovery of our nation.”
To create a stronger rule-based incentive regime for foreign and domestic investments, the President said amendments have been introduced to the Strategic Development Projects Act and the Colombo Port City Commission Act. “These amendments streamline the procedures for Foreign Direct Investment (FDI), enhance the transparency of the incentive system, and provide the consistency that foreign investors seek. We believe that these amendments will significantly increase the inflow of foreign direct investment into the country,” the President told the Parliament.
