A Gazette Notification has been issued reducing the duration and scope of tax exemptions and incentives available to businesses investing in the Colombo Port City.
In line with International Monetary Fund (IMF) guidelines, President Anura Kumara Dissanayake, in his capacity as Minister of Finance, issued the Gazette, which amends the regulations originally gazetted in August 2023. The changes apply to both Primary Enterprises of Strategic Importance (PBSIs) and Secondary Enterprises of Strategic Importance (SBSIs).
Under the new rules, the corporate income tax exemption period for PBSIs—previously 25 years followed by 10 years at a 50% tax rate—has been reduced to a maximum of 15 years. For SBSIs, the 25-year exemption has been replaced with a concessional four-year taxation period at 7.5%. This means taxes will still be paid, but at a lower rate.
The IMF has repeatedly urged Sri Lanka to introduce transparent, rules-based, and timely incentive frameworks. While the government had committed in 2023 not to grant exemptions without clear criteria, the IMF’s August 2025 country report noted that exemptions were nevertheless issued to 24 companies between January and September 2024 without consultation.
The new Gazette also changes the start date of exemptions for PBSIs from “the date of publication in the Gazette” to “after the project implementation period has expired,” meaning benefits will only begin once development is complete.
Further, the scope of non-income tax exemptions for SBSIs has been reduced. Whereas the 2023 Gazette allowed 25-year exemptions under 13 different laws—including VAT, Customs, Excise, and Casino Regulation—the 2025 Gazette limits exemptions to just three: the Customs Ordinance, the Ports and Airport Development Levy Act, and the Sri Lanka Export Development Act. As a result, VAT exemptions have been removed.
The Gazette also raises minimum investment thresholds for PBSIs and links them to mandatory job creation. The 2025 framework introduces four categories:
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Category A: US$100 million with 300 jobs.
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Category B: US$500 million with 300 jobs (five times higher than 2023).
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Category C: US$1 billion with 300 jobs (ten times higher).
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Category D: US$25 million with 100 jobs (same investment as 2023’s social category, but with a new job requirement).
“These strategic reforms are designed to overcome project challenges that have affected investor sentiment and the pace of development,” the Colombo Port City Economic Commission stated in a press release this week.
