ECONOMYNEXT – Sri Lanka has given a 25-year tax holiday, and the next 10 years at half the rate, to IFC Colombo 1 (Pvt) Ltd, which will develop a mixed use plot in the Colombo Port City.
IFC Colombo 1 is a unit of CHEC Port City Colombo (Pvt) Ltd, which in turn is owned by China Harbour Engineering Company and China Communications and Construction Company Limited of China.
CHEC Port City is the company that reclaimed the land for Colombo Port City.
IFC Colombo 1 will invest 142.71 million dollars. A tranche of 94.98 will go to construction and preliminary costs and 47.73 million for land which will be raised from foreign sources.
“The objective behind establishing IFC Colombo 1 (Pvt) Ltd. is to carry out real estate development within the Colombo Port City, with a vision of creating a thriving and sustainable real estate ecosystem by strategically integrating commercial, retail, and residential elements,” a gazette notice detailing the tax holidays said.
“The development projects by IFC Colombo 1 (Pvt) Ltd. will promote tourism, urban amenities, and technological advancement, attract foreign direct investment, and enhance Colombo Port City’s international profile.”
The company plans to employ 50 direct personnel in the first year and the company’s trading office will require a minimum floor space of 800 square meters within 5 years from commencing operations, a gazette notice said.
In addition to income tax, the firm will also be exempted on value added tax, import duties and excise duties for material bought for construction.
Sri Lanka is planning to stop giving very long tax holidays as part of raising revenue, under an International Monetary Fund program.
Sri Lanka authorities have said several businesses that were promised tax holidays and categorized as primary businesses of strategic importance earlier will be given, but new ones will be based on different criteria and the underlying Strategic Development Act and Port City laws will be amended.
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Sri Lanka’s corporate tax rates however are high at 30 percent, compared to about 20 percent for East Asian countries with monetary stability.
Tax holidays of 8 years are given in some East Asian countries and the corporate tax rate of Singapore which has exceptional monetary stability is only 17 percent. VAT rates are also about half of Sri Lanka’s rate.
Colombo Port City is a dollarized special economic zone which will be free of the central bank’s open market operations. (Colombo/July21/2025)