ECONOMYNEXT – Sri Lanka plans to limit the duration of tax holidays granted under a Strategic Development Act, and also limit tax breaks in the China-backed Port City.
Tax breaks under the SDP had drawn fire for the lack of eligibility criteria and the ability to negotiate discretionary tax breaks.
Authorities remain committed to a consultative process with staff on these matters
“To minimize revenue losses and curb corruption risks, we are no longer providing any tax exemptions or incentives, and we are also no longer approving new projects under the Strategic Development Projects (SDP), Act since December 2023,” program documents said.
“We have published our first tax expenditure statement in 2024, assessing the value of all tax exemptions. Should we consider new tax proposals to attract investments, we will consult with IMF staff prior to their implementation.”
The changes to the SDP Act are to be submitted to the parliament by August.
“We will submit to parliament by end-August 2025 amendments to the SDP Act, consistent with
IMF TA, that will introduce transparent, rules-based eligibility criteria to increase the
effectiveness of granted tax incentives and to limit the duration for which incentives can be
granted (reset SB),” Sri Lanka authorities said.
“We will introduce transparent, rules-based eligibility criteria and duration limits on the incentives granted under the Port City Act to strengthen the net economic benefit by end-September 2025.” (Colombo/Mar04/2025)