Sri Lanka Colombo Port City — Primary BSI designations for four >$1bn FDI projects (14 July 2025 gazettes)

Mechanism

The Colombo Port City Economic Commission Act No. 21 of 2021 establishes a 269-ha reclaimed-land Special Economic Zone with a separate fiscal, customs, currency and business-regulation regime from the rest of Sri Lanka. The Act's incentive architecture rests on two designation tiers: Businesses of Strategic Importance (BSI) for non-land-leasing investors and Primary Businesses of Strategic Importance (Primary BSI) for investors committing both capital and a long-term land lease inside the zone. Primary BSI status is conferred by gazette notification of the Minister of Finance (statutorily the President since the September 2024 transition), each gazette enumerating a specific bundle of tax-act exemptions and the duration of each exemption.

The 14 July 2025 gazettes were the first batch of Primary BSI designations issued by the new Dissanayake / NPP administration and the first material activation of the zone's incentive regime since the 2022 sovereign default. They consolidate ~USD 1.2 billion of FDI commitments — IFC Colombo 1 at USD 142.71 million on a 12,561.60 sqm plot (USD 94.98 m construction + USD 47.73 m land), Ceylon Real Estate Holdings on a 30,629.92 sqm commercial complex, plus the Clothespin Management and ICC Port City projects — under the most aggressive tax-holiday terms ever granted in Sri Lanka: 35 years of Inland Revenue Act exemption (running to 13 July 2060) plus ~25 years of VAT, customs and excise relief (running to 13 July 2050).

Each designation is contingent on the investor executing its land-lease agreement with the Commission within six months of gazette publication; failure to do so automatically invalidates Primary BSI status.

Downstream implications

• This is the first Sri Lanka filing in the IPTM register and the inaugural

large-scale activation of the Port City fiscal regime — a structural marker for the post-2022 IMF Extended Fund Facility reconstruction trajectory.

• The CHEC subsidiary (IFC Colombo 1) anchors the gazette set, reinforcing the

Chinese-OEM concentration of the zone's first wave: CHEC is the developer of the Port City itself and Sri Lanka's primary BRI counterparty.

• The 35-year IRA exemption is materially more generous than the 25-year Strategic

Development Project regime previously available under the SDP Act, and it precipitated a fiscal-cost backlash that produced the 20 September 2025 Regulation No. 01 of 2025 (compressing future Primary BSI awards to a single one-time 15-year exemption — to be filed as a separate IPTM action / queued).

• Civil-society and trade-union challenges to the accompanying labour-law carve-outs

led to subsequent litigation and a reported Attorney-General undertaking to revoke the gazettes; the validity status of the designations as of late 2025 is therefore contested and should be tracked.

Open questions

• Exact Extraordinary Gazette numbers for each of the four 14 July 2025

designations (the documents.gov.lk extraordinary-gazettes index lists them under date but specific PDF URLs were not resolvable during filing).

• Final disposition of the trade-union litigation and whether the AG-undertaken

revocation took effect for all four gazettes or only the labour-law schedules.

• Whether any of the four designees executed the requisite land lease within the

six-month window (expiry 14 January 2026) and therefore retained Primary BSI status post-rollback regulation.