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Section 71(3) of the Colombo Port City Economic Commission Act No. 11 of 2021 empowers the Minister of Finance (statutorily the President since the September 2024 NPP-administration transition) to make regulations prescribing the guidelines, thresholds and exemption envelopes under which the Commission may recommend Primary BSI and Secondary BSI designations. Regulation No. 1 of 2025 exercises that power for the second time since the Act's activation, superseding the predecessor instrument Regulation No. 02 of 2023.
The substantive changes are a compression of the headline tax-holiday envelope across both designation tiers:
of a 25-year full IRA exemption followed by a 10-year 50%-reduced-rate follow-on collapses to a single one-time exemption of up to 15 years. This is the same compression that the 14 July 2025 Primary BSI designation gazettes flagged in the public debate — those four awards used the now-superseded 25+10 structure (and the 35-year IRA tail for the IFC Colombo 1 / Browns / Clothespin / ICC Port City designees, running to 2060), which the new regulation cannot retroactively undo for already-issued gazettes but does remove from the prospective grant menu.
exemption envelope spanning up to 25 years is replaced by a four-year window of concessionary 7.5% corporate income tax from the commencement of commercial operations. After that window, normal CIT rates apply.
exemptions to either BSI tier — a notable retreat given that VAT relief was a cornerstone of the original Port City fiscal proposition.
The regulation is effective from the date of Gazette publication (20 September 2025, per Section 71(3) of the Act) and is time-limited to a five-year operative window — itself a notable design choice that telegraphs further compression as the IMF Extended Fund Facility review cycle progresses.
fiscal regime and the clearest empirical example of how the IMF Extended Fund Facility (March 2023 – 2027) reshapes investment-incentive policy in real time. The 25-year-plus-10-year envelope only operated for ~26 months before the present regulation reset the menu.
Holdings / Clothespin Management / ICC Port City — USD ~1.2 bn aggregate FDI commitment, with CHEC the anchor counterparty) are grandfathered as already-issued awards but cannot be replicated under the new menu. Any marginal investor evaluating Port City after 20 September 2025 faces a 15-year cap on IRA exemption rather than the 35-year tail granted to the July cohort.
cap on Secondary BSIs materially raises the effective tax cost of financial-services / fintech / professional-services investment in the zone, which were the categories Reg. 02 of 2023 was designed to attract.
Asian SEZ peer set (e.g., the Maldives MIFC, Jebel Ali Free Zone CIT bands) but offered for only four years rather than 15-25 years — Sri Lanka has compressed the duration rather than the rate.
2025 — the documents.gov.lk extraordinary-gazettes index lists 2025 issues by date but the file-naming convention for the specific PDF was not resolvable via web search during filing.
14 July 2025 Primary BSI cohort was met by each of the four designees — this determines whether any of the grandfathered 35-year/25-year envelopes survived into the post-Regulation 1/2025 regime.
compressing the 15-year Primary BSI ceiling further, and whether the five-year sunset on Reg. 1/2025 is intended as a forced review point or as the limit of the current administration's policy commitment.