Sri Lanka updated Colombo Port City SEZ incentives, which include reduced tax holidays and increased investment thresholds.
Sri Lanka has issued new regulations for the Colombo Port City Special Economic Zone (SEZ), reducing tax holidays and increasing investment thresholds. The regulations, gazetted on 20 September 2025, are titled Colombo Port City (Guidelines on the Grant of Exemptions or Incentives to Businesses of Strategic Importance) Regulations, No. 1 of 2025 and will remain in force for five years.
Primary Businesses of Strategic Importance (BSI) must meet specific capital and employment requirements. Category A requires USD 100 million investment and 300 jobs, Category B USD 500 million and 300 jobs, Category C USD 1 billion and 300 jobs, and Category D USD 25 million and 100 jobs.
Corporate income tax holidays start after a four- to eight-year project implementation phase: 10 years for Category A, 12 years for B, 15 years for C, and 8 years for D. VAT exemptions are not included. Primary BSIs retain exemptions under the Customs Ordinance, Ports and Airports Development Levy Act, and Sri Lanka Export Development Act during the implementation period.
Secondary BSIs no longer have set eligibility criteria. The Colombo Port City Economic Commission can designate these businesses. They receive a four-year corporate tax rate of 7.5% after commercial operations, after which standard tax laws apply.
The regulations aim to adjust incentives for the SEZ and align with the country’s fiscal programme under the IMF.
