By: Staff Writer
November 03, Colombo (LNW): In a move that has sparked renewed scrutiny, the government has granted sweeping tax exemptions to four companies operating under the Colombo Port City project, despite earlier assurances to the International Monetary Fund (IMF) to suspend such incentives until a transparent legislative framework is enacted.
According to extraordinary gazette notifications 2445/2 through 2445/5, issued by President Anura Kumara Dissanayake on July 14 in his capacity as the Minister of Finance, Economic Stabilisation, and National Development, has granted tax exemptions under the Inland Revenue Act for a period of 35 years to four companies operating within the Colombo Port City.
All income, profits, and dividends distributed will be exempted from all taxes specified under this Act for the first twenty-five years and all payments made shall be exempted from the Withholding Tax specified under this Act for the first twenty-five years;
After the end of the aforesaid twenty-five year period, 50 percent incentive from the prevailing corporate tax rate specified under this Act will be given for a period of ten years
Ceylon Real Estate Holdings (Private) Limited (licensed on 03 May 2024), Clothespin Management and Development (Private) Limited (licensed on 28 March 2025), IFC Colombo (Private) Limited (licensed on 21 August 2024) and ICC Port City (Private) Limited (Licenced on 04 April 2025) were the companies that were eligible for tax relief.
These companies have been classified as “Authorised Persons” and “Businesses of Strategic Importance” and shall be entitled to long-term corporate income tax exemptions, VAT exemptions, customs duty exemptions, dividends tax exemptions, and exemptions of personal income tax for foreign employees.
This decision comes in direct disparity to Sri Lanka’s commitments under the IMF’s Extended Fund Facility (EFF), where the government agreed to suspend all new tax exemptions under the Port City and Strategic Development Projects (SDP) Acts until new, rules-based frameworks are introduced.
According to the IMF’s Fourth Review Staff Report (July 2025), the government has committed to not issuing additional exemptions under the outdated laws and bringing amendments to the Port City and SDP Acts to the House by October 2025 with the aim of enhancing transparency, accountability, and alignment with fiscal reform goals.
The IMF previously stated that discretionary tax relief had led to revenue losses, corruption risk, and investor mistrust, requiring the complete overhaul of exemption policy by appropriately set criteria and time limits.
Any backtracking, analysts further comment, would undermine world confidence and complicate Sri Lanka’s process of debt restructuring.
Sri Lanka has made a commitment to the IMF not to provide any tax exemptions or incentives or approving new projects under the Strategic Development Projects (SDP) Act and to refrain from exemptions under the Port City Act, between January and September 20, 2024.
Despite this assurance tax exemptions to 24 companies (four as Primary Businesses, three as Duty Free Businesses, and 17 as Secondary Businesses) were gazetted without consulting IMF staff, the present government has informed them via its Memorandum of Economic and Financial Policies released by the IMF on July 03.
The continuous structural bench mark of suspending tax exemptions will be removed in consultation with IMF staff upon successful amendments to the SDP and Port City Acts and regulations in September and October this year the government has pledged in its memorandum.
