In a move that has reignited scrutiny, the Government has granted extensive tax exemptions to four companies operating within the Colombo Port City project, contradicting earlier commitments made to the International Monetary Fund (IMF) to halt such incentives until a transparent legislative framework is established.
On July 14, President Anura Kumara Dissanayake, acting as Minister of Finance, Economic Stabilisation, and National Development, issued extraordinary gazette notifications numbered 2445/2 through 2445/5, providing tax exemptions under the Inland Revenue Act for a period of 35 years to these four Colombo Port City-based companies.
Under these exemptions, all income, profits, and dividends distributed by the companies will be fully exempt from all taxes specified in the Act for the first 25 years. Additionally, all payments made will be exempt from Withholding Tax for the same 25-year period. Following this initial phase, the companies will receive a 50 percent reduction on the prevailing corporate tax rate for an additional 10 years.
The companies benefiting from this decision are Ceylon Real Estate Holdings (Pvt) Ltd, licensed on May 3, 2024; Clothespin Management and Development (Pvt) Ltd, licensed on March 28, 2025; IFC Colombo (Pvt) Ltd, licensed on August 21, 2024; and ICC Port City (Pvt) Ltd, licensed on April 4, 2025.
Classified as “Authorised Persons” and “Businesses of Strategic Importance,” these companies are entitled not only to long-term corporate income tax exemptions but also to exemptions from VAT, customs duties, dividend taxes, and personal income tax for foreign employees.
This decision stands in direct contradiction to Sri Lanka’s commitments under the IMF’s Extended Fund Facility (EFF), which required the suspension of all new tax exemptions under the Port City and Strategic Development Projects (SDP) Acts until new, rules-based frameworks are implemented.
The IMF’s Fourth Review Staff Report (July 2025) confirms the government’s commitment to cease issuing additional exemptions under the current outdated laws and to submit amendments to the Port City and SDP Acts to Parliament by October 2025. These amendments aim to improve transparency, accountability, and alignment with broader fiscal reform objectives.
Previously, the IMF highlighted that discretionary tax relief measures had resulted in significant revenue losses, increased risks of corruption, and undermined investor confidence. Consequently, the IMF called for a comprehensive overhaul of the exemption policy, recommending clearly defined criteria and fixed time limits.
