Sri Lanka is to move ahead with the International Monetary Fund (IMF) recommended amendments to the Colombo Port City Economic Commission Act, No. 11 of 2021.

This includes rules-based investment incentives and refraining from granting tax exemptions till new frameworks are introduced, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe said, speaking to parliament yesterday (7).

“The changes that we have brought in are to strengthen the regulatory framework. The regulatory framework of the previous Act was not enough. The rules-based investment incentives was not there and it was very unclear to investors how much incentives you will get and what you would get,” Abeysinghe said, speaking about the structural reforms recommendation raised by the IMF.

“Earlier, any investor could get 25 years, whether it’s a primary investment or a secondary investment. There was no standardisation on how we really bring these incentives in. Therefore this particular Act amendment is making the regulations clear and standard for the global context. This is the change that is going to allow the Port City Economic Commission to approve more investments that are in the pipeline, which they were unable to do for the last year,” he said.

In IMF’s Financing Assurances Review Staff Report on Sri Lanka released in July last year (2025), the report stated that the Port City Act, by the end of October under a new Structural Benchmark, and IMF consultation was to introduce transparent, rules based eligibility criteria amendments for time-bound incentives. “Efforts are underway to amend the Port City Act (end-October, new SB), in consultation with IMF staff, to introduce transparent, rules-based, best-practice aligned eligibility criteria for time-bound incentives,” the report said. 

“And then in terms of the personal income tax, it's going to be made equitable, otherwise people who are working in the zone would have been tax free and people working outside would have been taxed, so this ambiguity has been cleared,” Abeysinghe added.   

In its July 2025 report, the IMF stated that till new frameworks for such tax exemptions are to be in place, tax exemptions were to not be granted. “Authorities have reaffirmed the programme commitment to refrain from granting tax exemptions until new frameworks for such exemptions are in place,” the report said.

“The mandatory tax filing for IRD is very specifically mentioned, and the fee structure changes have been made to make the lives of investors easier. These are the fundamental changes that have come through these amendments. At the same time, ease of doing business, there will be another amendment coming through next month, to ensure that there will be more ease for investors to come in.”   

The report further details that in January and September, the Sri Lankan Government had however issued exemptions to 24 companies under the Port City Act without consultations with the IMF staff, which included four applications, for which land lease and advance payments had been made.

“When we came into power, we had to negotiate with the IMF and get them to agree for the 24 companies which were agreed early, to be continued, that is the negotiation we did. When the IMF said you can't even give that 24. That is why they are protected,” Abeysinghe said.    

“Considering the legal and reputational risks, the authorities will approve these projects,” the report noted. “They have pledged to refrain from granting any new Port City-related  exemptions until the amended Port City Act and its regulations are enacted in line with IMF TA, supported by a new continuous SB (Structural Benchmark) and a commitment to provide monthly information on recently provided tax exemptions.”

“At the same time, the IMF clearly said now you need to bring a proper resolution, proper Act, in the global standards for you to continue this project. That is what this government has done, with negotiations , looking at the standards, looking at the similar investments around the world,” Abeysinghe explained. 

He also noted that the amendments are to include offshore banking regulations, as articulated by the Central Bank of Sri Lanka.