The Ceylon Chamber of Commerce has warned that proposed amendments to Sri Lanka’s Inland Revenue (Amendment) Bill 2026 could impose undue burdens on financially distressed companies, urging policymakers to adopt a balanced approach that safeguards investment confidence.
The Chamber’s Tax Steering Committee conducted a comprehensive review of the proposed amendments, assessing “their impact on business continuity, investment, taxpayer rights and Sri Lanka's competitiveness”. The committee submitted detailed recommendations to the Ministry of Finance, outlining “the potential impact of the proposed amendments and their implications for the Government's broader policy direction”.
On thin capitalisation rules, the Chamber called for “maintaining the exclusion of negative reserves in gearing calculations to avoid adding tax burdens on financially distressed companies”. It also urged “the allowability of finance cost on all genuine commercial borrowings to protect legitimate financing”.
Regarding restrictions on the submission of evidence, the Chamber proposed “introducing flexibility in the proposed 6 to 9 month timeline for submitting information to the Commissioner General, allowing taxpayers to provide verified evidence beyond this period to balance administrative efficiency with fairness”.
On penalties for compliance lapses, the Chamber urged “that enforcement measures remain proportionate, avoiding stringent penalties that include imprisonment, for minor compliance failures”. It proposed “relying on existing recovery mechanisms to safeguard investment confidence and fairness to taxpayers”.
With respect to the taxation of insurance businesses, the Chamber recommended “deferring amendments to Section 67 pending further consultation with the insurance industry and the regulator”. It advised “avoiding treating policyholder distributions as taxable income of insurers" and called for "greater clarity in the application of adjustment provisions, particularly in light of IFRS 17 implementation”.
On the discretionary powers of the Commissioner General, the Chamber stressed that such powers “should be clearly defined and guided by transparent rules to avoid uncertainty”. It added that “while such powers are important for enforcement, they must be applied fairly, with proper safeguards, to ensure consistency and maintain taxpayer confidence”.
The Chamber’s engagement extended beyond written submissions. It organised a seminar on 12 March at its auditorium, “bringing together members, industry stakeholders, policymakers, and the regulator.” According to the Chamber, the session “provided participants with a detailed briefing on the proposed changes, clarified key provisions, and facilitated an open exchange of views between the private sector and authorities, especially on areas of concern raised by the membership”.
The Chamber noted that it “has also engaged directly with policymakers to ensure that provisions identified as those that could negatively impact business sentiment are either suitably amended during the Committee Stage or deferred for further consultation prior to implementation”.
In its concluding remarks, the Ceylon Chamber reiterated: “The importance of maintaining a stable, predictable, and investment-friendly tax framework, particularly at a time when Sri Lanka is seeking to strengthen economic recovery and attract private investment.” It affirmed its commitment to “constructive, solutions-oriented engagement with policymakers, working collaboratively to refine and strengthen legislation in the public interest to ensure timely support and effective implementation of reforms”.