The Colombo Port City Economic Commission has marked a significant milestone in its mission to transform the Colombo Port City into a highly competitive special economic zone (SEZ) on the global stage. The Parliament of the Democratic Socialist Republic of Sri Lanka has granted approval this week to a comprehensive incentives program proposed by the Commission, developed in consultation with the Minister of Investment Promotion. This program outlines the guidelines for providing exemptions and incentives to businesses classified as Businesses of Strategic Importance (BSI). The details were published in Extraordinary Gazette No. 2343/60 on August 4th, 2023.
Established under the Colombo Port City Economic Commission Act, No. 11 of 2021, the Commission is strategically focused on attracting international investors, enhancing economic stability, and positioning Sri Lanka as a key player in service exports. In line with the Act, the Commission has identified businesses crucial for the prosperity of the Colombo Port City and designated them as Businesses of Strategic Importance, proposing exemptions or incentives from the relevant statutes outlined in the Act.
To present an attractive proposition to potential investors, the Commission has engaged with renowned international advisory firms including PricewaterhouseCoopers, Ernst & Young, KPMG, and Boston Consulting Group. This collaboration has yielded a proposed framework that positions the Colombo Port City as a globally competitive SEZ, characterized by transparent regulations, adherence to good governance principles, and a range of sector-specific incentives.
The Colombo Port City’s Businesses of Strategic Importance are categorized into two main groups: “Primary Businesses of Strategic Importance” and “Secondary Businesses of Strategic Importance.” Primary businesses encompass initiatives involving a minimum of USD 100 million in physical infrastructure per land plot or USD 25 million in the Marina or Social Infrastructure development. Secondary businesses encompass a variety of sectors including international trade, shipping logistics, banking and financial services, information technology, and tourism, among others.
For “Primary Businesses of Strategic Importance,” the Commission has devised two optional incentive schemes. Scheme A provides exemptions or incentives from relevant regulations for a period of 25 years, coupled with a 50% reduction in the prevailing corporate tax rate for the initial 10 years following the 25-year period. Scheme B offers an enhanced capital allowance of 300% on depreciable assets utilized within the Colombo Port City, with deductions permissible for up to 40 years. Qualified Authorized Persons are required to select their preferred scheme at the outset.
In the case of “Secondary Businesses of Strategic Importance,” there are four different eligibility criteria for accessing incentives or exemptions. These criteria are based on revenue, employment generation, projected enterprise valuation growth, or substantial contributions to enhancing social development in Sri Lanka and the establishment of an international financial center within the Colombo Port City. Secondary Businesses of Strategic Importance will be eligible for exemptions or incentives from the designated statutes for a period of 25 years.
The Colombo Port City Economic Commission plays a pivotal role as the primary interface for investors, functioning as the Single Window Investment Facilitator. It aims to cultivate a business-friendly atmosphere within the Colombo Port City’s multi-service SEZ and is steadfast in its commitment to fostering a thriving ecosystem that attracts global investments and fuels sustainable development in Sri Lanka.