Regulatory & Policy News
View all(59)Court Rules in Favor of CBSL on EPF Data Disclosure ⚖️
The Court of Appeal has set aside a Right to Information (RTI) Commission order that previously directed the Central Bank of Sri Lanka (CBSL) to disclose detailed transaction-level data regarding the Employees’ Provident Fund (EPF). • Legal Ruling: The Court held that specific details of government securities transactions—including purchase dates, yields, prices, and counterparties—are exempt under Section 5(1)(d) of the RTI Act. • Economic Rationale: Disclosure of investment strategies was deemed commercially sensitive. The Court noted that publicizing this data could allow market participants to outmaneuver EPF bids, placing the Fund at a competitive disadvantage and potentially reducing returns for millions of member contributors. • Governance & Oversight: While the court acknowledged the importance of transparency, it ruled that the EPF is already subject to sufficient oversight via the Auditor General, annual reports, and parliamentary review. • Precedent: The judgment affirms that the Central Bank’s fiduciary duty to protect fund assets outweighs the public interest claim in this specific instance, as the petitioner failed to prove that disclosure benefits would surpass the potential harm to the Fund's market position.
📈 Sri Lanka’s Courts Clear Decades-Old Backlog, Generate Rs. 952.9 Mn
Sri Lanka has successfully cleared long-standing accumulations of case productions across Magistrates’ and High Courts, addressing critical storage and security inefficiencies. This nationwide initiative has revitalized judicial spaces while recovering significant economic value. • Overall Revenue: The disposal of items stagnant for over two decades generated Rs. 952.9 million in 2025 alone. Total judicial revenue—including fines, notary fees, and bail bond confiscations—reached Rs. 6.57 billion for the year. • Resource Recovery: The project targeted a vast range of seized items, including vehicles (lorries, tractors, motorcycles), timber, sand, and industrial tools. By clearing these, the state mitigated the decay of assets originally imported at a high foreign exchange cost. • Operational Impact: Led by the Judicial Service Commission in collaboration with the "Clean Sri Lanka" program, the effort has cleared court premises of hazardous materials like explosives and prohibited substances, improving security and logistical flow. • National Context: Beyond the fiscal gain, the initiative supports economic stability by returning idle resources to the economy and enhancing public confidence in the efficiency of the justice system.
CSE & SEC Forum: Scaling SOEs via Capital Market Integration 📈
The Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE) convened over 45 State-Owned Enterprises (SOEs) to discuss transitioning toward capital market funding to reduce Treasury reliance and enhance governance. • Strategic Objectives The initiative aims to provide SOEs with alternative funding pathways for mid-to-long-term growth while improving transparency and operational efficiency. Key focus areas include reducing the burden on public finances and attracting institutional investors. • Market Performance & Capacity • Between 2020 and 2025, listed entities raised Rs. 560.58 Bn through debt, equity IPOs, and rights issues. • The investor base has seen significant growth, with CDS accounts recently surpassing the 1 million threshold. • 2025 saw 25 new listings, including 6 companies, utilizing diverse instruments like Blue, Green, and Social Bonds. • Key Mechanisms for SOEs • Catalyst Board: A flexible entry point with relaxed regulations specifically designed for SOE integration. • Equity & Debt: Options for partial listing where the State retains control while allowing public and employee participation via ESOP schemes. • Governance: Emphasis on regular financial reporting to build investor trust and bridge existing governance gaps. • Economic Impact Integration is viewed as a catalyst for economic transformation, deepening market liquidity, and streamlining the quality of essential services provided by the state sector.
### 📈 Sri Lanka Advances in AML/CFT Review; On-Site Evaluation Set for October
Sri Lanka has crossed three critical milestones in its third Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Mutual Evaluation process, according to the Financial Intelligence Unit (FIU) and the Central Bank of Sri Lanka (CBSL). • Key Milestones & Timeline • Feb 20: Submitted technical and contextual information to the Asia/Pacific Group (APG). • March 20: Met deadline to submit the Technical Compliance Report covering 40 FATF recommendations. • June 19: Deadline for the "Effectiveness Report" detailing practical framework performance. • Oct 26 – Nov 6: Scheduled on-site review by APG assessors. • July 2027: Final Mutual Evaluation Report expected to be adopted. • Legislative & Sector Progress • Amendments to three core laws (Financial Transactions Reporting, Prevention of Money Laundering, and Suppression of Terrorist Financing Acts) are now gazetted and await Parliamentary approval. • The evaluation impacts the banking & finance sector and private sector reporting entities, which will undergo direct scrutiny during the on-site visit. • Economic Impact Successful compliance is vital for maintaining correspondent banking relationships and investor confidence. The process is a key safeguard against potential "grey-listing" risks as the country pursues economic stabilization. Based on provisional data and official CBSL statements.
### 📈 SC Ruling: Bunker Fuel Supply Classified as Domestic Sale, Not Export
The Supreme Court of Sri Lanka has delivered a landmark judgment defining the legal boundaries of "exports" in tax statutes, dismissing eight appeals from bunkering companies. • Core Ruling: The supply of bunker fuel and lubricants to foreign vessels in Sri Lankan waters is a domestic sale. It does not qualify as an "export," affirming tax assessments for Income Tax and VAT. • The "Two-Termini Doctrine": Justice A.H.M.D. Nawaz ruled that an export requires goods to be dispatched from one country to another to be received as imports. Since bunker fuel is consumed by the ship and has no foreign destination as cargo, it fails this legal test. • Tax Implications: VAT Status: The court clarified that the VAT Act explicitly places bunkering in the exempt category rather than the zero-rated category (reserved for exports). Income Tax: Suppliers are denied concessionary rates previously sought under "re-export" claims. • Key Determinants: Consumption: Fuel is burned for engine combustion, not delivered to a foreign consignee. Documentation: Lack of a Bill of Lading or foreign customs clearance confirms it is not cargo. Responsibility: The transaction ends at the port; the vessel’s subsequent movement is independent of the sale. • Industry Impact: The ruling sets a defining precedent for the petroleum and maritime sectors. While appellants argued this may hurt Sri Lanka’s hub aspirations, the Court maintained that any shift to "zero-rated" status must come from Parliamentary legislation, not judicial interpretation. _Note: Based on Supreme Court judgment SC Appeals 39–46/2023._
Dimuth Atapattu Appointed as First Director General of Data Protection Authority 📈
The Data Protection Authority (DPA) has officially appointed Dimuth Bhashitha Atapattu, an officer of the Sri Lanka Administrative Service (SLAS), as its Director General effective 5 March 2026. This move marks a critical step in operationalizing the Personal Data Protection Act No. 9 of 2022. • Strategic Leadership: Atapattu transitions from his role as Director of Commercialisation and Partnerships at the Ministry of Digital Economy. He also holds board positions at Sri Lanka CERT and the LK Domain Registry. • Professional Background: His experience spans both public and private sectors, including roles at Virtusa (Colombo/UK) and the Ministry of Defence. He holds postgraduate degrees from the University of Melbourne and the University of Sri Jayewardenepura. • Economic Impact: The DPA is tasked with safeguarding privacy rights and fostering a secure digital economy. This is a core component of the Government’s Digital Economy Blueprint, aimed at enhancing digital trust and responsible data governance. • Implementation Status: Based on provisional plans, the Personal Data Protection Act (amended in 2025) will be brought into operation in phases as the DPA becomes fully functional under the new leadership.
Sri Lanka’s WHT Regime: Key Pivots in IRA Bill 2026 📈
The proposed Inland Revenue (Amendment) Bill of 2026 marks a significant shift toward digitizing and formalizing Sri Lanka's tax landscape, specifically targeting the gig economy and investment returns. • Employment & Personal Tax Individual taxpayers with employment income subject to APIT are exempt from filing returns if their annual interest income is below Rs. 5,000 (eff. April 2025). However, providing a TIN is now mandatory for APIT statements; missing records will result in rejected tax credits. • Investment & AIT Changes Residents can now avoid mandatory withholding on interest by providing a self-declaration to banks confirming they have no taxable income. Note: Fraudulent declarations now carry a penalty of up to Rs. 200,000. • Expanded Service Fees (5% WHT) The "withholding universe" has expanded to include a broad range of independent service providers earning over Rs. 100,000/month. New categories include: • Digital & Creative: Social media specialists, brand ambassadors, IT specialists, videographers, and artists. • Professional Services: Auditors, valuers, advisors, translators, and debt collectors. • Personal Services: Personal trainers, coaches, beauticians, and therapists. • Administrative Compliance Withholding agents must now issue tax certificates free of charge. This structured pathway aims to integrate the ICT/BPM and gig sectors into the formal economy, enhancing the IRD's cross-verification capabilities.
Planters’ Association Warns of 'Price Cliff' Over Proposed 13.6% Tariff Hike 📈
The Planters’ Association of Ceylon (PA) has raised urgent concerns over the CEB’s proposal to increase electricity tariffs by 13.6% in Q2 2026, warning it threatens the global competitiveness of Sri Lanka's primary exports. • Overall Impact: The industry faces a "price cliff" in April after a previous tariff freeze. High energy costs are inflating the cost of production for tea and rubber processing, which require 24-hour factory operations. • Sector Grievances: Unlike other export sectors in processing zones, Regional Plantation Companies (RPCs) are charged standard industrial rates. The PA is lobbying for a dedicated "Agricultural Export" tier or concessional "green tariffs" to reflect their role in earning foreign exchange. • Sustainability & Innovation: To combat rising costs, RPCs are aggressively diversifying into renewable energy: • Bogawantalawa: Committed over Rs. 300 Mn to solar and hydro projects. • Talawakelle Tea Estates: Invested Rs. 59.3 Mn in rooftop solar (2024/25). • Efficiency: Implementation of ISO 50001 standards, IE3 motors, and VSDs has already reduced emissions by thousands of tons of CO2 equivalent. • Strategic Goal: The PA emphasizes that fair pricing is essential to allow reinvestment into renewable energy and ESG initiatives, ensuring the plantation sector aligns with national net-zero targets while remaining viable in international markets.
Legal Challenge Filed Against Inland Revenue (Amendment) Bill 2026 ⚖️
A significant constitutional petition has been filed in the Supreme Court by tax expert Prasad Dasanayaka, challenging key clauses of the proposed Inland Revenue (Amendment) Bill 2026 on grounds of judicial independence and taxpayer rights. • Judicial Oversight Concerns: The petition targets Clause 31, which allows tax default certificates issued by the Commissioner General to be treated as "conclusive evidence." This reportedly prevents Magistrates from questioning tax accuracy, which the petitioner argues is an unconstitutional transfer of judicial power to an administrative body. • Corporate Tax Impact: Clause 4 seeks to redefine "reserves" to include negative retained earnings (accumulated losses) when calculating interest deductions. This change would disproportionately restrict the ability of loss-making companies in sectors like manufacturing or SMEs to deduct interest expenses compared to profitable firms. • Fiscal Transparency: The filing alleges "stealth taxation," noting that the 2026 Budget speech did not disclose these specific redefinitions. It argues this bypasses Parliament’s exclusive control over public finance under Article 148. • Legal Requirement: The petitioner urges the Court to mandate a two-thirds majority in Parliament and a public referendum unless the impugned clauses are amended to align with the Constitution. _Note: Based on provisional court filings dated March 24, 2026._
⚡ LKR Power Crisis: Tariff Decision Pending for April 1st
The Sri Lankan government is currently navigating a critical period in the energy sector, balancing potential price hikes against rising operational risks. • Overall Status: Minister Nalinda Jayatissa has officially confirmed that a final decision regarding a proposed electricity tariff increase will be announced on April 1, 2026. • Key Risks: The decision-making process is heavily influenced by growing concerns over a fuel shortage, which threatens the stability of the national grid and thermal power generation capacity. • Sector Impact: The energy and power sector remains under pressure as the government weighs the financial viability of the Ceylon Electricity Board (CEB) against the cost-of-living impact on consumers and the industrial manufacturing sector. • Next Steps: Authorities are currently analyzing expenditure and fuel supply chains to determine if a tariff adjustment is necessary to prevent a wider power crisis. (Based on provisional government statements).
SEC and CSE Move to Curb Prolonged Watchlist Stays 📈
The Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE) held a joint session for auditors to streamline enforcement and improve transparency for companies on the Watchlist. • Core Objectives: The regulators aim to reduce the duration companies spend on the Watchlist by fostering better coordination between auditors, management, and the SEC/CSE. • Regulatory Compliance: Under Section 90 of the SEC Act, auditors are mandated to report material breaches, fraud, or financial irregularities. They are granted legal immunity for reports made in "good faith" to ensure independent oversight. • Watchlist Triggers: Key reasons for Watchlist inclusion include: • Non-submission of financial statements. • Modified Audit Opinions. • Going Concern issues (financial instability). • Key Solutions: • Companies must engage auditors early to avoid last-minute delays in financial reporting. • Resolution of Modified Opinions and independent verification can lead to full reinstatement of securities. • Early identification of Going Concern signals is critical for market stability and investor confidence. The initiative underscores a push for higher governance standards in Sri Lanka's capital markets, ensuring that enforcement actions drive corporate recovery rather than long-term delisting risks.
Bottled Water Industry Seeks Relief from MRP Gazette 📈
The Sri Lanka Bottled Water Association (SLBWA) has formally requested President Anura Kumara Dissanayake to suspend or revoke the Maximum Retail Price (MRP) gazette, citing severe financial strain on manufacturers. • Pricing Deadlock: The industry is currently bound by Gazette No. 2430/15 (issued April 2025), which fixed prices such as Rs. 70 for 500ml and Rs. 130 for 1.5L bottles. • Cost Escalations: Manufacturers report that while prices remained fixed, operating costs have surged due to: • Higher electricity tariffs impacting treatment plants. • Rising costs of PET plastic (petroleum-based) and raw material imports. • Increased fuel and freight charges affecting logistics. • SME Risk: The SLBWA warns that small and medium-scale producers are struggling to remain viable, which could lead to supply disruptions of safe drinking water nationwide. • Current Status: Based on provisional industry appeals; the association is urging a framework review to reflect current economic realities.