Regulatory & Policy News
View all(61)India Amends Tax Treaty with Sri Lanka to Plug Avoidance 📈
India has notified an amended protocol to its Double Taxation Avoidance Agreement (DTAA) with Sri Lanka, aimed at tightening loopholes, preventing treaty abuse, and curbing revenue leakage. The provisions will apply in India to income derived starting April 1, 2027. • Key Policy Change: The amended pact introduces the Principal Purpose Test (PPT) and updates the treaty's preamble. This shifts the framework from a purely objective criteria checklist to a focus on genuine commercial substance. • Impact on Investors: Tax authorities are now empowered to deny treaty benefits if a structure's principal purpose is to obtain a tax advantage, rather than facilitate real economic activity. Investors must now clearly substantiate the commercial rationale behind their investment structures. • Global Alignment: The modification integrates two significant OECD Multilateral Instrument (MLI) mandated changes. This aligns the bilateral corridor with international standards to prevent treaty-shopping and double non-taxation.
Exporters Urge Clear Framework for New Forced Labour Import Rules 📈
The Exporters Association of Sri Lanka (EASL) has welcomed the country's commitment to international labour standards but called for an urgent, clear implementation framework for newly gazetted regulations banning forced labour imports. • Key Concerns Raised: Without finalized operational guidelines, the EASL warns of risks including trade disruptions, shipment delays at the Colombo port, increased compliance costs, and heavy administrative burdens. • Proposed Solutions: • Establish structured consultations with exporters, importers, chambers of commerce, and logistics providers before enforcing procedures. • Adopt an international risk-based enforcement model targeting high-risk goods and jurisdictions, rather than enforcing blanket documentation on all transactions. • Request the Department of Customs to publish comprehensive guidelines covering verification procedures, acceptable documents, and a reasonable transition period. • Economic Context: EASL Chairman Nalaka Ratnayake emphasized that a transparent, risk-based approach is vital to eliminating forced labour from supply chains while preserving Sri Lanka’s global competitiveness and facilitating smooth trade operations across major export sectors like apparel & textiles and tea.
🚨 CAA Raids Private Hospitals & Labs: Expired Medical Supplies Seized
The Consumer Affairs Authority (CAA) has uncovered serious health and safety violations during a nationwide enforcement operation targeting private healthcare facilities. • Investigation Scope: The CAA conducted 52 targeted inspections spanning all districts across Sri Lanka to monitor compliance with consumer protection and health standards. • Major Violations: Multiple private hospitals and medical laboratories were caught storing and utilizing expired and unfit laboratory materials alongside active testing supplies. • Seized Materials: Key seized items included blood glucose testing kits, dengue diagnostic test kits, laboratory chemicals, cardiac patient gels, dye solutions, and other medical consumables. • Next Steps: The unfit materials have been taken into official custody. The CAA is conducting further investigations and launching legal action against the non-compliant institutions under the Consumer Affairs Authority Act. Island-wide raids will continue to safeguard public health.
🏛️ Colombo Cuts Entertainment Tax to Boost Creative Sector
The Colombo Municipal Council (CMC) has officially reduced its Entertainment Tax across all categories to support Sri Lanka’s creative industry and make cultural events more accessible. • Tax Reduction Details: The tax on local concerts has been slashed from 12% to 7% under the CMC's 2026 Budget, following the issuance of the official Gazette notification. • Economic & Social Impact: Colombo Mayor Vraie Cally Balthazaar stated the move aims to support local artists, musicians, and the creative industry, while fostering a more vibrant city culture through music, theatre, and sports. • Call to Action: Event organizers are strongly urged to pass these tax savings directly to the public by lowering ticket prices to make entertainment more affordable.
📈 Cabinet Approves Updated National Livestock Policy
The Cabinet of Ministers has approved the implementation of a revised National Livestock Policy to address evolving food security challenges and changing socio-economic conditions. The updated framework replaces the existing policy to align with recent global and local developments. • Key Policy Focus Areas: Private sector-led development and market-oriented, competitive production. Enhanced support for small-scale farmers and rural livelihoods to boost the rural economy. Adoption of environmentally sustainable practices across the livestock industry. Promotion of science- and technology-based development leveraging the expertise of local specialists. • Implementation Status: The proposal was submitted by the Minister of Agriculture, Livestock, Land and Irrigation, K.D. Lalkantha. The government has cleared the policy for immediate implementation to strengthen national food security.
📈 Treasury Unlocks Contract Repricing for Govt. Suppliers
The Treasury has issued Public Finance Circular No. 03/2026, authorized by the Cabinet and the National Procurement Commission, to provide financial relief to contractors hit by the Middle East conflict and Cyclone Ditwah. • Overall Relief Measures: Government institutions can now revise prices and extend procurement timelines to absorb rising fuel, freight, and material costs. The temporary measures apply retrospectively and are valid until 30 September 2026 for bids closed on or before 1 March 2026. • Sector Impact: The construction sector is set to be the primary beneficiary. Under the new guidelines, fixed-price public works contracts can utilize specific formulas to ease financial pressures and prevent project delays. • Key Breakdown by Contract Type: - Short-term Works (≤ 3 months): Eligible for CIDA’s Simplified (Composite) Price Adjustment Formula for fuel and material fluctuations. - Long-term Works (> 3 months without price adjustment provisions): Can apply either the CIDA Standard or Simplified Formula. - Goods & Services: Price adjustments will be determined via indices like the Producer Price Index (PPI) and freight indices, or through documented evidence (invoices, Customs declarations) if indices are unavailable. • Funding & Future Tenders: Chief Accounting Officers must secure funding via existing provision transfers or supplementary Budgets. All future tenders must strictly incorporate price adjustment provisions under the 2024 Procurement Guidelines.
📈 CIABOC & IRD Coordination Urged to Boost Tax Enforcement
A call for greater synergy between Sri Lanka's anti-corruption commission (CIABOC) and the Inland Revenue Department (IRD) highlights key opportunities to recover undisclosed revenue and strengthen rule of law. • Leveraging Investigative Data: CIABOC's complex, multi-year wealth investigations uncover substantial data on assets and bank accounts. Sharing this with the IRD could trigger immediate tax assessments on undisclosed income, bypassing lengthy criminal trial delays. • Overcoming Time Limits: In cases of suspected fraud or wilful tax evasion, standard statutory time limits do not apply, allowing the IRD independent powers to recover back taxes. • Public Domain Monitoring: The IRD is urged to proactively track public disclosures—such as recent reports of Sri Lanka Cricket spending ~Rs. 681 Mn on legal fees over three years—to cross-check if recipients have declared these earnings. • Key Takeaway: Systematic sharing of financial intelligence between state agencies and utilizing public audit/media reports would significantly improve national revenue collection and reinforce anti-corruption efforts.
⚖️ Proposed NGO Bill Threatens Civic Space & CSR Activities
• Key Concern: The newly released draft of the Non-Governmental Organisations (Registration and Supervision) Act (L.D.-O. 6/2026) faces sharp criticism for potentially eroding democratic space by bringing all "non-profit oriented" and altruistic activities under strict state supervision. • Broad Scope & CSR Impact: The draft extends regulation to social services, foundations, trusts, and even Corporate Social Responsibility (CSR) activities of for-profit firms. Political parties are currently not exempted, though religious organisations and conventional businesses remain largely excluded. • Compliance & Penalties: NGOs will be legally required to "align with Government policies." Failure to submit annual reports or audits on time could result in fines up to LKR 100,000 without court recourse. The Competent Authority (CA) is granted expansive powers to enter premises, attend internal meetings, and suspend or deregister entities. • Implementation Hurdles: Critics note the Bill is structurally ungainly and difficult to implement. The NGO Secretariat’s recurrent budget for 2026 is just LKR 3 million, leaving the CA severely underfunded and understaffed to effectively monitor money laundering or evaluate complex civil society projects. Based on provisional draft text.
📱 SL to Formulate Guidelines on Social Media for Under-16s
The Sri Lankan government is actively working to address the impact of social media on minors, aiming to balance digital education with child safety. • Current Policy Initiatives: Prime Minister Dr. Harini Amarasuriya announced that a successful pilot project is underway to reduce social media usage among children under 16. National guidelines and a mental health awareness program are currently being formulated. • Legislative Framework: A Private Member’s Bill, the _Social Media Minimum Age Bill_, is pending in Parliament. If passed, it will legally prohibit children under 16 from accessing social media platforms to boost online safety. • The Digital Dilemma: Government action faces minor hurdles as it simultaneously rolls out a school digitalization program. This program requires internet access for online studies, which can inadvertently lead students to social media. • Global Alignment: Sri Lanka's moves align with global trends. Countries like Australia, China, Indonesia, Malaysia, and the UK have already restricted access or implemented features like overnight curfues for teenagers to protect mental health. The final recommendations on Sri Lanka's approach are expected to be submitted to Cabinet before the end of 2026.
🏛️ Cabinet Approves 5-Year Strategy to Combat Money Laundering and Terrorist Financing
The Cabinet of Ministers has approved a comprehensive national policy covering the 2026-2030 period to strengthen Sri Lanka's defense against evolving global financial crime risks. • Policy Scope & Purpose: The five-year policy aims to counter money laundering, terrorist financing, and the proliferation of weapons of mass destruction. It addresses complex risks stemming from rapid technological advancements in the banking & financial services sector. • Risk Assessment Basis: Formulated based on findings from Sri Lanka's third National Risk Assessment (2024-2025) conducted by the Financial Intelligence Unit (FIU) of the Central Bank, aligned strictly with global Financial Action Task Force (FATF) standards. • Key Objectives: The framework will enhance institutional coordination, tighten preventive measures, and improve the country's capacity to detect and mitigate financial crimes, protecting the broader Sri Lankan economy and its international standing. • Governance: The proposal was officially submitted by President Anura Kumara Dissanayake in his role as the Minister of Finance, Planning, and Economic Development.
📊 Seminar Set to Tackle Beneficial Ownership Challenges Under New Companies Act
Corporate Management Consultants is organizing a timely seminar for corporate professionals to navigate the practical and legal challenges of complying with the beneficial ownership provisions introduced under the Companies Act, No. 12 of 2025. • Key Focus: Addressing implementation obstacles, regulatory expectations, and compliance best practices faced by Company Secretaries and corporate officers since the enactment of the new legislation. • Eminent Panelists: Dr. Arittha Wikramanayake (Precedent Partner, Heritage Partners) – Keynote on the legal framework and practical compliance issues. Kithsiri Gunawardene (Chairman, LOLC General Insurance PLC) – Sharing industry experiences and practical solutions for Company Secretaries. Dr. Subhani Keerthiratne (Director General, FIU of the Central Bank of Sri Lanka) – Presenting the Financial Intelligence Unit’s perspective on reporting and transparency. Sunethra Dharmakeerthi (Department of the Registrar of Companies) – Outlining regulatory expectations and filing requirements. Malik Cader (Former DG of SEC) – Moderator sharing corporate governance and enforcement insights. • Target Audience: Crucial for Company Secretaries, Directors, Legal/Compliance Officers, Chartered Accountants, and Auditors ensuring regulatory compliance.
📈 Sri Lanka Bans Forced Labour Imports to Protect US Trade Access
The Government of Sri Lanka has prohibited the import of goods produced using forced labour, effective July 10, 2026. The move aims to strengthen international trade compliance and mitigate the risk of severe US tariff hikes. • New Customs Regulations: Issued by President Anura Kumara Dissanayake in his capacity as Finance Minister, the directive mandates importers to submit documentary evidence to the Director General of Customs certifying that imports are free from forced labour. • The US Tariff Threat: The policy responds to the Office of the US Trade Representative (USTR), which flagged Sri Lanka among 60 economies lacking enforced bans on forced labour imports. The USTR proposed an additional 12.5% tariff on Sri Lankan exports, higher than the 10% rate proposed for regional competitors like Bangladesh and Pakistan. • Impact on Key Sectors: The US is Sri Lanka's largest export market, bringing in approximately US$ 3 Bn in annual revenue. This market is heavily dominated by the apparel & textiles sector, making compliance critical to maintaining competitive market access and protecting national employment. • Broader Compliance: Finance Deputy Minister Dr. Anil Jayantha Fernando noted that while domestic labour laws are robust, Customs screening will be tightened to eliminate child and forced labour concerns. This follows Sri Lanka’s ratification of the International Labour Organisation’s (ILO) Convention No. 190 in April, aimed at securing ethical supply chains.