Major Shift: Sri Lanka Trims SDP Tax Holidays & Boosts Transparency 📈

The Government has published the Strategic Development Projects (Amendment) Bill, 2025, overhauling the investment incentive framework: • Tax Holiday Cut: The maximum tax holiday granted under the SDP Act has been drastically reduced from 25 years to a maximum of 10 years. • Enhanced Vetting: The BOI must now refer all SDP proposals to the Finance Ministry for a mandatory ex-ante cost-benefit analysis before granting concessions. • Transparency & Compliance: New rules introduce compulsory tax filing, disclosure of project outcomes, and ex-post monitoring of performance by the BOI. • Accountability: Tax benefits can be restricted, suspended, or revoked if an SDP project fails to meet approved performance indicators, following a show-cause process. • Fiscal Reporting: The Finance Ministry is mandated to publish an annual report detailing tax expenditures for all SDPs, promoting greater fiscal transparency. • Transition: Existing tax holidays granted prior to the amendment will remain valid for their original duration, provided conditions are met. The move aims to replace a culture of "cronyism" and "privilege" with "credibility" and "predictability" to attract quality investments, according to President and Finance Minister Dissanayake.