The Colombo Port City Economic Commission (Amendment) Act, No. 1 of 2026 is a short instrument with a long reach. It repealed and replaced section 35 of the principal Act, repealed and replaced the offshore banking Part, and rewrote the machinery by which incentives are granted, monitored and withdrawn.
| Act as enacted, 2021 | Act as amended, 2026 | |
|---|---|---|
| Employment income | Section 35 of the principal Act exempted the employment income of both resident and non-resident employees of an authorised person from income tax, without limit of time. | Section 35 as replaced confines the exemption to employees of a person who held a registration, licence, authorisation or approval before the section commenced, and then only for three years from the month following commencement. Section 35(3) provides that employment income of employees of a person licensed on or after commencement is liable to income tax. |
| Duration of incentives | Section 52(7) provided that the period of validity of exemptions or incentives granted to a Business of Strategic Importance shall not exceed forty years, and section 53(2)(c) repeated the cap. | Section 52(7) as substituted provides that the period of validity shall be as prescribed. Section 53(2)(c) as amended refers to the cessation date as prescribed. The forty-year figure is no longer in the Act. What replaces it is whatever regulations prescribe from time to time. |
- Fees before licensing
- New section 27(2a): until a licence and certificate of registration are issued under sections 26(3) and 26(4), the Commission may charge no fee — including a land use fee — other than the fee specified in section 27(2).
- Designated currency
- Section 36 now ties conversion to a designated foreign currency as prescribed under the Foreign Exchange Act, No. 12 of 2017, rather than to conditions prescribed at large.
- Offshore banking supervision
- New sections 42A to 42F place regulation and supervision of offshore banking licensees with the Central Bank of Sri Lanka, applying international standards expressly defined in section 75 to include those published by the Basel Committee on Banking Supervision and the Financial Stability Board. Capital adequacy, liquidity, risk management, supervisory review, disclosure and enforcement each have their own section.
- Licensing authority
- Section 42(3) as amended: the licence is granted under this Act, not under the Banking Act. Section 43 as replaced: suspension, revocation or cancellation is by the Minister assigned the subject of Finance on the recommendation of the Central Bank, after the licensee has been afforded an opportunity of being heard.
- Banks already licensed
- New section 51A: the offshore banking Part does not apply to banks licensed under the Banking Act operating in and from the Area of Authority with the approval of the Central Bank.
- Incentives: grant
- Section 52(2) as amended: businesses are identified as Businesses of Strategic Importance according to criteria to be prescribed. New section 52(3A): tax-related exemptions are subject to technical analysis by the Ministry of Finance, with technical input from the Commission.
- Incentives: review
- New section 52(5A) and section 52E: the Ministry of Finance may, in consultation with the Commission, review the tax holiday period and the applicable exemptions and incentives every five years.
- Incentives: monitoring and withdrawal
- New sections 52A and 52B: the Commission evaluates key performance indicators, publishes outcomes and fiscal impacts on its website, and on non-compliance may issue a notice, and thereafter restrict, suspend or revoke any or all exemptions, or impose administrative penalties — subject to a show-cause notice, one month to respond, and a right to be heard in person or by representative.
- Returns and transparency
- New section 52C: every authorised person files tax returns under the Inland Revenue Act, No. 24 of 2017. New section 52D: the Ministry of Finance publishes an annual report on tax expenditures relating to all Businesses of Strategic Importance.
Taken together, the 2026 amendment moves Port City from a regime of fixed statutory entitlement towards one of conditional, monitored and periodically reviewed concession. That is a defensible direction for a state managing its fiscal position and its obligations to external creditors. It is also a different risk profile, and it should be priced as one.
