Sri Lanka plans to amend its controversial Strategic Development Projects (SDP) Act by February 2025, according to Treasury Secretary Mahinda Siriwardana. The Act, which has been criticized for granting discretionary tax holidays and making top executives’ salaries tax-free, has drawn scrutiny from the International Monetary Fund (IMF) for exposing the country to potential corruption.
In response, Sri Lanka will conduct a comprehensive review of past tax incentives to adopt a more rigorous and transparent approach to granting new incentives to investors. The amendments will introduce clear, rules-based eligibility criteria, sunset clauses to limit the duration of incentives, and assessments of their benefits and costs. These changes aim to increase the effectiveness of tax incentives and attract more foreign investment to the country.