By The Pulseline News Desk
Sri Lanka is preparing a major overhaul of its investment framework, including the establishment of a new state-owned investment promotion agency managed by private sector and international professionals, two new investment laws and changes to capital allowances and capital gains taxation aimed at attracting private investment.
President Anura Kumara Dissanayake announced the proposals while presenting the 2027 Budget in Parliament, outlining the Government’s plans to improve investor confidence, strengthen investment protection and create a more competitive environment for both domestic and foreign investors.
As part of efforts to replace outdated investment regulations, the Government is advancing two key pieces of legislation.
The proposed Investment Protection Bill has been referred to the Attorney General for clearance. It is intended to safeguard investor assets, guarantee fair and equal treatment, and establish clear provisions for compensation and dispute resolution.
Meanwhile, a gazetted Public-Private Partnership (PPP) Bill is expected to be presented to Parliament in early 2027. The legislation will provide a framework for developing and managing projects jointly with the private sector.
The Government has also initiated legislation to grant permanent residency to qualifying investors, while further reforms to customs and labour laws are planned to improve the overall investment climate.
“Every investment made by the Government and every tax concession granted will be evaluated on the economic and social benefits they generate,” President Dissanayake said.
200% enhanced capital allowance for major investments
In a significant tax incentive aimed at encouraging export-oriented manufacturing and tourism development, the Government has proposed a 200% enhanced capital allowance on qualifying capital expenditure.
Effective April 1, 2027, the incentive will be available to enterprises approved by the Board of Investment (BOI) that invest at least US$3 million in export-oriented manufacturing or tourism development.
To qualify, investments must be completed within three years for manufacturing and non-hotel tourism projects, while hotel investments will be allowed a five-year completion period.
Enterprises opting for the new incentive will not be eligible to claim existing capital allowances under the Fourth Schedule or enhanced capital allowances under the Second Schedule of the Inland Revenue Act.
Unlike existing concessions under the Second Schedule, which are linked to depreciable assets and the geographical location of investments, the proposed incentive will apply to qualifying capital expenditure incurred within the stipulated investment period, without geographical distinctions.
Capital Gains Tax extended to cryptocurrencies and other assets
The Government also plans to expand the scope of Capital Gains Tax (CGT) by amending Section 195 of the Inland Revenue Act, with the changes scheduled to take effect from April 1, 2027.
The proposed amendments will broaden the definition of a capital asset to bring several additional categories of assets within the tax framework.
These will include digital and virtual assets, including cryptocurrencies; commercially valuable licences and rights, such as telecommunications and broadcasting licences; and gems, jewellery, precious metals and other valuable movable assets exceeding a prescribed monetary threshold.
The proposed changes represent an expansion of the existing capital gains tax framework, bringing a wider range of assets within the tax net.
Together, the investment legislation and tax reforms form part of the Government’s broader effort to mobilise private capital, encourage investment in productive sectors and strengthen Sri Lanka’s competitiveness as an investment destination.
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