The below analysis is based on: Colombo Port City Economic Commission Act, No. 11 of 2021 and the 2025 Amendment Bill issued on 28th of November , 2025 . This Bill has not yet become law. The provisions discussed here will take legal effect only after the Speaker signs the Bill and it is duly certified as an Act of Parliament.

Our intention is to keep you informed and help you prepare in advance for possible future legislative and tax changes. Until the Bill is enacted, these amendments remain proposals and should not be treated as binding law.

1. Fees Payable During Application Process

Original (Section 27)

Applicants had to pay all required fees at the time of application.

Amendment

A new Section 27(2a) states that no fees (including land use fees) are chargeable until both the licence AND certificate of registration are issued, except for the non-refundable processing fee.

Effect: Reduces upfront cost and risk for investors.

2. Employment Income Tax Exemption – Major Change

Original (Section 35)

All employees (residents and non-residents) employed by authorised persons enjoyed full income tax exemption indefinitely.

Amendment

Section 35 is fully replaced:

• Employees of persons already approved before the new section becomes effective:

  • Tax exemption continues ONLY for 3 years.

• Employees of persons approved after the amendment becomes effective:

  • No income tax exemption; employment income is taxable.

Effect: Removal of the long-term employment income tax incentive, with only a short transitional window.

3. Foreign Exchange Conversion Rules Tightened

Original (Section 36)

The Commission could prescribe how rupees are converted into foreign currency.

Amendment

Conversion must now be done according to the Foreign Exchange Act, No. 12 of 2017.

Effect: Strengthens Central Bank oversight on FX operations.

4. Offshore Banking Licensing Framework Overhauled

This is the largest set of changes.

4.1 Applicability of Banking Act

Original section was unclear; the Commission had wide power.

Amendment:
Section 42 is rewritten to clearly state:

• Offshore banking within the Port City is governed under the Port City Act, not the Banking Act (except where specified).

• Foreign banks can apply directly to the Commission for an offshore banking licence.

4.2 Central Bank Regulatory Authority Inserted

New Sections 42A–42F introduce:

• Central Bank power to regulate and supervise offshore banks.

• Mandatory compliance with international banking standards:

  • Capital adequacy

  • Liquidity

  • Risk management

  • Disclosure and transparency

• Central Bank may issue directions and impose penalties.

Effect: Moves Port City banking closer to mainstream prudential regulation.

4.3 Suspensions/Revocations Now by Minister of Finance

Under the original Act, the Commission played the lead role.

Amendment:

• New Section 43: Only the Minister of Finance, on Central Bank recommendation, may suspend/cancel a licence.

4.4 Section 45 Repealed

Originally dealt with offshore banking matters; now removed entirely.

4.5 Nature of Business Offshore Banks Can Conduct – Redefined

A new Section 46 specifies:

• Expanded list of permissible offshore banking activities.

• Banks may deal with non-residents freely.

• Deals with residents require prior Central Bank approval.

• Banks may open non-interest-bearing rupee accounts for local expenses.

Effect: More clarity and control, especially around dealings with Sri Lankan residents.

4.6 Auditor Appointment Now Controlled by Central Bank

New Section 48:

• Central Bank issues list of approved auditors.

• Offshore banks must submit audit reports to both CB and the Commission.

• Additional audits may be required.

Effect: Strengthens financial reporting governance.

4.7 Section 49 Repealed

Another cleanup of obsolete provisions.

4.8 Exclusion of Licensed Commercial Banks

New Section 51A:

• Banks already licensed under the Banking Act and operating in Port City are not governed by the Port City offshore banking provisions.

5. Businesses of Strategic Importance – New Criteria & Performance Evaluation

Original (Section 52–53)

The Commission had broad discretion to identify strategic businesses.

Amendment

• Criteria for identification must be prescribed (more structured).

• New Sections 52A–52E introduce:

  • Mandatory performance evaluations

  • Requirements for maintaining eligibility

  • Possibility of modifying or withdrawing exemptions

Effect: Moves from discretionary to rules-based governance for incentives.

6. Consequential Amendments & New Definitions

• Section 71 adjusted based on repealed sections.

• Section 75 amended to include new definitions required for offshore banking oversight.

Summary of the Most Significant Changes

1. Tax incentives reduced – long-term income tax exemptions removed.

2. Central Bank now fully regulates offshore banking – not the Commission alone.

3. Minister of Finance becomes final decision-maker on licence revocation.

4. FX rules tightened – must follow Foreign Exchange Act.

5. More structured criteria & evaluation for “Strategic Businesses.”

6. Banks under the Banking Act separated from Port City banking rules.

7. Reduced upfront fees for applicants until full approval is granted.

Read 

Colombo Port City Economic Commission Act, No. 11 of 2021

Colombo Port City Economic Commission (Amendment) Bill, 2025-28.11.2025