The Government has proposed several important changes to the Strategic Development Projects (SDP) Act, No. 14 of 2008 through the new Amendment Bill issued on 07 November 2025.
These changes are aimed at tightening tax incentives, improving transparency, and ensuring better monitoring of large investment projects.

Below is a simple explanation of the major changes and what they mean for investors, businesses, and professionals. Kindly  note that the below changes are based on the proposed Amendment Bill issued on 07.11.2025. These provisions are not yet law and will come into effect only after the Bill is approved by Parliament and formally enacted.

1. Maximum Tax Holiday Reduced to 10 Years

Under the 2008 Act, a project could receive tax exemptions for up to 25 years.The new Bill reduces this to a maximum of 10 years.

What this means:
Future Strategic Development Projects will receive shorter tax holidays, and investors must plan their financials with a more realistic incentive period.

2. Stronger Evaluation Before Approving a Project

Before a project receives SDP status:

• The Board of Investment (BOI) will first identify the project.

• The Ministry of Finance must then carry out a cost–benefit analysis.

• Only after this analysis can the project be recommended for tax holidays or concessions.

What this means:
SDP approval will now depend on measurable economic benefits, not only on the strategic importance of a project.

3. New Monitoring System After Approval

Once a project is approved, the BOI must carry out regular monitoring to check whether the investor is meeting their commitments (KPIs).

If a project fails to comply:

• BOI can restrict, suspend, or cancel tax benefits.

• BOI can impose penalties to recover any tax losses.

What this means:
Investors must maintain proper records and meet agreed KPIs to retain tax benefits.

4. Mandatory Tax Compliance for All SDP Entities

Even if a project enjoys tax exemptions:

• The company must file tax returns under the Inland Revenue Act.

• Withholding tax on certain payments must still be paid.

• Employees’ salaries will be taxed as usual.

What this means:
There are no more “fully tax-free zones”. Core business income may be exempt, but normal tax obligations still apply.

5. No Extension of Tax Holiday

The tax holiday will begin from the start of commercial operations (as certified by BOI), and:

• No extensions are allowed under any circumstances.

What this means:
Businesses must plan clearly within the approved period.

6. New Transparency Requirements

The Ministry of Finance will publish:

• An annual tax expenditure report, showing the cost of SDP incentives to the government.

• Performance results of SDPs on its official website.

What this means:
There will be more public visibility and accountability on how tax incentives are used.

7. New Definition Structure for SDP Entities

The Bill removes the old, broad definition of “Strategic Development Project”. Instead, an SDP Entity is now defined as a company:

• Registered with the BOI, and

• Officially identified as an SDP under the new section 3.

Future “SDP criteria” will be issued via regulations.

8. Existing Projects Are Protected (Grandfathering Rule)

If a project already received a tax holiday or exemption before this Amendment:

• Those benefits will continue until the originally agreed expiry date,

• As long as the project complies with its terms and conditions.

What this means:
Current investors will not lose their approved incentives.

Conclusion: A More Structured and Transparent SDP Regime

The 2025 Amendment introduces major reforms to the Strategic Development Projects Act. The new framework focuses on:

• Shorter but clearer incentives

• Better economic justification

• Stronger monitoring and compliance

• More transparency for taxpayers

For investors, the SDP scheme remains attractive—but now requires clear documentation, compliance discipline, and realistic long-term planning.

Examples of Strategic Development Projects in Sri Lanka

To understand how the Strategic Development Projects Act has been used in the past, here are a few well-known projects that received SDP status due to their national importance, investment scale, and economic impact:

1. Port City Colombo (CIFC)

One of the largest SDP approvals, aimed at creating a financial and business hub with significant foreign investment, employment generation, and long-term economic benefits.

2. Shangri-La Hotels (Colombo & Hambantota)

Approved due to its contribution to tourism, hospitality development, and job creation. Received concessions during construction and initial operations.

3. Cinnamon Life Integrated Resort (John Keells Holdings)

A major mixed-use development recognized as an SDP because of its scale, foreign exchange earnings, and impact on tourism and commercial activity.

4. Altair Colombo

Granted SDP status due to its high-value investment and role in transforming the urban skyline and boosting the property sector.

5. Colombo International Container Terminal (CICT)

Part of the Colombo Port expansion, recognized as a strategic logistics investment under the SDP framework.

Read Original Act : Strategic Development Projects Act ,No 14 of 2008

Read the Bill : Strategic Development Projects (Amendment) Bill - GS 643/2025 (2025-11-07)