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A new enterprise which is engaged in the manufacture of je ellery, cutting and polishing of ge s with a minimum investment of at least Rs 10 million and exporting n t less than 70% of output would be entitled to a 20 year tax holiday. Existing BOI/non-BOI companies investing an additional sum of R 5 million and exporting not less th n 70% of output too will be granted a total of 20 years tax holiday.

Any new company engaged in the tr ding of gems, diamonds and gold will be granted a 20 year tax holiday, pr vided such enterprise receives at le st 90% of its income in foreign currency.

Furthermore, all precious metals an gems (including diamonds) have been exempt from the application of duty, VAT under the "normal laws". These policies have been framed with the obective of making Sri Lanka a centre for manufacturing, trading and retailing in gems, precious metals and jewellery.


Companies involved in the cultivation and/or processing of non plantation agricultural produce (excluding planting and primary processing of tea, rubber and coconut), research on high quality seeds and seed production, cultivation under poly-tunnels and drip tunnels using advanced technology, development of marketing infrastructure such as storage facilities for agricultural produce and dairy and livestock development would be entitled to generous tax holidays and other concessions.

Any company engaged in the above activities and investing a minimum Rs 10 mn and employing 20 persons shall be entitled to a 10 year tax holiday. Note that in the case of agriculture, the minimum area under cultivation should be 5 hectares. If the total investment is between Rs 2.5 mn and Rs 10 mn the tax holiday period is 5 years. In addition, companies which qualify for tax holidays as mentioned above would be entitled to import all project related imports duty free. For companies exporting less than 50% the duty exemption on plant, machinery and other project related equipment shall apply during the project establishment period. Export oriented companies would enjoy duty exemption on raw material imported for the purpose of export processing.

Many items required for agricultural activity have been exempt from duty under the Customs Ordinance and are thus available to companies regardless of export orientation. These include seeds, green houses, poly-tunnels, drip irrigation systems, selected agricultural machinery etc. (click here for more details).


Any new enterprise engaged solely in the export of locally manufactured products, will be eligible for concessionary tax at 150/o per annum for a period of 20 years, provided the annual purchase of locally manufactured products for export is not less than US $ 20 million and the annual inward remittances to meet local expenses of the enterprise shall not be less than Rs. 15 million.

The company shall also be entitled to exemption from exchange control and duty on capital goods and raw materials.

A company setting up its Regional Operating Headquarters (ROHQ) in Sri Lanka for the purpose of managing the business of two or more of its associates/related companies established offshore, would be entitled to a 5 year tax holiday subject to the ROHQ providing such companies with two or more of the following services, and receiving 900/0 of its income in foreign currency:
o administration, business planning and co-ordination

sourcing of raw materials and components

research and development services

technical support services

financial and treasury management

marketing and sales promotion

ROHQs meeting the above criteria will be eligible for a five year tax holiday and the right to operate Foreign Currency Banking Unit Accounts.


Existing BOI companies presently engaged in the manufacture and export of apparel and textile products already located in "difficult" or "most difficult" areas as classified by the BOI shall be entitled to an additional tax holiday period of five years provided they either set up a new expansion unit in the same locality before 3 1.12.1999, for the manufacture of garment ancillary products, or invest a mirnmum of Rs 10 million in a specialized

training centre for advanced technology. The manufacturing unit should provide additional employment for a minimum of 100 persons and export at least 50% of its output


whilst the specialist training centre should have a capacity to train not less than 100 persons at any given time.

Existing non BOI enterprises already established outside the district of Colombo too would be eligible for this tax holiday provided they set up a new company to manufacture any item other than apparel, employ 75 persons and export a minimum of 250/0 of its output. These new units too should be set up outside the Colombo District by 31.12.1999.


Investments of more than Rs 10 million in hotels, recreational complexes, golf courses and other projects related to tourism and leisure attract a tax rate of 15 per cent for 15 years. During the implementation (construction) period, such projects may also import equipment and construction materials free of import duty.

Enterprises in this category may also obtain foreign loans to meet cost of imports with the prior approval of the Controller of Exchange. Note that tourism, recreation and leisure projects that exceed Rs 500 million (US$ 8.0 inn) qualify for incentives under Large-Scale Projects.

A new company undertaking the construction of at least 100 housing units in not more than 3 locations with an investment of Rs. 50 million would be entitled to an income tax holiday of 7 years.

In the event the investment is Rs. 100 million or more, such companies will be eligible for a 10 year tax holiday. The above companies would also be entitled to customs duty exemption on project
related items during the implementation (construction) period of the project.


New companies constructing and operating hospitals on a two tier basis (both paying and non-paying sections) either within or outside the district of Colombo would be entitled to a tax holiday period of 10 years and duty free import of project related items during the implementation period. Hospitals established within the Colombo District should have a minimum investment of Rs. 75 million whilst those set up outside the district of Colombo should invest a minimum of Rs. 50 million. The non-paying sections should consist of an outpatient department (OPD) and a ward with a minimum of 25 beds.

The above projects would also be entitled to import specific project related items free of customs duty during the project construction period and as detailed in the customs exemption list thereafter (see page 39 for details).


This category of investment includes warehouses, environmental improvement, power generation and industrial estates.

To qualify for incentives, the minimum project size is Rs 50 million (US$ 805,000) for power projects and Rs 125 million (US$ 2.0 million) for other activities.

A concessionary tax rate 15 per cent is offered as follows:

Project Size
(Rs. million)
Preferential income
tax of 15%
(Number of years)
l25*to249 7
250to499** 10

* For power projects, mm. investment is Rs5Omn

** Projects above Rs. 500 million qua 47ji for incentives under Large Scale Projects

Other benefits include exemption from import duties on capital goods, construction machinery, equipment and construction materials during the project establishment period.


Existing enterprises engaged in the manufacture of cement, steel, textile or textile processing, including yarn, thread or any other industry as may be determined by the Ministry of Finance shall also be entitled to incentives subject to their undertaking an additional investment of not less than Rs. 500 inn. as applicable to large scale projects. The income tax holiday would be applicable to the company's entire income from the date on which the enterprise makes its first commercial export or production after the expansion programme. In addition they would be entitled to import duty free all project related materials required for the expansion.


Tax concessions are available to institutions providing training facilities to approved sectors. These include information technology, technical training, management and textile technology. Other sectors may be approved by the BOI, depending on their contribution to the national economy.

Institutions providing training are eligible for a preferential tax rate of 15 per cent for 10 years. They are exempt from import duty on the import of machinery and other inputs during the project establishment period. In order to further stimulate the private sector investor engagement in the provision of training facilities in priority sectors such a~s garments, gems and jewellery, electronics, computer software, a 5 year tax holiday will be granted provided each training institute undertakes training for a minimum of 300 persons.

To ensure that human resources are developed further incentives are granted in the area of training of software specialists by granting a 5 year tax holiday for operation of software training institutes which have a minimum of Rs. 15 million with the facilities to train a minimum of 300 persons per year.


Any new company providing transport services to workers to and from Export Processing Zones or Industrial Parks shall be granted a 5 year income tax holiday, provided such an enterprise engage new buses with a total seating capacity for not less than 400 persons.

Any existing enterprise which has entered into an agreement with the BOI and enjoying an unexpired tax exemption period would be granted an additional tax holiday for a specified period as indicated in column 1 below, provided that such enterprise provide transport facilities to workers from a date not later than December 31st 1999 satisfying the following criteria for a continuous period of not less than 05 years.

Column 1
Period of exemtion
Column II
Minimum seating capacity
Column III
Min. No. of employees of the factory
01 Year 200 300
02 Years 400 600
03 Years 700 1200


All enterprises which have entered into an Agreement under Section 17 of the BOI Act after November 1993 and have created an additional 100 permanent jobs after November 8, 1995 will be eligible to import a passenger vehicle free of import duty up to a value of US$35,000. A special application has to be submitted for the purpose. Depending on project requirements, the BOI may also consider approving the duty-free import of off-road vehicles on an individual basis.

Specialised project-related vehicles such as ambulances (for hospitals) and freezer trucks (for food processing operations) are approved for duty-free importation automatically.

Projects eligible for concessions in this sector are decided on a case-by-case basis by the Board in consultation with the Ministry of Industrial Development and within the framework of regulations published under the BOI Law, Mines and Minerals Act and other related statutes.




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Source: Board of Investment (BOI) , Sri Lanka

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