The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) has urged the Government to implement a series of urgent tax and investment policy reforms to make the country a more attractive destination for foreign direct investment in an increasingly competitive global environment. The recommendations are contained in a new policy white paper titled Enhancing Foreign Direct Investment through Tax and Investment Policy Reform in Sri Lanka, issued by the Institute’s Faculty of Taxation and its Foreign Direct Investment Task Force.
The report highlights that traditional tax holidays and concessionary tax rates are becoming less effective following the introduction of the OECD Global Minimum Tax framework. It warns that unless Sri Lanka modernises its investment policies, the country risks losing both potential investors and valuable tax revenues to other jurisdictions.
Among its key recommendations are the introduction of internationally compliant investment incentives, the adoption of a Qualified Domestic Minimum Top Up Tax, and the replacement of conventional tax holidays with incentive schemes linked to employment generation, technology transfer, research, innovation and capital investment. The paper also recommends prioritising sectors such as technology, renewable energy, export oriented manufacturing and regional headquarters operations.
The white paper further calls for reforms to improve the ease of doing business by streamlining visa approvals, strengthening tax administration, enhancing regulatory transparency and establishing an Independent Tax Ombudsman to resolve administrative disputes. It also recommends modernising Sri Lanka’s Advance Pricing Agreement programme and strengthening beneficial ownership regulations to align with international standards.
CA Sri Lanka believes these reforms are essential to enhance investor confidence, create quality employment, encourage technology transfer and position Sri Lanka as a competitive regional investment hub capable of delivering sustainable long term economic growth.
