WORLD TRADE
ORGANIZATIONG/SCM/Q3/LKA/10
14 January 2003
(03-0174)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Responses by SRI LANKA to Follow-Up Questions Posed by
the UNITED STATES1 Regarding the Notification of SRI LANKA2
The following communication, dated 8 October 2002, has been received from the Permanent
Mission of Sri Lanka.
_______________
Could Sri Lanka please provide the relevant sections of the implementing legislation,
and any relevant amendments, for the programmes for the above programmes?
Reply
The following information is attached herewith as the responses to the question posed by the
United States on Sri Lanka's Notification No. G/SCM/N/74/LKA.
(a) The schedule summarizing the notified programmes and relevant sections of the
implementing legislations and instruction series;
(b) Hard copies of relevant sections of implementing legislations and instruction series.
                                                     
1 G/SCM/Q3/LKA/8
2 G/SCM/N/74/LKAG/SCM/Q3/LKA/10
Page 2
Programme Relevant Sections of the Implementing Legislation/ Instruction Series Document Reference
1. Income Tax Concessions
(a)  Tax Holidays
(b)  Concessionary Tax
       Rates  - The current exemptions are based on Sections 44, 45, 46 and 47 of  the Inland Revenue Act No.
38 of 2000. The original ordinance that governs the exemptions is Inland Revenue Act No.28 of
1979.
  - The current exemptions are based on Sections 1 and 2 of the Board of Investment of Sri Lanka
Law No. 1 of 1998. The original ordinance that governs the exemptions is the Board of
Investment of Sri Lanka Law No. 4 of 1978.Annex – I
Annex – VIII*
2. Tax Holidays on Profits
generated  - The current exemptions are based on Sections 17 (1) and 20 (1) of the Inland Revenue Act
No. 38 of 2000. The original ordinance that governs the exemptions is Inland Revenue Act
No. 28 of 1979.
  - The current exemptions are based on Sections 1 and 2 of the Board of Investment of Sri Lanka
Law No. 1 of 1998. The original ordinance that governs the exemptions is the Board of
Investment of Sri Lanka Law No. 4 of 1978.Annex – II
Annex – VIII*
3. Concessionary Tax on
Dividends  - The current exemptions are based on Section 48 of the Inland Revenue Act No. 38 of  2000. The
original ordinance that governs the exemptions is Inland Revenue Act No. 28 of 1979.Annex - III
4. Indirect Tax Exemptions -
Internal Tax Exemptions
(a)  Goods & Services Tax
      (GST)
(b)  National Security Levy  - Section 7 (1) of Goods and Services Tax Act No. 34 of 1996
  - All sections in National Security Levy Act No. 52 of 1991 and its amendments up to
01.09.2001.Annex - IV
Annex - IXG/SCM/Q3/LKA/10
Page 3Programme Relevant Sections of the Implementing Legislation/ Instruction Series Document Reference
5. Export Development
Investment Support
Scheme  - The original ordinance that governs the programmes that come under this Scheme is Part III of
Sri Lanka Export Development Act No. 40 of 1979.Annex - V
6. Import Duty Exemption   - Sections 10  and 22 A of the Customs Ordi nance and subsequent amendments of Revenue
Protection Order No. 97/03, carried an amendm ent to the Revenue Protection Act No. 19 of
1962
  - Part III of Sri Lanka Export Development Act No. 40 of 1979
  - The current exemptions are based on Sections 1 and 2 of the Board of Investment of Sri Lanka
Law No. 1 of 1998. The original ordinance that governs the exemptions is the Board of
Investment of Sri Lanka Law No. 4 of 1978.Annex – VI and
Annex – VII
Annex – V
Annex – VIII*
7. Exemption from Exchange
Control  - Exchange Control Act of Sri Lanka
  - The current exemptions are based on Sections 1 and 2 of the Board of Investment of Sri Lanka
Law No. 1 of 1998. The original ordinance that governs the exemptions is the Board of
Investment of Sri Lanka Law No. 4 of 1978.Annex – X**
Annex – VIII*
**This will be submitted in due course.
* Details of documents referred to in Annex VIII
1.  Regulation No. 1 of 1994 and No.2 of 1994 issued on 08-04-1994 Annex VIII-A
2.  Regulation No. 1 of 1995 issued on 10-11-1995 Annex VIII-B
3.  Government Gazette No. 941/13 of 19-09-1996 Annex VIII-C
4.  Government Gazette No.969/10 of 01-04-1997 Annex VIII-D
5.  Regulation No. 1 of 1998 issued on 19-03-1998 Annex VIII-E
6.  Government Gazette No.1040/3 of 10-08-1998 Annex VIII-F
7.  Government Gazette No.1084/15 of 17-06-1999 Annex VIII-G
8.  Government Gazette No.1212/2 of 26-11-2001 Annex VIII-H
9.  Regulation No. 1 of 2002 and Government Gazette No.1242/29 of 28-06-2002 Annex VIII-IG/SCM/Q3/LKA/10
Page 4
ANNEX I
INLAND REVENUE ACT NO. 38 OF 2000
Rate of income tax on
qualified export profits
and income of person notbeing a company, who
commenced to carry on
any specified undertaking44.  Where any person (not being a company) commences on or after
10 November 1993, to carry on any specified undertaking and the taxable
income of that person for any year of assessment commencing prior to
1 April 2014 includes any qualified export profits and income, and the rate of
income tax payable on a part of such income (hereinafter in this section referred
to as the "relevant part of income") exceeds fifteen per centum , then, in regard
to the relevant part of the income, the tax shall be computed as follows:
(a) if the relevant part of the income exceeds the amount of such qualified
export profits and income:
(i) the tax payable on such part of the relevant part of the income
as is equal to the amount of such qualified export profits and
income shall be at the rate of fifteen per centum ;  and
(ii) the tax payable on the balance of relevant part of the income
shall be computed according to such of the rates of abovefifteen per centum  as are applicable thereto under this Act:  and
(b) if the relevant part of the income does not exceed the amount of the
qualified exports profits and income, the tax payable on the entirety of
the relevant part of the income shall be at the rate of fifteen per centum
notwithstanding anything to the contrary in this Act.
Rate of income tax on
qualified export profits
and income of a companywhich commenced to
carry on any specified
undertaking45.  Where any company commences after 10 November 1993, to carry
on any specified undertaking and the taxable income of that company for any
year of assessment commencing prior to 1 April 2014, includes any qualifiedexport profits and income, such part of the taxable income of that company for
that year of assessment as consists of such qualified exports profits and income
shall notwithstanding anything to the contrary in this Act, be chargeable with
income tax at the rate of fifteen per centum .
Rate of income tax on
qualified export profits
and income of a person(not being a company)
who carries on any
specified undertaking46.  Where any person (not being a company) commenced, prior to
10 November 1993, to carry on any specified undertaking and the taxableincome of such person for any year of assessment commencing prior to
1 April 2015, includes any qualified exports profits and income and the rate of
income tax payable on a part of such income (hereinafter in this section referred
to as the "relevant part of income") exceeds fifteen per centum , then, in regard
to the relevant part of the income, the tax shall be computed as follows:
(a) if the relevant part of the income exceeds the amount of such qualified
export profits and income:
(i) the tax payable on such part of the relevant part of the income
as is equal to the amount of such qualified export profits and
income shall be at the rate of fifteen per centum ;  andG/SCM/Q3/LKA/10
Page 5
(ii) the tax payable on the balance of relevant part of the income
shall be computed according to such of the rates of above
fifteen per centum  as are applicable thereto under this Act;  and
(b) if the relevant part of the income does not exceed the amount of the
qualified exports profits and income, the tax payable on the entirety ofthe relevant part of the income shall be at the rate of fifteen per centum
notwithstanding anything to the contrary in this Act.G/SCM/Q3/LKA/10
Page 6
ANNEX II
INLAND REVENUE ACT NO. 38 OF 2000
Exemption from income
tax for five years of the
profits and income of
certain companies17. (1)  The profits and income within the meaning of
paragraph (a) of section 3 (other than any profits and income from the sale ofcapital assets) of any company from any undertaking referred to in subsection
(2), shall be exempt from income tax for a period of five years such period of
five years being calculated from the date on which such undertaking
commenced to carry on business.
(2)  The provisions of subsection (1) shall apply to any company which
is approved by the Minister by Order published in the Gazette:
(a) being a company which is engaged only in carrying on one or more of
the undertakings hereinafter specified, namely, an undertaking for:
(i) animal husbandry;(ii) the cultivation of land with any plant of whatever description
other than tea, rubber, coconut or paddy;
(iii) marine or inland fisheries;(iv) carrying on any activity referred to in any of the foregoing
subparagraphs and processing the product of such activity;
(v) the production from any agricultural produce of Sri Lanka of
such commodities as may be specified by the Minister, by
Order published in the Gazette, having regard to the need to
provide incentives for the production of such commodities;
(b) being a company which is an Export Production Village Company.
(3)  For the purpose of this section "Export Production Village
Company" means a company:
(a) which is a people's company within the meaning of the Companies Act
No. 17 of 1982;
(b) the shareholders of which are the Export Development Board
established by the Sri Lanka Export Development Act No. 40 of 1979,
and the producers of any of the products produced by that company;
and
(c) the products of which are exported by the company or through any
other company engaged in the export of goods or commodities:
Provided that this section shall not apply to any company which carries
on an undertaking which had commenced to carry on business prior to17 November 1983, or which was formed by the splitting up or
reconstruction of any business which was in existence prior to
17 November 1983.G/SCM/Q3/LKA/10
Page 7
ANNEX III
INLAND REVENUE ACT NO. 38 OF 2000
Rate of income tax on
dividends out of exportsprofits and income48. (1)  Where the taxable income of any person (other than a
company) for any year of assessment includes any dividend:
(a) being a dividend out of the:
(i) export profits and income of any company referred to in section
32r of the Inland Revenue Act, No. 28 of 1979 paid, during the
period in which such profits and income are taxable at the rateof ten per centum , or within one year thereafter;  or
(ii) profits and income of any company which has entered into an
agreement with the Board of Investment of Sri Lanka under
section 17 of the Board of Inve stment of Sri Lanka Law No. 4
of 1978 being profits and income in respect of which such
company has, in lieu of the exemption granted to it under such
agreement, opted to be charged with income tax at the rate of
ten per centum , paid during the period for which such profits
are so chargeable with income tax or within one year thereafter;or
(b) being a dividend paid by any company out of such dividend received by
that company as is referred to in subparagraph (i) or subparagraph (ii)
of paragraph (a) if the first mentioned dividend is paid during any yearof assessment in which the second mentioned dividend was received by
that company, or within one year thereafter;  or
(c) being dividend out of any such dividend as is referred to in
subparagraph (i) or subparagraph (ii) of paragraph (a) received by anycompany through one or more intermediary companies during the
period for which the profits and income out of which the dividends
referred to in subparagraph (i) or subparagraph (ii) of paragraph (a) are
paid are taxable at the rate of ten per centum  or within two years
thereafter, if the first-mentioned dividend is paid during the year of
assessment in which the second-mentioned dividend was received by
that company or within one year thereafter.
and the rate of income tax payable on a part of such income thereinafter in this
section referred to as the "relevant part of income" exceeds fifteen per centum ,
then, in regard to the relevant part of the income, the tax shall be computed as
follows:
(A) if the relevant part of the income exceeds the amount of such
dividend:G/SCM/Q3/LKA/10
Page 8
(i) the tax payable on such part of the relevant part of the
income as is equal to the amount of such dividend shall
be at the rate of fifteen per centum;  and
(ii) the tax payable on the balance of relevant part of the
income shall be computed according to such of the
rates of above fifteen per centum  as are applicable
thereto under this Act;  and
(B) if the relevant part of the income does not exceed the amount of
such dividends, the tax payable on the entirety of the relevant
part of the income shall be at the rate of fifteen per centum
notwithstanding anything to the contrary in this Act.G/SCM/Q3/LKA/10
Page 9
ANNEX IV
GOODS AND SERVICES TAX ACT, NO. 34 OF 1996
Zero rating 7. (1)  A supply of:
(a) goods shall be zero rated where such supply has been exported by the
supplier;
(b) services shall be zero rated where such supply is directly connected
with:
(i) any movable or immovable property outside Sri Lanka;
(ii) any repair of any foreign ship or aircraft, refurbishment of
marine cargo containers or any other goods imported for the
purpose of re-export;
(iii) a copyright, patent, licence, trade mark or similar intellectual
property right, to the extent that, such right is for use outside
Sri Lanka.
(2) Where a registered person supplies any goods or services which
is zero rated then:
(a) no tax shall be charged in respect of such supply;
(b) the supply in all other respects be treated as a taxable supply
and accordingly the rate at which tax is as charged on the
supply shall be zero.G/SCM/Q3/LKA/10
Page 10
ANNEX V
SRI LANKA EXPORT DEVELOPMENT ACT, NO. 40 OF 1979
PART III
Powers and functions of the Board
Powers and functions of
the Board12. (1)  The powers and functions of the Board shall be:
(a) to advise the Export Development Council of Ministers on the national
export development policy and programmes;
(b) to recommend to the Export Development Council of Ministers policies
and measures on export-oriented investment;
(c) to recommend the adoption of trade agreements or negotiation of inter-
country commercial policy, financial and other related arrangements
that will facilitate the development of export from Sri Lanka;
(d) to formulate a national export development plan and programme for
approval by the Export Development Council of Ministers;
(e) to monitor the implementation of the national export plan and
programme and actively assist in the implementation of the plan;
(f) to facilitate the development of supplies of export products;(g) to administer the Export Development Fund and implement all
programmes of assistance for export production and marketing in close
cooperation with the various agencies of the Government and of trade
and industry;
(h) to function as a focal point within the Government where exporters can
deal with all export problems;
(i) to carry out export potential surveys related to Sri Lanka products;(j) to carry out research and development on export products;(k) to promote the export of professional and consultancy services from Sri
Lanka in order to earn foreign exchange;
(l) to promote and sponsor trading houses, engineering and development
work and other activities abroad, that will enhance Sri Lanka's foreign
exchange earnings;
(m) to carry out feasibility studies on export-oriented projects and to
undertake any special projects on export development on a pilot basis.G/SCM/Q3/LKA/10
Page 11
ANNEX VI
CUSTOMS
PART II
Levying of Customs Duties
Duties to be levied and
power of parliament to
modify duties10. The several duties of customs, as the same are respectively
inserted, described, and set forth in figures in the table of duties (Schedule A)
shall be levied and paid upon all goods, wares, and merchandise imported into
or exported from Sri Lanka:
Provided that:(a) Parliament may from time to time, by means of a resolution duly passed
at any public session, increase, reduce, abolish, or otherwise alter thecustoms duty leviable on any goods imported into or exported from Sri
Lanka or into or from any specified port therein, or subject to such
terms or conditions, if any, as may be expressed in the said resolution,
may impose customs duty upon any goods so imported or exported
whereon customs duty at the time when such resolution is passed is notleviable;  or may add to, rescind, or vary any of the conditions, in the
said Schedule as exempt from customs duty or may add to, rescind, or
vary any of the conditions, exceptions, or provisions of the said
Schedule with regard to the payment of customs duty;  or may amend
or alter the provisions of the said Schedule by the deletion of referencesto goods stated therein to be exempt from import duty, or by specifying
that goods of any class or description shall, subject to such terms and
conditions as may be expressed in resolution, be exempt from export
duty, or by adding to, deleting from or in any manner varying the
classification or description of goods specified in the said Schedule orany provision contained therein relating to any such goods, whether or
not the duty on such goods is varied, imposed or abolished by the
resolution;
(b) no such resolution shall take effect unless it shall have been notified in
the Gazette.
* * * * *
22A. (1)  The Director-General or such other officer authorized in
that behalf shall and subject to such terms and conditions as may be prescribed
by the Minister from time to time allow importation of articles which are
intended to be re-exported without payment of import duty.
(2)  Where goods manufactured or processed in Sri Lanka containing as
a part or ingredient thereof any material imported and upon which import duty
has been paid or secured are exported, refund or rebate of the whole or part of
the import duty actually paid or secured in respect of such quantity of the rawmaterial or articles as may appear to the satisfaction of the Director-General to
have been used in the manufacture or processing of the goods shall be allowed
upon such terms, and subject to such conditions, as may be prescribed by the
Minister.G/SCM/Q3/LKA/10
Page 12
(3)  The provisions of subsection (2) shall apply only to such goods as
may from time to time be prescribed by the Minister by Notification to be
published in the Gazette having regard to the economic development of the
country.
(4)  Drawback or rebate of the duty paid or secured in the case of plant,
machinery and equipment imported for use in projects and ventures approved
by the Minister, having regard to the economic development of the country and
subject to such terms and conditions shall be allowed, on re-export, by the
Minister of such rates as he may prescribe, having regard to the duration of use,
depreciation in value and such other circumstances relating to such plant,
machinery or equipment.
Drawback of export duties (5)  Where any class or description of goods manufactured or produced
in Sri Lanka are exported to any place outside Sri Lanka and are thereafter re-
imported, a drawback of the export duties of customs paid at the time of export
under this Ordinance shall be allowed in full or part in respect of such goodsupon such terms and conditions as may be prescribed by the Minister having
regard to the period within which such goods are reimported.
(6)  Every person concerned in making any fraudulent claim for
drawback or rebate of duty shall at the election of the Director-General be liable
to a penalty not exceeding one hundred thousand rupees or three times the value
of such goods on which such claim is made.G/SCM/Q3/LKA/10
Page 13
ANNEX VII
No. 1,000/11 – WEDNESDAY, 5 NOVEMBER 1997
PART I:  SECTION (I) – GENERAL
Government Notifications
REVENUE PROTECTION ACT, NO. 19 OF 1962
ORDER
Whereas the Cabinet has decided that a Resolution should be introduced in Parliament, being
a Resolution which will have the effect of altering the rates of import duty of the articles specified in
column 3 of the Schedule hereto:
Now, therefore, in pursuance of the powers vested in me by Section 2 of the Revenue
Protection Act No. 19 of 1962, I Chandrika Bandar anaike Kumaratunga, Minister of Finance and
Planning, do, by this Order from midnight of 05/06 November 1977:
(a) require the Director-General of Customs to demand and levy on each article specified
in column 3 of the Schedule hereto, import duty at the General rate set out in the
corresponding entry in column 5 of that Schedule or, where a preferential rate is
leviable and payable under the provisions of Schedule A of the Customs Ordinance
(Chapter 235), at the preferential rate set out in the corresponding entry in column 4
of that Schedule;
(b) delete the List of Exemptions under the provisions of Schedule A of the Customs
Ordinance (Chapter 235) and substitute therefore, Annex II to the Schedule hereto
and require the Director-General of Customs to exempt the articles described in the
said Annex II from import duty.
CHANDRIKA BANDARANAIKE KUMARATUNGA
        Minister of Finance, Planning, Ethnic Affairs
and National Integration
* * * * *
ANNEX II
List of Exemptions
The following items are exempted from duty provided the Director General of Customs is
satisfied that the imports are made for the purposes mentioned therein.
1. Passengers' Baggage as defined by regulations made by the Minister of Finance under
Section 107A of the Custom s Ordinance (Chapter 235).G/SCM/Q3/LKA/10
Page 14
2. Apparatus, drugs and chemicals imported for educational purposes or for research
work.
3. Films of educational, scientific or cultural character produced by the United Nations
Organization or any of its specialized agencies.
4. Temporary import of Professional and Scientific Equipment and Pedagogic material
under such terms and conditions as are approved by the Secretary to the Treasury.
5. Articles awarded abroad to any person for distinction in art, literature, science or
sport or for public service or otherwise as a record of meritorious achievement and
conduct and to be imported by or on behalf of that person.
6. Raw materials imported for the manufacture of pharmaceuticals.
7. Ayurveda, Siddha and Unani raw and prepar ed drugs and medicinal plants specified
by Notification published in Gazette by the Director General of Customs in
consultation with the Secretary, Ministry of Health.
8. Homeopathic drugs recommended by the Homeopathic Council of Sri Lanka.9. Nutritional supplements for nasogastric tube feeding.
10. Artificial limbs, crutches, hearing aids, accessories for hearing aids (including
batteries of a voltage not exceeding 1.4 (one decimal point four) as being meant for
use in hearing aids specified on their packing) and other appliances which are worn or
carried or implanted in the body to compensate for a defect or disability.
11. Machinery, medical and surgical instruments, apparatus and accessories including
medical and dental equipment and ambulances for the provision of Health Services
subject to conditions laid down by the Secretary to the Treasury.
12. Articles specially designed for the use of the deaf and the blind.13. Articles of foreign production re-imported, upon which import duty has previously
been paid, subject to regulations made by the Director General of Customs.
14. Goods imported by organizations approved by the Secretary to the Treasury to be
gifts from persons or organizations overseas for the relief of distress caused by
natural or other disasters.
15. Goods imported for display or use at Exhibitions, Fairs, Meetings, or similar events,
approved by the Secretary to the Treasury subject to the conditions laid down.
16. Capital and Intermediate goods, and transport equipment for use exclusively at the
place of production, imported for the exclusive use of and industry which exports
and/or supplies to direct Exporters, 50 per cent or more of its output, under such
terms and conditions as are approved by the Secretary to the Treasury.
17. Inputs (raw materials and components and parts) imported under Inward Processing
Scheme for export, under such terms and conditions as are approved by the Minister
of Finance.G/SCM/Q3/LKA/10
Page 15
18. Samples of textile fabrics not exceeding 42 (forty-two) metres and articles of apparel
and clothing accessories subject to a maximum of 12 (twelve) units imported as
samples by garment exporters.
19. Ornamental fish imported for re-export under such terms and conditions as are
approved by the Director General of Customs.
20. Fish caught by fishing vessel which is operating from a Sri Lanka Port and which has
been duly registered as a Port of Registry in Sri Lanka or issued with landing permits
by the Ministry of Fisheries.
21. Ground equipment and technical supplies imported for use within the limits of an
Airport in Sri Lanka in connection with the establishment and maintenance of anInternational Air Service.
22. Unused postage and revenue stamps to be of current or new issue in Sri Lanka.23. Materials imported for the fabrication of plant, machinery and equipment to be used
in an industry which exports 50 per cent or more of the output under such terms and
conditions as are approved by the Secretary to the Treasury.
24. Containers and accessories therefore used for the safe carriage of goods.
25. Ingredients for the manufacture of animal and poultry food.
26. Imports of Brass in the form of sheets, ingots, nuggets, scrap and any other inputs
required for the Crafts Industry.
27. Goods, machinery and equipment required for refurbishing of approved Tourist
Hotels or Rest Houses, and vehicles (for one year only) required for the Tourist
Industry subject to the conditions laid down by the Secretary to the Treasury.
28. Machinery and equipment imported under the Fiscal Incentives Scheme for utilizing
advanced technology subject to the conditions laid down by the Secretary to the
Treasury.
29. Weapons, armaments, ancillary equipment, ammunition, explosives, vehicles and
equipment capable of being used by the armed forces and imported by the Service
Commanders and the Inspector General of Police for the purpose of National Security
as recommended by the Secretary, Ministry of Defence.
30. Machinery, equipment and accessories required for the provision of a
Telecommunication service subject to the conditions laid down by the Secretary to
the Treasury.
31. Seeds, fruits, spores, plants and parts thereof imported for the purpose of planting
subject to the condition laid down by the Secretary to the Treasury.
32. Technical grade, separate chemically defined active ingredients used in formulation
of pesticides and plant growth regulators for the Agriculture industry subject to theconditions laid down by the Secretary to the Treasury.G/SCM/Q3/LKA/10
Page 16
33. Project related machinery, equipment, parts and inputs including raw material and
accessories for the Textile and Garments Industry subject to the conditions laid down
by the Secretary to the Treasury.
34. Materials including chassis fitted with engines imported for the
manufacture/assembly of Tractors, Lorries, Trucks and Buses subject to theconditions laid down by the Secretary to the Treasury.
35. Parts, components and accessories for the manufacture/assembly of machines for
cleaning, sorting or grading seed, grain or dried leguminous vegetables, machinery
used in the milling industry or for the working of cereals or dried leguminous
vegetables, subject to the conditions laid down by the Secretary to the Treasury.
36. Raw materials, components, parts and accessories for the manufacture of fishing
boats subject to the conditions laid down by the Secretary to the Treasury.
37. Greenhouses, Poly-tunnels, Drip Irrigation systems and shade netting for Agriculture
and related activities subject to the conditions laid down by the Secretary to theTreasury.
38. Raw materials, components and parts imported for the manufacture of Energy Saving
Lamps subject to the conditions laid down by the Secretary to the Treasury.
39. Gold, Rough Stones of diamonds and diamond powder imported for processing or for
the manufacture of jewellery for re-export under such terms and conditions as
approved by the Director General of Customs.G/SCM/Q3/LKA/10
Page 17
ANNEX VIII-A
THE BOARD OF INVESTMENT OF SRI LANKA LAW, NO. 4 OF 1978
REGULATIONS made by the President under se ction 24 of the Board of Investment of
Sri Lanka Law No. 4 of 1978 read with Article 44(2) of the Constitution of the Democratic Socialist
Republic of Sri Lanka.
Colombo        D.B. Wijetunga
6 April 1994 President
Regulations
1. These Regulations may be cited as the Board of Investment of Sri Lanka Regulations,
No.1 of 1994.
2. With effect from 1 April 1994, the Board of Investment of Sri Lanka, established by the Board of
Investment Law, No. 4 of 1978, (hereinafter re ferred to as "the Board") may, notwithstanding
anything to the contrary contained in the Inland Revenue Act, No. 28 of 1979, embody or incorporate
in any agreement entered into with an enterprise under section 17 of the aforesaid law, any one of the
following provisions:
(i) that an enterprise engaged in the construction and operation of a resort hotel shall be
charged with income tax in respect of profits and income of such enterprise, for aperiod of 15 years, at the rate of 15 per centum for any year of assessment, reckoned
from the date on which such enterprise commences commercial operations;
(ii) that an enterprise engaged in the manufacture and export of non-traditional products
or export of services as determined by the Board in consultation with the Ministry ofFinance including deemed export of non-traditional products and services shall be
charged with income tax in respect of profits and income of such enterprise, for a
period of 20 years, at the rate of 15 per centum for any year of assessment, reckoned
from the date on which such enterprise effects its first commercial export;
(iii) that an enterprise engaged in infrastructure development with an investment of not
less than US$25 million or its equivalent in Sri Lanka Rupees, or in any convertible
currency, shall be charged with income tax in respect of profits and income of such
enterprise, for a period of 20 years, at the rate of 15 per centum for any year of
assessment, reckoned from the date on which such enterprise commences commercial
operation:
(iv) that an enterprise with an investment of not less than US$2.5 million or its equivalent
in Sri Lanka Rupees or in any convertible currency engaged in the construction and
operation of:
(a) hospitals with a minimum capacity of one hundred beds;  or(b) a project consisting of over two hundred housing units;  or(c) environment related infrastructure or warehouses for sale or lease or rent,G/SCM/Q3/LKA/10
Page 18
shall be charged with income tax in respect of profits and income of such enterprise
for a period of 7 years at the rate of 15 per centum for any year of assessment
reckoned from the date on which such enterprise commences commercial operation;
(v) that an enterprise engaged solely in technical training as may be determined by the
Board in consultation with the Ministry of Finance, shall be charged with income taxin respect of profits and income of such ente rprise for a period of 10 years at the rate
of 15 per centum for any year of assessment reckoned from the date on which such
enterprise commences commercial operation;
(vi) that in the case of an enterprise which prior to 1 April, 1994 has entered into an
agreement under section 17 of the aforesaid Law, and which in enjoying any
exemption or modification in terms of paragraphs (i), (ii), (iia) of regulation 2 andregulation 8B of the Greater Colombo Economic Commission Regulation No. 1 of
1978 published in Gazette Extraordinary No. 8/2 of 31 October 1978 (as amended
from time to time) and which as at 1 April 1994 has an unexpired tax exemption
period of not less than 4 years during which the profits and income of that enterprise
are exempted from income tax under the Agreement, such enterprise may opt to becharged with income tax in respect of the profits and income of that enterprise during
a period of 20 years at the rate of 10 per centum for any year of assessment
commencing on 1 April 1994, in lieu of such exemption or modification presently
being enjoyed by it;  and
(vii) the exemptions granted by subparagraphs (i) to (v) above shall be extended only to
entirely new enterprise and not to enterprises formed by the splitting up,
reconstitution or acquisition of any existing business or any description within Sri
Lanka.
3. No exemption or modification in terms of paragraphs (i), (ii) and (iia) of regulation 2, and
regulation 8B of the Greater Colombo Economic Commission Regulations No. 1 of 1978 published in
Gazette Extraordinary No. 8/2 of 31 October 1978, shall be granted by the Board to any new
enterprise;
Provided that, the Board may where it is satisfied that an applicant has made an application
for approval of a project prior to 10 November 1993, extend such exemptions and modifications to
such application, on approval of his project.
_______________
THE BOARD OF INVESTMENT OF SRI LANKA LAW, NO. 4 OF 1978
REGULATION made by the President under secti on 24 of the Board of Sri Lanka Law No. 4
of 1978 read with Article 44(2) of the Constitution of  the Democratic Socialist Republic of Sri Lanka.
Colombo        D.B. Wijetunga
6 April 1994 President
Regulations
1. This Regulation may be cited as the Board of Investment of Sri Lanka Regulation No. 2 of
1994.G/SCM/Q3/LKA/10
Page 19
2. The Board of Investment of Sri Lanka establis hed by the Board of Investment of Sri Lanka
Law No.4 of 1978 (hereinafter referred to as "the Board") may embody or incorporate in any
agreement, entered in terms of Section 17 of the aforesaid Law, with an enterprise, if such enterprise
is a resident company and which in accordance with  such agreement has invested or intends to invest
in Sri Lanka within the period specified in such agreement, not less than (50) fifty million United
States Dollars or its equivalent in any other foreign currency, to meet the cost of any project approvedby the Board (hereinafter referred to as a "flagship company"), the following provisions:-
(i) that the number of contributors who may present a petition for the winding up of a
flagship company on the ground specified in Sub-section (f) of Section 255 of the
Companies Act, No. 17 of 1982 shall be not less than five contributors holding not
less than ten per centum of its issued share capital;  and
(ii) that only a creditor to whom a flagship company is indebted and is unable to pay a
debt of not less than Rupees one (1) million shall be entitled to present a petition for
winding-up of a flagship company by Court on the ground specified in Sub-section (e)
of Section 255 of the Companies Act, No. 17 of 1982.G/SCM/Q3/LKA/10
Page 20
ANNEX VIII-B
THE BOARD OF INVESTMENT OF SRI LANKA, LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of Sri
Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
6 November 1995        President
Regulation
3. This Regulation may be cited as the Board of Investment of Sri Lanka
Regulation No. 1 of 1995.
4. The Board of Investment of Sri Lanka, (hereinafter referred to as "the Board"), may, in an
agreement entered into with an enterprise under Section 17 of the Board of Investment of Sri Lanka,
Law No. 4 of 1978, embody or incorporat e any of the following provisions:-
(i) that the provision of the Inland Revenue Act No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period of
five years for any year of assessment reckoned from the date of commencement of
business in respect of profits and income of any enterprise which is:
(a) a new enterprise engaged in the production or manufacture for export,
including indirect export, of any non-traditional product or commodity
utilizing higher technology and employing not less than fifty local persons
with an investment not less than fifty Million Rupees or its equivalent in any
convertible foreign currency to be made within a period specified by theBoard to meet the cost of the project;
(b) a new enterprise engaged in the provision of any service as defined in this
Regulation for export, including indirect export, for payment in foreign
currency utilizing higher technology and employing not less than twenty-five
local persons provided that in the case of ship breaking or ship repairing the
enterprise shall invest not less than ten Million Rupees or its equivalent in any
convertible foreign currency within a period specified by the Board to meet
the cost of the project.
(c) an existing enterprise engaged in carrying on any of the industrial
undertakings referred to in (a) or (b) above utilizing higher technology and
employing not less than fifty employees on incremental basis with a minimum
incremental investment of Rupees 50 Million or its equivalent in convertibleforeign currency to be made within a period specified by the Board to meet
the cost of the Project.
Provided that the employment and investment criteria on incremental
basis shall not apply to an enterprise which has entered into an agreement
with the Board having an exemption or modification under the Board ofInvestment of Sri Lanka Regulati on No. 1 of 1994 published in the Gazette
Extraordinary  No. 813/12 of 8 April 1994.G/SCM/Q3/LKA/10
Page 21
Provided further that the period during which the profits and income
of such enterprise is exempted from the income tax shall be reckoned from
the date on which such enterprise enters into an agreement supplemental to
the existing agreement;  and
(d) a new enterprise engaged in carrying on any or more of the undertakings
hereinafter specified and located outside the District of Colombo employing
not less than fifty local persons with an investment of not less than Rupees
2.5 Million or its equivalent in any convertible foreign currency, if wholly
owned by resident persons, to be made within a period specified by the Board
to meet the cost of the project namely:
(i) an undertaking for animal husbandry;
(ii) an undertaking of cultivating land with any plants of whatever
description other than tea, rubber, coconut or paddy;
(iii) an undertaking for marine or inland fisheries;
(iv) an undertaking for carrying on any activity referred to above and/or
for processing the product of such activity;  and
(v) an undertaking for collection and storage whether dry or cold, of
domestic agricultural produce.
(ii) that a new enterprise shall be charged with income tax for a period of 15 years at the
rate of 15 per centum for any year of assessment reckoned from the date of
commencement of commercial operation of such an enterprise which is:
(a) engaged in construction and operation of hotels, recreational complexes, golf
courses and any other tourism and tourist related activity as may be
determined by the Board, with an investment of not less than Rupees
10 Million or its equivalent in any convertible foreign currency to be made
within a period specified by the Board to meet the cost of the project.
(b) engaged in dairy and livestock development using only locally produced milk
with an investment of not less than Rupees 10 Million or its equivalent in any
convertible foreign currency to be made within a period specified by the
Board to meet the cost of the project.
(iii) that a new enterprise shall be charged with income tax for a period not exceeding
7 years in the case of (a) below or for a period not exceeding 10 years in the case of
(b) below at the rate of 15 per centum for any year of assessment reckoned from the
date of commencement of commercial operations of such enterprise which is engaged
in the construction and operation of warehousing complexes, environment related
projects such as garbage or sewage disposal, data and voice transmission, housingprojects consisting of minimum 100 units, power generation with  an investment to be
made within a period specified by the Board to meet the cost of the project in a sum:
(a) not less than Rupees 125 Million or its equivalent in any convertible foreign
currency but not exceeding Rupees 249 Million or its equivalent in anyconvertible foreign currency;  orG/SCM/Q3/LKA/10
Page 22
(b) not less than Rupees 250 Million or its equivalent in any convertible foreign
currency but not exceeding Rupees 499 Million or its equivalent in any
convertible foreign currency.
Provided that for a housing project, the investment shall not be less
than Rupees 50 Million or its equivalent in convertible foreign currency.
(iv) that the provisions of the Inland Revenue Act No. 28 of 1979, relating to the
imposition payment and recovery of income  tax shall not apply for the respective
periods specified below for any year of assessment reckoned from the date of
commencement of business in respect of profits and income of any enterprise which is
a new enterprise engaged in large scale development projects including infrastructure
with an investment to be made within a period specified by the Board to meet the costof the project a sum of money as specified below or its equivalent in convertible
foreign currency:
(a) Rupees 500 Million to Rupees 1,499 Million for a period of ten (10) years;
(b) Rupees 1,500 Million to Rupees 2,499 Million for a period of
twelve (12) years;
(c) Rupees 2,500 Million to Rupees 4,999 Million for a period of
fifteen (15) years;
(d) above Rupees 5,000 Million or its equivalent for a period of
Twenty (20) years.
Provided that an enterprise engaged in the production or
manufacture, for export, of any non-traditional product or commodity shall
employ not less than one hundred persons and export not less than ninety per
centum of the output.
5. For the purpose of paragraph (i) of Regulation 2:
(i) "non-traditional products" mean any industrial, agricultural, horticultural, fruit, dairy,
aquatic, aquacultural or fisheries products, ayurvedic herbs and drugs, handloom
textiles, handicrafts and other rural industrial products, provided that such non-
traditional products shall not include black tea in bulk, crepe rubber, sheet rubber,
scrap rubber, coconut oil, desiccated coconut, (other than desiccated coconut
manufactured by using continuous scale automated process technology and marketed
with a quality guarantee), copra, fresh coconut, coconut fibre and uncut gem stones;
(ii) "higher technology" means:
(a) Technology which introduces a new design, formula or process for the
manufacture of an article or in the provision of a service, resulting in one ormore of the following:-
(i) higher productivity resulting in lower cost of production;(ii) quality improvement of product/service;(iii) better utilization of raw material;G/SCM/Q3/LKA/10
Page 23
(iv) upgrading of technical skills;  and
(v) minimizes/controls environmental pollution and/or wastage.
(b) Manufacture of the products using a technology hitherto not applied in
Sri Lanka (excluding technology involving only simple processing);
(c) Technology for the local processing of raw materials, which are currently
imported in processed form excluding simple types of processing;  and
(d) Technology hitherto unutilized in Sri Lanka that would make use of local
resources to provide public utilities and infrastructure service.
(iii) "existing enterprise" means an enterpri se which has entered into an agreement with
the Board under Section 17 of the Board of Investment of Sri Lanka Law No. 4 of
1978.
(iv) an enterprise engaged in the production or manufacture for export, including indirect
export of non-traditional products shall export not less than ninety per centum of the
output directly and/or indirectly and an enterprise providing services payable in
foreign currency or rendering indirect services which will ensure or enhance the
quality or character of the exportable products, to export companies shall provide not
less than seventy per centum of the services to them.
4. (i) For each year of assessment during a period of 15 years immediately succeeding the
last date of that year in which the profits and income of the enterprise is exempted
from income tax under subparagraphs (i) (a) or (b) or (c) of Regulation 2 above the
said enterprise shall be entitled to be ch arged with income tax in respect of such
enterprise at the rate of 15 per centum reckoned from the said last date;
(ii) An enterprise referred to in subparagraph (i) (d) of Regulation 2 above which exports
not less than ninety per centum of its output for each year of assessment during a
period of 15 years immediately succeeding the last date of that year in which the
profits and income of the enterprise is exempted from income tax shall be entitled tobe charged with income tax in respect of such enterprise at the rate of 15 per centum
from the said last date;  and
(iii) For each year of assessment during a period specified below immediately succeeding
the last date of that year in which the profits and income of the enterprise, which is
engaged in the production or manufacture of non-traditional products for export, is
exempted from income tax under subparagraph (iv) of Regulation 2 above the said
enterprise shall be entitled to be charged wi th income tax in respect of such enterprise
at the rate of 15 per centum reckoned from the said last date:
(a) for a period of ten years in respect of an enterprise which is exempted from
income tax for a period of ten years;  or
(b) for a period of eight years in respect of an enterprise which is exempted from
income tax for a period of twelve years;  or
(c) for a period of five years in respect of an enterprise which is exempted from
income tax for a period of fifteen years.G/SCM/Q3/LKA/10
Page 24
5. The period during which the foregoing exemptions or modifications may be granted by the
Board shall be two (2) years with effect from the date on which this Regulation is published in the
Gazette .
6. The minimum investment to be made in a project by a non-resident person shall be as
determined by the Board.
7. The Greater Colombo Economic Commission Regulation No. 1 of 1978 published in Gazette
Extraordinary  No.8/2 of 31 October 1978, as amended from time to time and the Board of Investment
of Sri Lanka Regulation No. 1 of 1994 published in Gazette Extraordinary  No. 813/21 of
8 April 1994 shall, mutatis mutandis , be valid and operative.G/SCM/Q3/LKA/10
Page 25
ANNEX VIII-C
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of Sri
Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
16 September 1996     President
Regulation
The Board of Investment of Sri Lanka Regulation No. 1 of 1994 published in Gazette
Extraordinary  No. 813/21 of 8 April 1994, are hereby amended in regulation (2) thereof, by the
insertion, immediately after subparagraph (vi) of that regulation, of the following new subparagraph
(viA) –
"(viA) that a new enterprise, who with prior written approval of the Board, takes over or
acquires, subject to such modifications or variations to the business of an existing
enterprise as may by approved be the Board, the assets of any existing enterprise
(i.e. an enterprise which has entered into an agreement with the Board under
section 17, of the aforesaid Law) shall be charged with income tax in respect of theprofits and income of such an enterprise for a period of twenty (20) years at the rate of
fifteen per centum for any year of assessment, reckoned from the date on which such
enterprise commences commercial operation;"
THE BOARD OF INVESTMENT OF SRI LANKA LAW, NO. 4 OF 1978
REGULATION made by the President under secti on 24 of the Board of Investment of Sri
Lanka Law No. 4 of 1978 read with Article 44(2) of the Constitution of the Democratic Socialist
Republic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
16 September 1996     President
Regulation
The Board of Investment of Sri Lanka Regulation No. 1 of 1995 published in Gazette
Extraordinary No. 896/17 of 10 November 1995, is hereby amended as follows:-
(1) in regulation (2) thereof:
(a) by the repeal of subparagraph (c) of paragraph (i) of that regulation;
(b) by the renumbering of subparagraph (d) of paragraph (i) as subparagraph (c) of
paragraph (i) of that regulation;
(c) by the substitution for paragraph (iii) of that regulation of the following new
paragraph:-G/SCM/Q3/LKA/10
Page 26
"(iii) that a new enterprise shall be charged with income tax for a period not
exceeding 7 years in the case of (a) below or for a period not exceeding
10 years in the case of (b) below, at the rate of 15 per centum for any year of
assessment reckoned from the date of commencement of commercial
operations of such enterprise which is engaged in the construction and
operation of warehousing complexes, environment related projects such asgarbage or sewage disposal, data and voice transmission, housing projects
consisting of minimum 100 units, power generation with an investment to be
made within a period specified by the Board to meet the cost of the project in
a sum:
(a) not less than Rupees 125 Million or its equivalent in any convertible
foreign currency but not exceeding Rupees 249 Million or itsequivalent in any convertible foreign currency;  or
(b) not less than Rupees 250 Million or its equivalent in any convertible
foreign currency but not exceeding Rupees 499 Million or its
equivalent in any convertible foreign currency;
Provided that for a project for housing or power generation, the
investment referred to (a) above shall be not less than Rupees
50 Million or its equivalent in convertible foreign currency.";
(2) in regulation (4) thereof:
by the substitution in paragraph (i) of that regulation for the figure and letters "(i) (a) or (b) or
(c)" of the figure and letters "(i) (a) or (b)".G/SCM/Q3/LKA/10
Page 27
ANNEX VIII-D
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATION made by the President under Section 24 of the Board of Investment of
Sri Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
31 March 1997         President
Regulation
The Board of Investment of Sri Lanka Regulations, No. 1 of 1995 published in Gazette
Extraordinary No. 896/17 of 10 November 1995, as amended by Regulation published in Gazette
Extraordinary  No. 941/13 of 19 September 1996, is hereby further amended as follows:
(1) in regulation 4 thereof:
(a) by the substitution in paragraph (ii) of that regulation for the words and figures "An
enterprise referred to in subparagraph (i) (d)" of the words and figures "An enterprise
referred to in subparagraph (i) (c)";  and
(b) by the substitution in paragraph (iii) of that regulation for the words "engaged in the
production or manufacture of non-traditional products for export", of the words
"engaged in the production or manufacture of non-traditional products for export or
engaged in a large scale development project for the generation of power in respect of
which a Power Purchase Agreement has been entered into with the Ceylon ElectricityBoard, on or before 31 December 1996";  and
(2) by the repeal of regulation 5 thereof  and the substitution therefor of the following regulation:-"5. The provisions of the Inland Revenue Act No. 28 of 1979 relating to the imposition, payment
and recovery of income tax in respect of profits and income shall not apply for a further period not
exceeding three years, to the profits and income of  an existing enterprise which has entered into an
agreement under section 17 of the Law in terms of the Board of Investment Regulations, published in
Gazette Extraordinary  No. 697/4 of 13 January 1992, as amended by Regulation published in Gazette
Extraordinary  No. 780/2 of 16 August 1993 and which is engaged in the manufacture and export of
apparels and other textile products in any area outside the limits of the Colombo Municipal Council
and which, prior to such date as may be specified by the Board creates additional employment for notless than 150 local persons, in excess of the present level of employment or 450 local persons,
whichever is higher;  Such period shall be reckoned from the date on which the original tax exemption
period of five years has expired or is due to expire.
Provided that in the case of an enterprise which has established an expansion unit jointly with
not more than two other enterprises, each such ente rprise shall be eligible for the further period not
exceeding 3 years referred to above, if each such enterprise creates additional employment for not less
than 150 local persons in excess of the present level of employment or 450 locals persons, whichever
is higher;  and each enterprise which is eligible for the aforesaid further period of 3 years shall ensure,
that the present level of employment which shall henceforth include the additional employment of 150created by each such enterprises, be maintained;G/SCM/Q3/LKA/10
Page 28
For the purpose of this paragraph the present level of employment shall be the average
number of local employees of the enterprise in respect of whom the payment of Employees 'Provident
Fund and Employees' Trust Fund contributions have been made in full for the six months preceeding
1 January, 1997".G/SCM/Q3/LKA/10
Page 29
ANNEX VIII-E
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of
Sri Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
17 March 1998       President
Regulations
1. This regulation may be cited as the Board of Investment of Sri Lanka Regulations, No. 1 of
1998.
2. The Board of Investment of Sri Lanka establis hed by the Board of Investment of Sri Lanka
Law, No. 4 of 1978 (hereinafter referred to as "the Board") may, in addition to anything contained in
the Provisions of any previous regulations made by the Board, embody or incorporate in anyagreement entered into with an enterprise under Section 17 of the said Law any one of the following
provisions:
(i) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax in respect of profits and income,
shall not apply for a period of five (5) years in respect of the profits and income of anexisting enterprise which is engaged in the textile manufacturing or textile processing
industry and makes an additional investment of not less than Rupees 5 Million
towards modernization of its industry.  The said period shall be reckoned from the
date on which the enterprise reaches the export target of fifty per centum of its output
within a period of five (5) years from the date on which the agreement underSection 17 of the Law, was entered into.
(ii) that the provisions of the Inland Revenue Act No. 28 of 1979 relating to the
imposition, payment and recovery of income tax in respect of the profits and income,
shall not apply in respect of an existing enterprise or a new enterprise which is formedby the acquisition of assets of any existing enterprise and which is engaged in the
manufacture of cement, steel or textile manufacturing and/or textile processing
industry including yarn and/or thread or w ith the approval of the Minister any other
industry as may be determined by the Board with an additional investment of any sum
of such value as is specified in Column I below, to meet the additional cost of the
project, for the period specified in the corresponding entries in Column II below.  The
said period shall be reckoned from the date on which the enterprise makes its firstcommercial export or production, as the case may be, after the additional investment
is made:-G/SCM/Q3/LKA/10
Page 30
COLUMN I COLUMN II
Value of Additional Investment Period of Exemption
(a) Not less than Rupees
500 Million to Rupees1,499 MillionTen (10) years
(b) Not less than Rupees
1,500 Million to Rupees
2,499 MillionTwelve (12) years
(c) Not less than Rupees
2,500 Million to Rupees
4.999 MillionFifteen (15) years
(d) Above Rupees 5,000 Million Twenty (20) years
(iii) that an existing enterprise or a new enterprise referred to in paragraph (ii) above
which makes an additional investment as specified therein, shall upon the expiration
of the period of exemption originally granted in terms of the said paragraph, becharged with income tax in respect of the profits and income of such enterprise at the
rate of fifteen (15) per centum for corresponding extended periods set out in
Column II below, in relation to the original  periods of exemptions set out in Column I
below, provided that such enterprise exports not less 90 per cent from its output.
COLUMN I COLUMN II
Original period of Exemption Extended period at 15%
(a) 10 years 10 years
(b) 12 years 8 years(c) 15 years 5 years
(iv) (a) Paragraphs (ii) and (iii) of regul ation 2 of the Board of Investment of
Sri Lanka Regulations, No.1 of 1997, published in Gazette Extraordinary
No. 995/9 of 30 September 1997, are hereby rescinded.
(b) Notwithstanding anything to the contrary contained in the paragraph (iv) of
regulation (2) of the Board of Investment of Sri Lanka Regulation No. 1 of
1995 published in Gazette Extraordinary  No. 896/17 of 10 November 1995,
the concessions relating to large scale development projects mentioned
therein shall not apply to a manufacturing industry if in the opinion of the
Board, such industry is not undertaking a substantial manufacturing process inSri Lanka.
(v) (a) that the provisions of the Inland Revenue Act No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for the period
specified in Column I below corresponding to the location specified inColumn II below, in respect of the profits and income of an existing
enterprise which has entered into an agreement with the Board under
Section 17 and is engaged in any export-oriented manufacturing industry, if
such enterprise sets up an expansion unit or relocates its industry in a Zone or
area which is designated a "difficult area" or "most difficult area" providedthat such enterprise shall commence its expansion unit or relocate its factory
on or before 31 December 1998, and employ not less than 150 local persons
and export from the designated Zone or area not less than fifty per centum ofG/SCM/Q3/LKA/10
Page 31
its output or in the case of an enterprise engage in the manufacture of apparels
and textile products, not less than ninety per centum of its output:-
COLUMN I COLUMN II
Period of Exemption Location of the Zone
(a) Five (5) years difficult area
(b) Eight (8) years most difficult area
(b) The tax exemption periods referred in paragraph (a) above shall also be
granted to any existing enterprise whic h has not entered into an agreement
with the Board under Section 17 and which the Board determines is engaged
in carrying on any export-oriented manufacturing industry, provided that suchenterprise satisfies the requirements specified in paragraph (a) above.
(c) The tax exemption periods referred to in paragraph (a) above shall also be
granted to any new enterprise which is engaged in any export oriented
manufacturing industry provided that such enterprise satisfies the requirementspecified in paragraph (a) above.
For the above purposes the said period shall be reckoned from:(i) the date on which the original tax exemption period is due to expire
where such enterprise is currently exempted from income tax;  or
(ii) the date on which the expansion unit or relocated industry effects its
first commercial export where such enterprise currently not exempted
from income tax;  or
(iii) the date on which the new enterprise effects its first commercial
export.
(vi) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for an additional
period of five (5) years in respect of the pr ofits and income of an existing enterprise
which has entered into an agreement with the Board under Section 17 and which is
engaged in the manufacture and export of apparels and textile products in a difficult
or most difficult area, if such enterprise expands at its same location for the
manufacture of:
(a) garment ancillary products;  or
(b) other related items for the garment industry;Provided such expansion is commissioned on or before 31 December 1998, and
employs additional one hundred (100) local persons and exports not less than fifty per
centum of its output.
The said additional period shall be reckoned from the date on which the original tax
exemption period of such enterprise is due to expire.
(vii) that the provisions of the Inland Revenue Act No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for an additional
period of five (5) years in respect of the pr ofits and income of an existing enterpriseG/SCM/Q3/LKA/10
Page 32
which has entered into an agreement with the Board under Section 17 and which is
engaged in the manufacture and export of apparels and textile products in a difficult
or most difficult area if such enterprise establishes with a minimum investment of
Rupees 10 Million a specialized centre in advanced technology at the same location
for the provision of facilities for training for not less than one hundred (100) local
persons at any given time and the enterprise commences training on or before31 December 1998.
The said additional period shall be reckoned from the date on which the original tax
exemption period of such enterprise is due to expire.
(viii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for a period of five (5)years in respect of the profits and income of a new enterprise which is incorporated as
a company by an existing enterprise which has not entered into an agreement with the
Board under Section 17, to be established outside the district of Colombo on or before
31 December 1998, for manufacture of any item other than apparels and textile
products provided such new enterprise employs seventy five (75) local persons andexports not less than twenty-five per centum of its output.
The said period shall be reckoned from the date on which the new enterprise effects
its first commercial export.
(ix) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery shall not apply for the periods specified in
Column I below corresponding to the location specified in Column II below, in
respect of the profit and income of a new enterprise which is engaged in the
manufacture of apparels and textile products employing not less than two hundred andfifty (250) local persons with a minimum investment of Rupees 20 Million provided
such enterprise locates its factory in a difficult area or most difficult area and exports
at least ninety per centum of its output:-
COLUMN I COLUMN II
Period of Exemption Location of Area
Five (5) years difficult area
Eight (8) years most difficult area
The said period shall be reckoned from the date on which the enterprise effects its
first commercial export.
(x) (a) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of ten (10) years, in respect of the profits and income of any new enterprise
which carries on any thrust industry as defined in paragraph (xiii) having itsfactory in an area designated by the Board with a minimum investment of
Rupees 50 Million and exports not less than ninety per centum of its output
and employs not less than fifty (50) local persons.
The said period shall be reckoned from the date on which the enterprise effects its
first commercial export.
(b) where such enterprise invests an additional investment of any sum of such
value as is specified in Column I below, the provisions of the Inland RevenueG/SCM/Q3/LKA/10
Page 33
Act No. 28 of 1979 relating to the imposition, payment and recovery of
income tax in respect of the profits and income of such enterprise, shall not
apply for the period specified in the corresponding entries in Column II
below.  The said period shall be reckoned from the date on which the
enterprise makes its first commercial export or production, as the case may
be, after the additional investment is made:-
COLUMN I COLUMN II
Value of Additional Investment Period of Exemption
(a) Not less than Rupees
1,500 Million to Rupees2,499 MillionTwelve (12) years
(b) Not less than Rupees
2,500 Million to Rupees
4,999 MillionFifteen (15) years
(c) Above Rupees 5,000 Million Twenty (20) years
(xi) (a) that the provisions of the Inland Revenue Act No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of five (5) years or ten (10) years respectively in respect of the profits and
income of any existing enterprise which has not entered into an agreementwith the Board under Section 17 and is currently engaged in any thrust
industry, and defined in paragraph (xiii):-
(i) for a period of five (5) years, if such enterprise reaches an export
target of fifty per centum export of its output within a period of five
(5) years;  and
(ii) for a period of ten (10) years, if such enterprise reaches an export
target of ninety per centum of its output within a period of five (5)
years.
(b) an existing enterprise which has entered into an agreement with the Board
under Section 17, which is already exporting not less than ninety per centum
of its output and is currently engaged in a thrust industry as defined in
paragraph (xiii) shall be eligible for a tax exemption period of ten (10) years
if it makes an additional investment of Rupees 50 Million.  Further, where
such existing enterprise makes an a dditional investment of any sum of such
value as is specified in Column I below, the provisions of the Inland Revenue
Act No. 28 of 1979 relating to the imposition, payment and recovery in
respect of the profits and income of such enterprise shall not apply for the
period specified in the corresponding entries in Column II below.  The said
period shall be reckoned from the date on which the enterprise makes its firstcommercial export or production, as the case may be, after the additional
investment is made:-
COLUMN I COLUMN II
Value of Additional Investment Period of Exemption
(a) Not less than Rupees
1,500 Million to Rupees
2,499 MillionTwelve (12) yearsG/SCM/Q3/LKA/10
Page 34
(b) Not less than Rupees
2,500 Million to Rupees
4,999 MillionFifteen (15) years
(c) Above Rupees 5,000 Million Twenty (20) years
(xii) (a) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax in respect of the profits and
income, shall not apply for a period of ten (10) years in respect of an existing
enterprise which has entered into an agreement with the Board under
Section 17 and is engaged in any thrust industry as defined in paragraph (xiii)
exporting not less than ninety per centum of its output provided it makes an
additional investment of not less than Rupees 50 Million and currently it is
not enjoying a tax exemption period.
(b) where such enterprise makes an additional investment of any sum of such
value as is specified in Column I below, the provisions of the Inland Revenue
Act, No. 28 of 1979 relating to the impositions, payment and recovery of
income tax in respect of the profits and income of such enterprise, shall notapply for the period specified in the corresponding entries in Column II
below:
The said period shall be reckoned from the date on which the enterprise makes it first
commercial export or production as the case may be, after the additional investment ismade:-
COLUMN I COLUMN II
Value of Additional Investment Period of Exemption
(a) Not less than Rupees
1,500 Million to Rupees
2,499 MillionTwelve (12) years
(b) Not less than Rupees
2,500 Million to Rupees4,999 MillionFifteen (15) years
(c) Above Rupees 5,000 Million Twenty (20) years
(xiii) that any new enterprise or existing en terprise which has entered into an agreement
with the Board under Section 17, which is engaged in any thrust industry and which
makes an additional investment as specified in paragraphs (x), (xi) and (xii) above,
shall upon the expiration of the period of exemption originally granted in terms of thesaid paragraph, be charged with income tax in respect of the profits and income of
such enterprise at the rate of fifteen per centum for the corresponding extended
periods set out in Column II below, in relation to the original periods of exemptions
set out in Column I below, provided that su ch enterprise exports not less than ninety
per centum from its output:-
COLUMN I COLUMN II
Original period of Exemption Extended period at 15%
(a) 10 years 10 years
(b) 12 years 8 years
(c) 15 years 5 yearsG/SCM/Q3/LKA/10
Page 35
for the above purposes of Paragraphs (x), (xi), (xii) and (xiii), a thrust industry means
any new enterprise or existing enterprise which has entered into an agreement with
the Board under Section 17, which is carrying or proposing to carry on, as the case
may be, any one or more of the following businesses:-
(a) electronics and components for electronic assembling;(b) ceramics and glassware manufacture;(c) rubber based industries;(d) light and heavy engineering industry;
(e) any manufacturing or service industry of a pioneering nature as
determined by the Board.
(xiv) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for a period of five (5)years, in respect of the profits and income of any new enterprise which is engaged in
the development of software for commercial purposes and undertakes software
training, if such enterprise employs not less than twenty-five (25) technically
qualified local persons.
The said period of five (5) years shall be extended to eight (8) years if such enterprise
during its first five (5) years of commercial operation exports seventy per centum of
its output.
The said period shall be reckoned from the date of commencement of commercial
operation by the enterprise.
(xv) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for a period of
eight (8) years in respect of an existing enterprise which has entered into anagreement with the Board under section 17 and is engaged in the development of
software for commercial purposes and is exporting not less than seventy per centum
of its output.  The said period shall be reckoned from the date of the signing of a
supplementary agreement incorporating or embodying the above provision.
(xvi) that the provisions of the Inland Revenue Act No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period often (10) years in respect of the profits and income of a new enterprise which is
engaged in the construction and operation of a hospital on a two-tier basis i.e. one tier
dedicated to free health care service for the poor with indoor and outdoor facilities
and the other as a fee-based emergency health care service with an investment of not
less than Rupees 75 Million if the hospital is located in the District of Colombo or aninvestment of not less than Rupees 50 Million if it is located in a rural area.
The said period shall be reckoned from the year of assessment in which such
enterprise first commences to make a profit.
(xvii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period of
ten (10) years in respect of the profits and income of any new enterprise which
undertakes the construction of not less than one hundred (100) housing units with anG/SCM/Q3/LKA/10
Page 36
investment of not less than Rupees 100 Million for sale or lease in not more than three
(3) locations.  The said period shall be reckoned from the date on which the enterprise
effects its first commercial sale or lease of a housing unit.
(xviii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period ofseven (7) years in respect of the profits and income of any enterprise which
undertakes the construction of not less than one hundred (100) housing units with a
minimum of Rupees 50 Million for sale or lease in not more than three (3) locations.
The said periods shall be reckoned from the date on which the enterprise effects its
first commercial sale or lease of a housing unit.
(xix) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a minimum
period of twenty (20) years, which may be further extended by the Board, where in
the opinion of the Board the circumstances justify such extension, in respect of the
profits and income of a new enterprise which is engaged in the manufacture of
jewellery, cutting and polishing of gems and diamonds with a minimum investmentnot less than Rupees 10 Million and is exporting not less than seventy per centum of
its output.  The said period shall be reckoned from the date on which such enterprise
effects its first commercial export.
The said period of tax exemption shall be granted to an existing enterprise, which has
entered into an agreement with the Board under Section 17 of the Law or otherwise,
and is currently engaged in the manufacture of jewellery, cutting and polishing of
gems and diamonds, if it makes an additional investment of Rupees 5 Million and
exports not less than seventy per centum from its output.  The said period shall be
reckoned from the date on which the agreement under Section 17 of the Law, wasentered into.
(xx) That the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for a minimum period
of twenty (20) years, which may be further extended by the Board where in theopinion of the Board the circumstances justify such extension, in respect of the profits
and income of a new enterprise which is engaged in the trading of gems, diamonds
and gold if such enterprise receives at least ninety per centum of its income in a
convertible foreign currency.  The said period shall be reckoned from the date on
which the enterprise effects its first sale.
(xxi) That the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period of
five (5) years, in respect of the profits and income of a new enterprise which
undertakes to provide a transport service to employees to and from the Export
Processing Zones.  Such enterprise shall engage not less than ten (10) new forty-
seater buses for this purpose.
The period shall be reckoned from the date on which such enterprise commences its
commercial operations.
(xxii) That the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for an additional
period of one (1) year in respect of the profit and income of an existing enterprise
which has entered into an agreement with the Board under Section 17 and which hasG/SCM/Q3/LKA/10
Page 37
an unexpired tax exemption period:  provided such enterprise undertakes to provide
transport to its employees.  Such enterprise, shall purchase and use for the purpose:
(a) not less than 5 new forty-seater buses if located in an Export Processing Zone;
or
(b) not less than 3 new forty-seater buses if located in an difficult area;  or
(c) not less than 2 new forty-seater buses if located in a most difficult area.The said additional period shall be reckoned from the date on which the original tax
exemption period is due to expire.
(xxiii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition payment and recovery of income tax shall not apply for a period of five (5)
years in respect of the profits and income of a new enterprise which is established or
incorporated in Sri Lanka as a regional operating head quarters for the purpose of
managing the businesses of two or more companies established outside Sri Lanka andproviding any two or more of the under-mentioned services to such off-shore
companies:
(a) administration business planning and co-ordination;
(b) sourcing of raw materials and components;
(c) research and development services;(d) technical support services;(e) financial and treasury management;(f) marketing and sales promotion.
The said period shall be reckoned from the dates on which such enterprise
commences its commercial operation.
(xxiv) for the purpose of paragraph (i)-(xxiii) "difficult area" and "most difficult area" shall
be the areas designated as such by the Board for the purposes of this regulation.
3. No exemptions or modifications, in terms of the under-mentioned provisions of the Gazetted
regulations set out below shall, after 1 January 1998, be granted by the Board to any new enterprise,
unless prior to the above date, a letter of approval has been issued by the Board to such enterprise:-
(a) In the Board of Investment of Sri Lanka Regulation No. 1 of 1995 published in
Gazette Extraordinary  No. 896/17 of 10 November 1995:-
(i) subparagraphs (a), (b) and (c) of paragraph (i) of regulation (2) thereof;
(ii) subparagraph (b) of paragraph (ii) of regulation (2) thereof;  and
(iii) for housing projects in terms of paragraph (iii) of regulation (2) thereof.G/SCM/Q3/LKA/10
Page 38
(b) In the Board of Investment of Sri Lanka Regulation No. 1 of 1994 published in
Gazette Extraordinary  No. 813/21 of 8 April 1994, subparagraphs (a) and (b) of
paragraph (iv) of regulation (2) thereof.
4. In respect of the sale of all finished products in Sri Lanka by an enterprise referred to in the
above regulations, there shall be levied custom duties as are for the time being in force, under
Section 10 of the Customs Ordinance, on all articles which being raw materials had been imported into Sri Lanka by the enterprise free from custom duty and which are used in the manufacture
production and processing of such fini shed products or a component thereof.
_______________
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of
Sri Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic Socialist
Republic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
17 March 1998       President
Regulation
The Board of Investment of Sri Lanka Regulations, No. 1 of 1995 published in Gazette
Extraordinary  No. 896/17 of 10 November 1995, as last amended by regulation published in Gazette
Extraordinary  No. 969/10 of 1 April 1997, is hereby further amended as follows:-
1. by the insertion, immediately after the proviso to paragraph (iv) of regulation 2 of the
following new paragraph:-
"Provided further, that the provisions of paragraph (iv) above shall, (on a case by case basis)
apply to an enterprise which carries on the business of exploration, development, mining of
phosphatic rocks in Sri Lanka and processing of such minerals into commodities for sale.  In the case
of such an enterprise, the Board, where the circumst ances justify it so doing grant to such enterprises
either the tax concessions applicable under paragraph (iv) above or the tax concessions set out inparagraphs (a) and (b) below:-
(a) that such an enterprise shall be charged with income tax in respect of profits and
income of the enterprise at a rate, not less than five per centum (5%), which shall
however not exceed the corporate rate of in come for the time bein g in force, for any
year of assessment for a period not exceeding 12 years, reckoned from the date on
which such enterprise effects its first export or commences its commercial operation;and
(b) that such an enterprise shall be charged with income tax at a rate not exceeding
fifteen per centum (15%) on the taxable income for a period of 10 years immediately
succeeding the last date of the years for which profits and income of the enterprise is
charged at the rate mentioned in (a) above.
In the ascertainment of the taxable income for any year of assessment during the
periods referred to above, such enterprise  shall be entitled to deduct the following,
from the taxable income;-G/SCM/Q3/LKA/10
Page 39
(i) an amount equivalent to the monies remitted to the special Fund required to
be maintained by the enterprise for environmental restoration purposes and
the interest accrued thereto by that Fund;  and
(ii) a further amount not exceeding ten per centum (10%) on the taxable income,
if the Board so determines.
A year of assessment for the above purpose, shall be reckoned so as to
include the period of twelve months from first day of January of any year to
the thirty-first day of December of the year".G/SCM/Q3/LKA/10
Page 40
ANNEX VIII-F
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
31 July 1998       President
Regulations
The Board of Investment of Sri Lanka Regulations, No. 1 of 1998 published in Gazette
Extraordinary  No. 1019/13 of 19 March 1998 is hereby amended as follows:-
1. in regulation 2 thereof:-
(a) by the substitution for paragraph (iii) of that regulation of the following regulation:-
(iii) that an existing enterprise which has entered into an agreement with the
Board under Section 17, or a new enterprise referred to in paragraph (ii)
above which makes an additional investment as specified therein, shall upon
the expiration of the period of exemption originally granted in terms of the
said paragraph and provided that such enterprise which is engaged in themanufacture of cement, steel or textile manufacturing or the textile
processing industry, exports not less than ninety per centum (90%) of its
output, and in the case of any other industry as may be determined by the
Minister, be charged with income tax in respect of the profits and income of
such enterprise at the rate of fifteen per centum (15%) for the correspondingextended periods set out in Column II below, in relation to the original
periods of exemption set out in Column I below:
COLUMN I COLUMN II
Original period of Exemption Extended period at 15%
(a) 10 years 10 years
(b) 12 years 8 years
(c) 15 years 5 years
(b) in paragraph (xi) of that regulation:-
(i) by the insertion, immediately after the subparagraph (a) of paragraph (xi) of
that regulation, the following:-
"The said period shall be reckoned from the date on which the enterprises
reach the applicable export requirement referred to above";  and
(ii) in subparagraph (b) by the substitution for the words "Rupees 50 million.
Further, where such existing enterprise" of the words "Rupees 50 million, andit is currently enjoying a tax exemption period.  Further, where such existing
enterprise referred to in (a) or (b) above";G/SCM/Q3/LKA/10
Page 41
(c) by the substitution in subparagraph (b) of paragraph (xiii) of that regulation, for the
words "ceramics and glassware manufacture";  of the words "ceramics, glassware and
mineral based products manufacture":
(d) by the repeal of paragraphs (xxi) and (xxii) of that regulation and substitution therefor
for the following paragraphs:
"(xxi)  that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of five (5) years, in respect of the profits and income of a new enterprise
which provides transport services to employees to and from the Export
Processing Zones or Industrial Parks, or both such zones or parks as the case
may be, by engaging new buses where the total seating capacity of such buses
shall not be less than for 400 persons.
The said period shall be reckoned from the date on which such enterprise commences
its commercial operations.
(xxii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply in respect ofprofits and income of any existing enterprise which has entered into an
agreement with the Board under Section 17 for  a period specified in
Column I below provided that such enterprise commences to provide
transport facilities to employees from a date not later than 31 December 1998
satisfying the criteria on the minimum number of employees and seatingcapacities of buses in the corresponding Columns II and III mentioned below:
Provided further that such enterprise shall purchase such number of buses
corresponding to the minimum seating capacity and provide transport facilities to
such minimum number of employees for a co ntinuous period of not less than 5 years
by using such buses.
COLUMN I COLUMN II COLUMN III
Period of exemption Minimum seating
capacity of busesMinimum No. of
employees of the
factory
1 year 200    300
2 years 400    600
3 years 700 1,200
The said period shall be reckoned from the date on which the original tax exemption
period of enterprise has expired or is due to expire";
(b) by the addition, immediately after paragraph (xxiv) of that regulation, of the
following new paragraphs:
"(xxv) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of five (5) years in respect of the profits and income of a new enterprise
which is engaged in carrying on any one or more of the following
undertakings which shall be located outside the District of Colombo investing
not less than Rupees 2.5 million in the undertaking:G/SCM/Q3/LKA/10
Page 42
(a) an undertaking for dairy and livestock development;
(b) an undertaking for cultivating land with any plants of whatever
description other than tea, rubber, coconut or paddy;
(c) an undertaking for carrying on any activity referred to above and for
processing the product of such activity;  and
(d) an undertaking for collection and storage whether dry or cold, of such
domestic produce.
The said period shall be reckoned from the date of commencement of the
business of such enterprise:
Provided that such enterprise exports not less than fifty per centum (50%) out
of its output or production, such enterprise shall for a period of fifteen (15)
years immediately succeeding the last date of that year for which the profits
and income of the enterprise is exempted from income tax, be charged withincome tax in respect of the profits and income of the enterprise at the rate of
fifteen per centum (15%).
(xxvi) that provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a periodof ten (10) years in respect of the profits and income of a new enterprise
which shall engage in any undertaking in agriculture, dairy and livestock
development investing not less than Rupees 10 million and employing not
less than 20 local persons and utilizing a minimum of cultivation area of
five (5) hectares of land.
The said period shall be reckoned from the date of commencement of the
business of such enterprise.
Provided that such enterprise exports not less than fifty per centum (50%) out
of its output or production, such enterprise shall for a period of ten (10) years
immediately succeeding the last date of that year for which the profits and
income of the enterprise is exempted from income tax, be charged with
income tax in respect of the profits and income of the enterprise at the rate of
fifteen per centum (15%).
(xxvii) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of ten (10) years of an existing which has entered into an agreement with the
Board under Section 17 or a new enterprise which is engaged in the export of
locally procured fresh and processed fruits or vegetables and exports not less
than fifty per centum (50%) from its production or procurement, investmentnot less than Rupees 2.5 Million.  Such enterprise shall employ not less than
20 local persons and utilize a minimum of cultivation area of 5 hectares of
land for the undertaking.
The said period shall be reckoned from the date on which the enterprise
makes its first commercial export.
Such enterprise, for a period of ten (10) years immediately succeeding the
last date of that year for which the profits and income of the enterprise isG/SCM/Q3/LKA/10
Page 43
exempted from income tax, shall be charged with income tax in respect of the
profits and income of the enterprise at the rate of fifteen per centum (15%).
(xxviii) that the provisions of Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period
of five (5) years in respect of a new enterprise which is engaged in themarketing of agricultural products or commodities for export of not less than
ninety per centum (90%) of its local purchases.
The said period shall be reckoned from the first commercial export.Such enterprise, for a period of fifteen (15) years immediately succeeding the
last date of that year for which the profits and income of the enterprise isexempted from the income tax, shall be charged with income tax in respect of
the profits and income of the enterprise at the rate of fifteen per centum
(15%).
(xxix) for each year of assessment during the period specified below immediately
succeeding the last date of that year in which the profits and income of an
enterprise is exempted from income ta x under paragraph (v), (vi), (vii), (ix),
(x) (a), (ix) (a), (xi) (a), (xii) (a), (x iv) and (xv) above, such enterprise shall be
charged with income tax at the rate of fifteen per centum (15%).
(a) for a period of 15 years in respect of an enterprise which is exempted
from income tax for a period of 5 years;  or
(b) for a period of 12 years in respect of an enterprise which is exempted
from income tax for a period of 8 years;  or
(c) for a period of 10 years in respect of an enterprise which is exempted
from income tax for a period of 10 years;  or
(d) for a period of 5 years in respect of an enterprise which is exempted
from income tax for period of 15 years."
_______________
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the President under Section 24 of the Board of Investment of
Sri Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic Socialist
Republic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
30 June 1998     President
Regulations
The Board of Investment of Sri Lanka Regulations, No. 1 of 1995 published in Gazette
Extraordinary  No. 896/17 of 10 November 1995 as last amended by regulation published in Gazette
Extraordinary  No. 1019/13 of 19 March 1998, is hereby further amended by the insertion,G/SCM/Q3/LKA/10
Page 44
immediately after the second proviso to paragraph (iv) of regulation 2 of that regulation of the
following:-
"For the avoidance of doubts it is hereby declared that an enterprise subject to the tax
concessions set out in paragraphs (a) and (b) above, shall not be required to export ninety per centum
of its output."G/SCM/Q3/LKA/10
Page 45
ANNEX VIII-G
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATION made by the President under Section 24 of the Board of Investment of
Sri Lanka, Law No. 4 of 1978 read with Article 44 (2) of the Constitution of the Democratic SocialistRepublic of Sri Lanka.
Colombo          Chandrika Bandaranaike Kumaratunga
26 February 1999       President
Regulations
The Board of Investment of Sri Lanka Regulations, No. 1 of 1998 published in  Gazette
Extraordinary  No. 1019/13 of 19 March 1998, as last amended by Regulations published in Gazette
Extraordinary  No. 1040/3 of 10 August 1998, is hereby further amended in regulation 2 thereof as
follows:
1. by the addition at the end of paragraph (i), of that regulation of the following proviso:
"Provided that where such enterprise does not achieve the aforesaid export target, such
enterprise shall be charged with income tax in respec t of the profits and income of the enterprise at the
rate of fifteen (15) per centum for any year of assessment reckoned from the date on which the
agreement under section 17 of the Law was entered into";
2. by the substitution in subparagraph (a) of paragraph (v) of that regulation, for the words and
figures "on or before 31 December 1998", of the words and figures "on or before 31 December 1999";
3. by the substitution in paragraph (vi) of that regulation, for the words and figures "on or before
31 December 1998", of the words and figures "on before 31 December 1999";
4. by the substitution in paragraph (vii) of that regulation, for the words and figures "on or
before 31 December 1998", of the words and figures "on before 31 December 1999";
5. by the substitution in paragraph (viii) of that regulation, for the words and figures "on or
before 31 December 1998", of the words and figures "on before 31 December 1999";
6. by the substitution in paragraph (xxii) of that regulation, for the words and figures "not later
than 31 December 1998", of the words and figures "not later than 31 December 1999";  and
7. by the addition, immediately after  paragraph (xxix) of that regulation, of the following new
paragraph:
"(xxx) that the provisions of the Inland Revenue Act, No. 28 of 1979 relating to the
imposition, payment and recovery of income tax shall not apply for a period of
five (5) years in respect of the profits and income of an enterprise which establishes a
training institute to provide training for a minimum of three hundred (300) personsannually or such other number of persons as determined by the Board.
(a) in priority sectors including garments, gems and jewellery or electronics;
(b) in the field of computer software;G/SCM/Q3/LKA/10
Page 46
Provided that the minimum investment of the enterprise in this field should not be
less than Rupees fifteen (15) Million.
The said period shall be reckoned from the date on which the enterprise commences
its commercial operations or such later date as the Board shall specify taking into
consideration the circumstances of each case.
Such enterprise shall, for a period of fi fteen (15) years immediately succeeding the
last date of that year for which the profits and income of the enterprise is exempted
from the income tax, be charged with income tax in respect of the profits and income
of the enterprise at the rate of fifteen per centum (15%).G/SCM/Q3/LKA/10
Page 47
ANNEX VIII-H
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Trade, Industrial Development and Rural
Industries under Section 24 of the Board of In vestment of Sri Lanka, Law No. 4 of 1978.
Colombo    Ronnie de Mel
24 November 2001         Minister of Trade, Industrial
    Development and Rural Industries
Regulation
The Board of Investment of Sri Lanka Regulations, No. 1 of 1998 published in Gazette
Extraordinary  No. 1019/13 of 19 March 1998, as last amended by Regulations published in Gazette
Extraordinary  No. 1084/15 of 17 June 1999, are hereby further amended in regulation 2 thereof by
the insertion, immediately after paragraph (xxx) of that regulation, of the following new paragraph:
"(xxxi) that any undertaking, registered with and serviced by, the Ministry of the Minister in
charge of the subject of Industrial Development and which is carrying on the business of a
manufacture and export of apparels and textile pro ducts with a minimum of fifty (50) employees may
enter into an agreement in terms of Section 17 of the Board of Investment of  Sri Lanka Law, No. 4 of
1978 with the Board.  Such an agreement may embody or incorporate the provisions of paragraphs(vi), (vii) an (ix) of regulation 2 of the Regulation No. 1 of 1978 published in Gazette
Extraordinary No. 8/2 of 31 October 1978.
The inclusion of the above exemptions or modifi cations in an agreement, shall not in anyway
prejudice the right of any enterprise, of enjoying any benefit or privilege accorded to it under theprovisions of any other written law."G/SCM/Q3/LKA/10
Page 48
ANNEX VIII-I
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Enterprise Development, Industrial Policy,
Investment Promotion and Constit utional Affairs under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978.
Colombo     G.L. Peiris
6 June 2002          Minister of Enterprise Development, Industrial Policy
Investment Promotion a nd Constitutional Affairs
Regulations
1. These Regulations may be cited as the Board of Investment of Sri Lanka regulations, No. 1 of
2002.
2. The Board of Investment of Sri Lanka establis hed by the Board of Investment of Sri Lanka
Law, No. 4 of 1978 (hereinafter referred to as "the Board") may, in addition to anything contained inthe provisions of any prevailing regulations made by the Board, where it considers it necessary so to
do, incorporate in any agreement entered into with an enterprise under Section 17 of the said Law, any
one of the following provisions:
(i) that for a period of three (3) years, the provisions of the Inland Revenue Act, No. 38
of 2000 relating to the imposition, payment and recovery of income tax in respectprofits and income shall not apply to the profits and income of:
(a) a new enterprise, which is engaged, in the manufacture of goods for export
including deem export non-traditional goods or export of services where an
enterprise engaged in the manufacture for export of non-traditional goodsthere shall be a minimum investment of not less than Rupees 50 Million and
export not less than eighty per cent (80%) of its output.  Where an enterprise
engaged in export of services it shall receive not less than seventy per cent
(70%) of its turnover in convertible foreign currency;  or
(b) a new enterprise, which is established or incorporated in Sri Lanka, as a
regional operating headquarters for the purpose of managing the business, of
two or more offshore companies established outside Sri Lanka and providing
any two or more of the under-mentioned services to such offshore companies:
(a) administration, business planning and co-ordination;
(b) sourcing of raw materials and components;
(c) research and development services;
(d) technical support services;
(e) financial and treasury management;  and
(f) marketing and sales promotion.G/SCM/Q3/LKA/10
Page 49
Profits and income of such enterprise shall mean dividends received from
such offshore companies.
(c) a new enterprise which is engaged in agriculture and agro-processing or
either of them including trade corps, with an investment of not less than
Rupees five (5) Million;  or
(d) a new enterprise which is engaged in the provision of information technology
and information technology enables services employing not less than fifteen
(15) technically qualified persons or in the establishments of information
technology related training providing training to students of not less than 30
per annum;  or
(e) a new enterprise which is engaged in the manufacture of electronic products
with an investment of less than Rupees  fifty (50) Million and export of not
less than eighty per cent (80%) of such products;  or
(f) a new enterprise which is engaged in the industrial and machine tool
manufacturing with an investment of not less than Rupees fifty (50) Million;
or
(g) a new enterprise which is engaged in any designated industries with an
investment of not less than Rupees fifty (50) Million employing not less than50 local persons and export of not less than eighty per cent (80%) of its
products;  or
(h) a new enterprise which is engaged in an activity relating to small scale
infrastructure project in power generation, tourism and recreation,warehousing and cold storage with an investment of not less than Rupees
fifty (50) Million;  or
(i) a new enterprise which is engaged in any industrial, agricultural and service
industry or any other business activity as may be approved by the Minister, inwhich the investment is in excess of Rupees five hundred (500) Million.
The period of three (3) years referred to above shall be reckoned from the
year of assessment which the enterprise commences commercial operation or
production.
In respect of any such enterprise, for a further period of two (2) years
immediately succeeding the date of that year in which the profits and income
of the enterprise is exempted from income tax as above shall be charged with
an income tax in respect of the profits and income of the enterprise at the rate
of ten per cent (10%) and thereafter such an enterprise, other than an
enterprise which is engaged in export-oriented industry and agriculture, shallbe chargeable with an income tax at the rate of twenty per cent (20%).  In the
case of an enterprise which is engaged in the export oriented industry and
agriculture shall be chargeable with income tax at the rate of fifteen per
cent (15%).
(ii) that the provisions of the Inland Revenue Act, No. 38 of 2000 relating to the
imposition, payment and recovery of income tax shall not apply to the profits and
income for a period specified in Column II below reckoned from the commencement
of the commercial operation or production of any new enterprise which is engaged inG/SCM/Q3/LKA/10
Page 50
a pioneering investment projects in designated areas with an investment of such value
as is specified in Column I below within a period as may be specified by the Board:
COLUMN I COLUMN II
Minimum investment of
(SL Rs Mil.)Full tax holiday
(No. of years)
     1,250-2,499  5
     2,500-4,999  8
     Above 5,000 10
In respect of any such enterprise immediately succeeding the last date of that year in
which profits and income of the enterprise is exempt from income tax for any periodreferred to in Column II above, shall be charged with an income tax in respect of the
profits and income of the enterprise at the rate of fifteen per cent (15%) thereafter.
3. Notwithstanding anything to the contrary contai ned in any previous regulations, no exemption
or variations from the provisions of the Inland Revenue Act, No. 38 of 2000 shall be granted to anyproject approved by the Board on or after 1 April 2002, other than in accordance with the provisions
of these regulations.
4. For the purposes of this regulation:
"non-traditional goods" means goods other than bl ack tea in bulk, crepe rubber, sheet rubber,
scrap rubber, coconut oil, desiccated coconut (other than desiccated coconut manufactured byusing continuous scale automated process technology and marketed with a quality guarantee),
copra, fresh coconuts, coconut fibre or such other commodity as may be determined by the
Board;
"agriculture" means cultivation of land with plants of any description excluding tea and
rearing of fish;
"information technology enabled services" includes call centres or contact centres,
transcription (data entry), data centres, hosting centres, e-governance related projects;
"designated industries" means an undertaking engaged in the manufacture of ceramics,
glassware, and other mineral based industries, rubber based industries, light and heavy
engineering industries;
"pioneering investment projects in designated areas" includes an undertaking in any activity
relating to power generation, transmission and distribution and development of highways, sea-
ports and airports, railways, water services or any other infrastructure projects.
5. In respect of the sale of all finished products in Sri Lanka by any enterprise referred to in
subparagraph (f) of paragraph (i) of Regulation 2 of these regulations there shall be levied custom
duties under Section 10 of the Customs Ordinance, in all articles which being raw materials had been
imported into Sri Lanka by the enterprises free of custom duty and which are used in the manufacture,production or processing of such fini shed products or a component thereof.
_______________G/SCM/Q3/LKA/10
Page 51
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Enterprise Development, Industrial Policy,
Investment Promotion and Constit utional Affairs under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978.
Colombo     G.L. Peiris
26 June 2002          Minister of Enterprise Development, Industrial Policy
Investment Promotion a nd Constitutional Affairs
Regulation
The Board of Investment of Sri Lanka Regulations, No. 1 of 1978 published in  Gazette
Extraordinary  No. 8/2 of 31 October 1978, as last amended by Regulations published in Gazette
Extraordinary  No. 813/21 of 8 April 1994 are hereby amended as follows:
1. in Regulation 2 thereof:
(a) by the substitution in paragraph (i) for the words and figures "the Inland Revenue
Act, No. 4 of 1963 or the Inland Revenue Act, No. 28 of 1979, as the case may be",
of the words and figures "the Inland Revenue Act, No. 28 of 1979 or the Inland
Revenue Act, No. 38 of 2000, as the case may be,";
(b) by the substitution in paragraph (ii) for the words and figures "the Inland Revenue
Act, No. 4 of 1963 or the Inland Revenue Act, No. 28 of 1979, as the case may be",of the words and figures "the Inland Revenue Act, No. 28 of 1979 or the Inland
Revenue Act, No. 38 of 2000, as the case may be,";
(c) in subparagraph (c) of paragraph (iia) for the words and figures "the Inland Revenue
Act, No. 28 of 1979" of the words and figures "the Inland Revenue Act, No. 28 of
1979 or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(d) in subparagraph (c) of paragraph (i) for the words and figures "under Sections 70
or 71 of the Inland Revenue Act No. 4 of 1963 or under Sections 82 or 83 of the
Inland Revenue Act, No. 28 of 1979, as the case may be" of the words and figures
"under Sections 70 or 71 of the Inland Revenue Act, No. 4 of 1963 or under Sections
82 or 83 of the Inland Revenue Act, No. 28 of 1979 or under Section 92 of the InlandRevenue Act, No. 38 of 2000, as the case may be,";
2. in regulation 4 thereof for the words and figures "the Inland Revenue Act, No. 4 of 1963 or
the Inland Revenue Act, No. 28 of 1979, as the case may be", of the words and figures "the Inland
Revenue Act, No. 4 of 1963 or the Inland Revenue  Act, No. 28 of 1979 or the Inland Revenue Act,
No. 38 of 2000, as the case may be".
_______________G/SCM/Q3/LKA/10
Page 52
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Enterprise Development, Industrial Policy,
Investment Promotion and Constit utional Affairs under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978.
Colombo     G.L. Peiris
26 June 2002          Minister of Enterprise Development, Industrial Policy
Investment Promotion a nd Constitutional Affairs
Regulation
The Board of Investment of Sri Lanka Regulations, No. 1 of 1994 published in Gazette
Extraordinary  No. 813/21 of 8 April 1994 as last amended by Regulations published in Gazette
Extraordinary  No. 941/13 of 19 September 1996, is hereby further amended by the substitution in
Regulation 2 thereof, for the words and figures "the Inland Revenue Act, No. 28 of 1979", of the
words and figures "the Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No. 38
of 2000, as the case may be".
_______________
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Enterprise Development, Industrial Policy,
Investment Promotion and Constit utional Affairs under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978.
Colombo     G.L. Peiris
26 June 2002          Minister of Enterprise Development, Industrial Policy
Investment Promotion a nd Constitutional Affairs
Regulation
The Board of Investment of Sri Lanka Regulations, No.1 of 1995 published in Gazette
Extraordinary  No. 896/17 of 10 November 1995, as last amended by Regulations published in
Gazette Extraordinary  No. 1019/13 of 19 March 1998 are hereby further amended as follows:
1. in regulation 2 thereof:
(a) in proviso to paragraph (iii), by the addition, at the end thereof, of the words and
figures, "and for a solar power generation the investment shall be not less than
Rupees five Million (Rs 5 million)";
(b) by the substitution in paragraph (iv) for the words and figures "the Inland Revenue
Act, No. 28 of 1979" of the words and figures "the Inland Revenue Act, No. 28
of 1979 or the Inland Revenue Act, No. 38 of 2000, as the case may be,";  and
(c) by the insertion, immediately after paragraph (iv) thereof, of the following new
paragraph:G/SCM/Q3/LKA/10
Page 53
"notwithstanding anything stated in paragraph (iv) of Regulation 2 thereof, effective
from the date of publication of this amendment, that a new enterprise which is
engaged in an activity approved by the Board other than in the production or
manufacture for export of non-traditional products as defined in that regulation with
an investment of not less than Rupees five hundred Million (Rs 500 Million) up to
Rupees three thousand four hundred and nine ty-nine Million (Rs 3,499 Million) shall
be charged with an income tax at the rate of fifteen per centum (15%) for twenty (20)
years for any year of assessment in which the enterprise commences its commercial
operation.  Where such enterprise makes an investment in excess of Rupees three
thousand five hundred Million (Rs 3,500 Million) the enterprise shall be entitled to a
tax exemption period of ten (10) years reckoned from the date of commencement of
commercial operation.
In the case of an enterprise which engages in the manufacture or production for
export of non-traditional products as defined in that regulation the number of local
persons employed by the enterprise shall not be less than seventy-five (75)."
_______________
THE BOARD OF INVESTMENT OF SRI LANKA LAW NO. 4 OF 1978
REGULATIONS made by the Minister of Enterprise Development, Industrial Policy,
Investment Promotion and Constit utional Affairs under Section 24 of the Board of Investment of
Sri Lanka Law, No. 4 of 1978.
Colombo     G.L. Peiris
26 June 2002          Minister of Enterprise Development, Industrial Policy
Investment Promotion a nd Constitutional Affairs
Regulation
The Board of Investment of Sri Lanka Regulations, No.1 of 1998 published in Gazette
Extraordinary  No. 1019/13 of 19 March 1998, as last amended by Regulations published in Gazette
Extraordinary  No. 1084/15 of 17 June 1999 are hereby further amended as follows:
1. in regulation 2 thereof:
(a) by the substitution in paragraph (i) for the words and figures "the Inland Revenue
Act, No. 28 of 1979" of the words and figures "the Inland Revenue Act, No. 28 of
1979 or the Inland Revenue Act, No. 38 of 2000, as the case may be, ";
(b) by the repeal of paragraph (ii) and substitution therefor of the following paragraph:-
"(ii) that the provisions of the Inland Revenue Act, No. 38 of 2000 relating to the
imposition, payment and recovery of income tax in respect of the profits and income,
shall not apply in respect of an existing enterprise or a new enterprise which isformed by the acquisition of assets of any existing enterprise as may be approved by
the Board with the approval of the Minister in charge of the subject of Finance with
an additional investment of a sum of such value as is specified in Column I below,
for the period specified in the corresponding entry in Column II below.  The said
period shall be reckoned from the date on which the enterprise makes its firstG/SCM/Q3/LKA/10
Page 54
commercial export or production after the additional investment is made or such
other effective date as may be specified by the Board.
COLUMN I COLUMN II
Value of Additional Investment Period of Exemption
(a) not less than Rupees 500 million to Rupees 1,499 million ten (10) years
(b) not less than Rupees 1,500 million to Rupees 2,499 million twelve (12) years
(c) not less than Rupees 2,500 million to Rupees 4,999 million fifteen (15) years
(d) above Rupees 5,000 million twenty (20) years
Where any such enterprises which has been exempted from income tax for a period of
twenty (20) years in terms of item (d) of Column I above, within a period of
seven (7) years or such other extended period as may be authorized by the Board
reckoned from the date of commencement of the said tax exemption period, after
having invested not less than Rupees six thousand million (Rs 6000 Million) makes afurther investment of not less than Rupees  five hundred million (Rs 500 Million) such
enterprise shall be eligible for a further tax exemption period of five (5) years
reckoned from the date of the expiry of the aforesaid tax exemption period.";
(c) by the substitution in subparagraph (a) of paragraph (v) for the words and figures "the
Inland Revenue Act, No. 28 of 1979" and "on or before 31 December 1998"
respectively of the words and figures "the Inland Revenue Act, No. 28 of 1979 or the
Inland Revenue Act, No. 38 of 2000 as the case may be," and "on or before
30 June 2002" respectively;
(d) (i) in paragraph (ix) by the substitution in paragraph (ix) for the words and
figures "the Inland Revenue Act, No. 28 of 1979";  of the words and figures
"the Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No. 38
of 2000, as the case may be", and
(ii) by the addition immediately after that paragraph, of the following words:
"The provisions of this paragraph shall apply to projects which shall
commence commercial operations on or before 31 December 2001";
(e) by the substitution in subparagraphs (a) and (b) of paragraph (x) for the words and
figures "the Inland Revenue Act, No. 28 of 1979, respectively";  of the words and
figures "the Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No. 38
of 2000 as the case may be, respectively";
(f) by the substitution in subparagraphs (a) and (b) of paragraph (xi) for the words and
figures "the Inland Revenue Act, No. 28 of 1979, respectively";  of the words andfigures "the Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No. 38
of 2000 as the case may be, respectively";
(g) by the substitution in subparagraphs (a) and (b) of paragraph (xii) for the words and
figures "the Inland Revenue Act, No. 28 of 1979, respectively";  of the words and
figures "the Inland Revenue Act, No. 28 of 1979 or the Inland Revenue Act, No. 38of 2000 as the case may be, respectively";G/SCM/Q3/LKA/10
Page 55
(h) by the repeal of paragraph (xv) thereof and the substitution therefor of the following
paragraphs:
"(xv) (a) that where an enterprise which is engaged in the development of
software does not exports its output or export less than seventy per
centum (70%) of its output upon reaching a minimum turnover of
Rupees forty million (Rs 40 Million) of the enterprise per annum, theprovisions of the Inland Revenue Act, No. 38 of 2000 relating to
imposition, payment and recovery of income tax in respect of the
profits and income of the enterprise shall not apply for the enterprise
for a period of five (5) years reckoned from the year of the assessment
in which it reaches the minimum turnover limit or such other later
date as may be determined by the Board.  Provided where such
enterprise reaches the seventy per centum (70%) export limit withinthe above five (5) year period the tax exemption period of
five (5) years shall be extended to eight (8) years reckoned from the
year of assessment in which it reaches the minimum export
requirement or from the date of its first commercial export where
such enterprise reaches the minimum export requirement at the outset.
Provided that the provisions of subparagraph (xxix) of regulation 2
shall be applicable only to an enterprise which exports not less than
seventy per centum (70%) of its output.
(b) that where any new enterprise undertakes the provision of information
technology enables services call centres, medical transcription, web
farming, insurance claim processing, legal data base, data
warehousing, logistic management exclusively for export market the
provision of Inland Revenue Act, No. 38 of 2000 relating imposition,payment and recovery of income in respect of such enterprise shall
not apply for a period of five (5) years reckoned from the year of
assessment in which such enterprise makes its first export.";
(i) by the repeal of paragraph (xvi) thereof and the substitution therefor of the following
paragraph:
"(xvi) that where any new enterprise which is engaged in the construction and
operation of a hospital medical centre and has invested not less than
Rupees fifty million (Rs 50 Million) if located within limits of the Colombo
Municipal Council limits of Colombo or not less than Rupees twenty five
million (Rs 25 Million) if located in any other district, the provisions of the
Inland Revenue Act, No. 38 of 2000, relating to the imposition, payment andrecovery of income tax in respect of the profits and income of the enterprise
shall not apply for a period of ten (10) years to the profits and income of the
enterprise.
Provided that where a hospital is constructed on a land which has been
provided on concessional terms by the State or a state agency, such hospital
shall operate on a two tier basis i.e. one tier to be dedicated to free health care
service for the poor consisting of both indoor and outdoor facilities, and the
other tier to be operated as a fee based emergency health care service.
The period referred to above shall be reckoned from the date of
commencement of year of assessment in which such enterprise commencesG/SCM/Q3/LKA/10
Page 56
commercial operations and if such enterprise undertakes its operation of a
hospital on two tier basis the period shall be reckoned from the date of
commencement of the year of assessment in which the enterprise commences
to first make profit".
(j) by the repeal of paragraph (xvii) thereof and the substitution therefor of the following
paragraph:-
(xvii) (a) that where any new enterprise which is engaged in the construction
for sale or lease of not less than fifty (50) houses or flats constructed
in not more than three (3) locations and has invested not less than
Rupees fifty million (Rs 50 Million) in the construction, the
provisions of the Inland Revenue Act, No. 38 of 2000 relating to the
imposition, payment and recovery of income tax in respect of theprofits and income of the enterprise shall not apply for a period for
five (5) years to the profits and income of the enterprise.  The said
period shall be reckoned from the commencement of year of
assessment in which the enterprises commences its commercial
operations.
(b) that where any new enterprise which is engaged in the construction
for sale or lease of not less than three hundred (300) housing units in
not less than two (2) locations and has invested no less than Rupees
one hundred million (Rs 100 Million) in the construction, theprovisions of the Inland Revenue Act, No. 38 of 2000 relating to the
imposition, payment and recovery of income tax in respect of the
profits and income of the enterprise shall not apply for a period of
ten (10) years to the profits and income of the enterprise.  This period
shall be reckoned from the commencement of the year of assessmentin which the enterprise commences its commercial operations.
(c) that where any new enterprise which is engaged in the construction
for sale or lease of a housing cum mix development project with not
less than fifty (50) housing units and has invested not less thanRupees one hundred and twenty five million (Rs 125 M illion) in the
construction the provisions of the Inland Revenue Act, No. 38 of
2000 relating to the imposition, payment and recovery of income tax
in respect of the profits and income of the enterprise shall not apply
for a period of seven (7) years to the profits and income of the
enterprise.  This period shall be reckoned from the commencement of
year of assessment in which the enterprise commences commercialoperations.";
(k) by the substitution in paragraph (xix) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and figures "the Inland Revenue Act, No. 28 of
1979 or the Inland Revenue Act, No. 38 of 2000, as the case may be,":
(l) by the substitution in paragraph (xx) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(m) by the substitution in paragraph (xxi) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";G/SCM/Q3/LKA/10
Page 57
(n) by the substitution in paragraph (xx) for the words and figures "the Inland Revenue
Act, No. 28 of 1979" and "not later than 31 December 1999", of the words and
figures "Inland Revenue Act, No. 28 of  1979 or the Inland Revenue Act, No. 38 of
2000, as the case may be" and "not later than 31 December 2002" respectively,";
(o) by the substitution in paragraph (xxiii) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(p) by the substitution in paragraph (xxv) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(q) by the substitution in paragraph (xxvi) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(r) by the substitution in paragraph (xxvii) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(s) by the substitution in paragraph (xxviii) for the words and figures "the Inland
Revenue Act, No. 28 of 1979", of the words and figures "Inland Revenue Act, No. 28of 1979 or the Inland Revenue Act, No. 38 of 2000, as the case may be,";
(t) by the substitution in paragraph (xxx) for the words and figures "the Inland Revenue
Act, No. 28 of 1979", of the words and fi gures "Inland Revenue Act, No. 28 of 1979
or the Inland Revenue Act, No. 38 of 2000, as the case may be,".
2. The exemptions or modifications in terms of paragraphs (xix) and (xx) of regulation (2) of these
regulations shall not be granted by the Board in respect of projects for which applications have been
submitted after the publication of this regulation.
3. The number of local persons employed by the enterprise in projects referred to in
paragraphs (xxvi) and (xxvii) of regulation (2) thereof is hereby reduced to ten (10).G/SCM/Q3/LKA/10
Page 58
ANNEX IX
NATIONAL SECURITY LEVY (AMENDMENT) ACT, NO. 4 OF 2001
[Certified on 11 April 2001]
AN ACT TO AMEND THE NATIONAL SECURITY LEVY ACT, NO. 52 OF 1991;
AND TO PROVIDE FOR MATTERS CONNECTED THEREWITH
OR INCIDENTAL THERETO
1. This Act may be cited as the National Security Levy (Amendment) Act, No. 4 of 2001.
2. Section 3 of the National Security Levy Act, No. 52 of 1991, (hereinafter referred to as "the
principal enactment") as last amended by Act No. 24 of 2000 is hereby further amended in subsection
(2) of that section as follows:
(1) by the repeal of paragraphs (ff) and (fff) of that subsection, and the substitution, of the
following paragraph therefor:
(ff) the value of any ship or aircraft which is impor ted into Sri Lanka, if it is proved to the
satisfaction of the Commissioner-General of Inland Revenue that such ship or aircraft
is being used for international transportation of goods or passengers;
(2) in item A of paragraph (j) of that subsection:
(a) by the repeal of sub-paragraph (viii)  thereof, and the substitution therefor of the
following sub-paragraph:
"(viii) services of a construction contractor or sub-contractor for the construction of
any building, road, bridge, water supply, drainage or sewerage system,
harbour, airport or any infrastructure project in telecommunications or
electricity, not being:
(a) services for the supply of any material, plant, machinery or
equipment;  or
(b) professional or consultancy services.
for the purposes of, or in connection with, such construction";
(b) by the substitution, in sub-paragraph (xi) thereof, for the words and figures "No. 10 of
1972 or courier" of the words and figures "No. 10 of 1972, airline agent licensed
under regulations made under the Air Navigation (Special Provisions) Act, No. 55 of
1992 or courier";
(c) by the insertion immediately after sub-paragraph (xi) thereof, of the following new
sub-paragraphs:
"(xia) services of a port operator or port container terminal operator, provided at
any port;G/SCM/Q3/LKA/10
Page 59
(xib) services of a computer software developer  in respect of software developed
by such person for use wholly outside Sri Lanka and for which payment is
received in foreign currency through a bank;
(xic) services provided over the internet, using custom built software, by an
enterprise set up on or after 1 April 2001, exclusively for the provision ofsuch services being services enabling or facilitating the sale of goods, or for
the provision of services, by a person in Sri Lanka to persons outside
Sri Lanka, for payment in foreign currency;
(xid) client support services provided over the internet or telephone, by an
enterprise set up on or after 1 April 2001, exclusively for the provision of
such services, to one or more identified clients outside Sri Lanka, forpayment in foreign currency;"
(d) by the addition immediately after paragraph (k) thereof, of the following new
paragraph:
(l) the value of any aviation fuel imported for the use of any aircraft.
3. Section 4 of the principal enactment as last amended by Act No. 24 of 2000 is hereby
further amended as follows:
(1) in paragraph (k) of that section, by the substitution for the words and figures "for
every quarter commencing on or after 1 July 2000", of the words and figures "for
every quarter commencing on or after 1 July 2000 but prior to 1 April 2001";  and
(2) by the addition at the end of that section, of the following new paragraph:
"(l) for every quarter commencing on or after 1 April 2001:
(i) an amount equivalent to:
(A) seven and one half per centum  of the turnover of that person,
not being turnover referred to in item (B) of this sub-
paragraph;  and
(B) one half per centum  of the turnover of that person, arising
from the import or manufacture of any plant, machinery or
equipment, not being any motor car, motor coach or lorry,within the meaning of the Motor Traffic Act (Chapter 203),
for the first month of that quarter, on or before the fifteenth day of the second month
of that quarter;
(ii) an amount equivalent to:
(A) seven and one half per centum  of the turnover of that person,
not being turnover referred to in item (B) of this sub-
paragraph;  and
(B) one half per centum  of the turnover of that person, arising
from the import or manufacture of any plant, machinery orG/SCM/Q3/LKA/10
Page 60
equipment, not being any motor car, motor coach or lorry,
within the meaning of the Motor Traffic Act (Chapter 203),
for the second month of that quarter, on or before the fifteenth day of the third month
of that quarter;  and
(iii) the amount of the levy payable by such person for that quarter,
reduced by the aggregate of the amounts paid by him in accordance
with the provisions of sub-paragraph (i) and sub-paragraph (ii) of this
paragraph, on or before the fiftee nth day of the month immediately
succeeding that quarter.".
4. The Schedule to the principal enactment as last amended by Act No. 24 of 2000 is
hereby further amended as follows:
(1) in item 11 of that Schedule, by the substitution for the words and figures "on or after
1 July 2000", of the words and figures "on or after 1 July 2000 but prior to
1 April 2001";  and
(2) by the addition at the end of that Schedule, of the following item:
"(12) For every quarter commencing on or after 1 April 2001:
(i) on turnover other than turnover referred to in paragraph (ii) of this
item
7.5 per centum
(ii) on turnover arising from the import or manufacture of any plant,
machinery or equipment, not being a motor car, motor coach or lorry
within the meaning of the Motor Traffic Act (Chapter 203)
0.5 per centum ".
5. Where the Director-General of Customs collects during the period commencing on
1 April 2001, from an importer of an article not being plant, machinery or equipment, an amount in
excess of six and one half per centum  but not exceeding seven and one half per centum  of the value of
such article, such collection shall be deemed for all purposes to have been, and to be, validly made,
and the Director-General of Customs is hereby indemnified against all actions, civil or criminal, in
respect of such collection.
6.(1) Where a person to whom this Act applies is required by section 4 of the principal
enactment as amended by sections 3 and 4 of this Act, to pay any amount to the Commissioner-
General, in respect of any month or quarter, prior to the date on which this Act is certified as an Act of
parliament, such person shall be deemed for all purposes to have complied with the requirements ofthose sections, if he pays that amount to the Commissioner-General, within thirty days of the date on
which this Act is certified as an Act of Parliament.  Where such amount is not so paid, such amount
shall be deemed to be in default after the expirati on of thirty days from the date on which this Act is
certified as an Act of Parliament and such person shall be deemed to be a defaulter with effect from
that date.
(2) Where a person to whom this Act applies is required by section 4 of the principal
enactment as amended by sections 3 and 4 of this Act, to pay to the Commissioner-General in respect
of the period commencing on 1 April 2001 and ending on the date on which this Act is certified as anG/SCM/Q3/LKA/10
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Act of Parliament an amount in excess of six and one half per centum  of the turnover of that person
for that period, such person shall be deemed for all purposes, to have complied with the requirements
of that section, if he pays to the Commissioner-General, within thirty days of the date on which this
Act is certified as an Act of Parliament the difference between the amount he was required by
section 4 of the principal enactment as amended by sections 3 and 4 of this Act, to pay for that period,
and the amount paid by him for that period, as the case may be.  Where the difference is not so paid,such difference shall be deemed to be in default after the expiration of thirty days from the date on
which this Act is certified as an Act of Parliament and such person shall be deemed to be a defaulter
within the meaning of the principal enac tment, with effect from that date.
7. The amendment made to section 3 of the principal enactment by section 2 of this Act,
shall:
(a) in so far as the amendment relates to the repeal of paragraphs (ff) and (fff) of
subsection (2) of that section, be deemed for all purposes to have come into force on
1 April 2001;
(b) in so far as the amendment relates to sub-contractors be deemed, for the purposes, to
have come into force on 1 January 2001;
(c) in so far as the amendment relates to port operators and port container terminal
operators, be deemed, for all purposes, to have come into force on 15 February 2000;
(d) in so far as the amendment relates to computer software developers, be deemed for all
purposes to have come into force on 8 March 2001;
(e) in so far as the amendment relates to the im port of ships or aircrafts, be deemed for
all purposes, to have come into force on 1 January 1999;  and
(f) in so far as the amendment relates to the import of aviation fuel, be deemed, for all
purposes, to have come into force on 1 April 2001.
8. In the event of any inconsistency between the Sinhala and Tamil texts of this Act, the
Sinhala text shall prevail.
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