SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
with the potential for adjustments, penalties and even criminal proceedings in serious cases. 5.8 Tariffs Sri Lanka applies a range of ad valorem rates depending on the nature of the product, its use and its origin. Raw materials and essential capi - tal goods generally enjoy low or zero tariff rates, while finished consumer goods, especially those competing with local industries, are subject to higher rates. Tariffs on agricultural products, tex - tiles and apparel, and automobiles tend to be among the highest. These duties are designed to offer protection to domestic manufacturing, agriculture and assembly sectors, which are considered sensitive or strategically important to the national economy. In addition to basic customs duties, imports may attract other levies – such as the value added tax (VAT) at 18%, the port and airport develop - ment levy, excise duty (on selected goods such as liquor and vehicles) and the social security contribution levy at 2.5% – depending on the category of goods and importer status. Tariff preferences are available under various regional and bilateral trade agreements – includ - ing the South Asian Free Trade Area (SAFTA), the Indo-Sri Lanka Free Trade Agreement, and the Sri Lanka-Singapore Free Trade Agreement – through which reduced or zero duties may apply on qualifying goods. However, Sri Lanka main - tains a sensitive list under these treaties to retain tariff protection for key sectors. Global trade developments – such as shifting supply chains, currency volatility and rising pro - tectionism in other jurisdictions – have also influ - enced Sri Lanka’s customs and tariff policies. The government periodically reviews rates and trade concessions in response to these external
economic factors, as well as to manage foreign exchange outflows and support domestic pro - ducers. In 2025, the USA imposed a 44% tariff on Sri Lankan goods in retaliation for high import duties, threatening key export sectors such as apparel and rubber. In response, Sri Lanka is implementing a National Tariff Policy to simplify the system and gradually phase out para-tariffs, aiming to boost competitiveness and align with international trade norms amidst growing global and economic pressures. Sri Lanka does not impose any merger control notification thresholds based on revenue, market share or asset value, and there is no mandatory pre-merger notification requirement for private unlisted companies unless otherwise required by a sectoral regulator. Amalgamations and company mergers are regulated under the Companies Act, No 7 of 2007, which sets out procedural requirements for amalgamations, including court-supervised amalgamations. For listed companies, the SEC has issued the Takeovers and Mergers Code of 1995 (as amended), which requires prior notifi - cation to, and approval from, the SEC when an acquirer crosses specified shareholding thresh - olds in a listed company. Such transactions must also be disclosed to the Colombo Stock Exchange (CSE) in accordance with its rules. Separately, entities operating in regulated sec - tors – such as banking, insurance, finance and telecommunications – must obtain prior approv - al from the relevant regulator (including the Cen - 6. Competition Law 6.1 Merger Control Notification
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