Category: Daily Financial Times

LOLC Finance, Sri Lanka’s largest Non-Bank Financial Institution (NBFI), has announced the launch of its Exclusive Short-Term Fixed Deposits, offering 4-month and 7-month maturity options at some of the most attractive and competitive interest rates in the market.

Designed especially for Sri Lankans who work tirelessly to build and protect their savings, this new product delivers a powerful combination of stability, security, and stronger returns, backed by the most trusted financial entity in the industry.

LOLC Finance Head of Liability Management Roshani Weerasekera said: ‘These new Short-Term Fixed Deposits are designed to give Sri Lankans, especially hardworking families and small businesses, the confidence that their money is in the safest hands, while earning higher returns in a short period. Your hard-earned wealth deserves a home that understands its value, and at LOLC Finance, we are fully committed to safeguarding it and helping it grow.’

‘As Sri Lanka’s largest and most loved NBFI, LOLC Finance has earned the trust of millions by consistently delivering financial empowerment, reliability, and value. Today, we operate on par with leading banks, and we take immense pride in being the institution our customers trust to protect their life savings,’ she added.

As the country’s leading NBFI, LOLC Finance continues to demonstrate strength, resilience, and proven expertise in managing customer wealth responsibly. For the FY 2024/25, the company recorded a Profit After Tax (PAT) of Rs.25.1 billion and has already achieved Rs.14 billion PAT in the first half of FY 2025/26, a remarkable 72% year-on-year growth, indicating that the company is on track to surpass last year’s performance well before the financial year ends. Reinforcing this exceptional trajectory, LOLC Finance maintains a gross lending portfolio of Rs.360.2 billion, while customer deposits have grown to Rs.238.6 billion as at 30 September 2025.

The company’s financial strength reflects the consistent, unbroken trust and loyalty of its customers, a testament to the strong brand equity LOLC Finance has built over its two decades of leadership within Sri Lanka’s financial services landscape. With 30.3% of total industry equity, 20.6% of industry assets, and 36.3% of total industry profits, LOLC Finance stands firmly at the top of Sri Lanka’s NBFI sector, not just as the largest player, but as the most reliable partner for communities striving to safeguard and grow their hard-earned money. LOLC Finance is rated A+ (Stable) by Lanka Rating Agency, reaffirming its financial stability, robust governance, and its commitment to managing customer funds with integrity and reliability.

With the launch of the Exclusive Short-Term Fixed Deposits, LOLC Finance continues its mission to uplift grassroots communities and MSMEs by providing secure, rewarding, and responsible financial solutions. Backed by unmatched financial strength and industry-leading performance, customers can invest with confidence, knowing their future is safeguarded by Sri Lanka’s most trusted financial partner.

A group of political activists last week sent a petition to President Anura Kumara Dissanayake about the lack of recourse for women who are subjected to violence. The petition was signed by more than 100 women from various professional and other backgrounds. The crux of their frustration was that the National Commission on Women (NCW), mandated to safeguard and protect the rights of Sri Lankan women from discrimination and violence, was still not functional to deal with the numerous incidents of violence women are confronted with at home, the workplace and other public spaces including online platforms.

The NCW was set up last year under the Women’s Empowerment Act No 37 of 2024. Despite its designation as an independent commission, the NCW comes under the purview of the Ministry of Women and Child Affairs. The Constitutional Council called for applications and/or nominations to fill its seven member positions by 20 January 2025. Although some of these members have been appointed, it is unclear from the Ministry website if all the positions have been filled. The NCW’s functions which include receiving and investigating complaints about violence against women, appear to be stuck without a budget, an independent office and human and other resources.

Gender based hate speech is increasingly coming to light. In the past months a barrage of online and offline verbal abuse targeting the Prime Minister’s appearance, attire, sexual orientation and competence to hold her current portfolios have been building up. The trending onslaught, an errant entry in a Grade 6 English textbook which is a part of the national curricular undergoing reform and purported to have had details of a gay and lesbian website, has resulted in a no confidence motion against the Prime Minister. Historically, there have been instances where women Members of Parliament have been verbally abused during parliamentary sessions by their male counterparts who have humiliated and belittled them in language with sexual and gender undertones. Last year, Ramanathan Archchuna, a Jaffna District MP notorious for his unbecoming behaviour in Parliament, called a female lawyer (not a MP) a prostitute.

In the run up to the presidential and parliamentary elections of 2024, the National People’s Power mobilised women under the banner Gahanu Api Eka Mitata to build one of the biggest women’s movements in the country. It underscored the NPP’s vision to mainstream women’s politics in keeping with its manifesto pledge to create a society where women, who represent half of the country’s population, enjoy equal rights, free from physical, verbal and emotional violence. The manifesto went on to state that the NPP’s priority will be to uphold and introduce laws in alignment with international charters it has already signed and establish protection mechanisms, leading to the transformation of attitudes and institutional changes.

A part of this drive will be to operationalise the NCW as soon as possible without it being damned into the litter bin as another lip service project. The petition reminds the President that the NCW came about from the struggles of women, a point signifying the people’s ownership of it and the Government’s accountability for it.

Carson Cumberbatch PLC and Bukit Darah PLC have issued their latest response to the Indonesian Government’s plans to nationalise its palm oil plantation.

The update is a follow up to the Announcement dated 28 October 2025 on the ‘Implementation of new laws in Indonesia for Palm Oil Plantations’ which, according to publicly available information, has currently affected approx. 4.1 million hectares of palm oil plantations across Indonesia.

In a filing to the Colombo Stock Exchange, the two companies said based on information received from their subsidiary, Goodhope Asia Holdings Ltd. (Goodhope). Goodhope has continued its engagement with the Presidential Task Force established by the Government of Indonesia and has attended meetings and provided information as requested. The Task Force has intimated to Goodhope a provisional administrative fine of approximately IDR 1,826 billion (equivalent to approximately $ 108.4 million) which has been communicated as a temporary notification and subject to future adjustment and finalisation following further review by the Task Force.

Goodhope has sought detailed clarification from the authorities regarding the basis and methodology underlying this provisional computation and is actively discussing the matter. It has adequate liquidity to manage the impact, if imposed.

The company further reiterates its continuing commitment to full compliance with applicable Indonesian laws and regulations and remains engaged in constructive dialogue with the relevant authorities to ensure regulatory adherence and operational continuity, and to safeguard the interests of all stakeholders.

The Bar Association of Sri Lanka (BASL) yesterday said it is deeply concerned about recent social media posts that target the Attorney General.

‘These social media posts seek to unfairly interfere with the independence of the office of the Attorney General,’ the BASL said in a statement.

It also said the following.

It must be noted that the Attorney General performs a quasi-judicial role in respect of criminal matters. The Attorney General has to decide whether or not to charge/indict a suspect based on the material available and submitted to him by the investigating authority. In doing so, the Attorney General will be required to consider whether such material is admissible in law and, whether based on such material, there exists a reasonable prospect of a conviction.

The decisions of the Attorney General are reviewable, by way of the exercise of Writ jurisdiction before the Court of Appeal or by way of the exercise of the Fundamental Rights jurisdiction before the Supreme Court.

It must also be understood that judicial officers and quasi-judicial officers have to make decisions according to law, which sometimes may not necessarily reflect the popular view.

In case of Victor Ivon v. Sarath N. Silva, Attorney-General and Another (1998) 1 Sri.L.R. 340 at 349, it was observed by Justice Mark Fernando that ‘A citizen is entitled to a proper investigation – one which is fair, competent, timely and appropriate – of a criminal complaint, whether it be by him or against him. The criminal law exists for the protection of his rights – of person, property, and reputation – and lack of a due investigation will deprive him of the protection of the law.’

Whilst every citizen has a right to critique the decisions of public officials including the Attorney General, it must be done in a manner that will not undermine the independence of the office of the Attorney General and to the detriment of the rule of law. The officers of the Department of the Attorney General should not be subject to unwarranted and unfair interference from sections of the public or media who do so to achieve their partisan ends.

The BASL firmly believes that it is the duty of the Government and the law enforcement agencies to ensure that there is no unwarranted interference with the exercise of the powers of the Attorney General. The Government must ensure the protection of the independence of key institutions, including that of the office of the Attorney General, which is essential to protect the rule of law in our country.

We strongly urge that the independence and integrity of the office of Attorney General be protected at all times to ensure the protection of the cherished principles of justice and freedom.

Cabinet Spokesman and Minister Dr. Nalinda Jayatissa yesterday clarified that while a Chinese national is among the shareholders of the proposed Ambuluwawa cable car project, no Chinese company pulled out of the venture, amid growing public debate and scrutiny over the development.

Speaking at the weekly post-Cabinet meeting media briefing, he said the Government had taken note of public concerns surrounding the project, but cautioned against narratives that could undermine investor confidence at a critical time for the country’s economic recovery.

He warned that editorials and opinion pieces discouraging investment risk damaging Sri Lanka’s image as it works to overcome a prolonged economic crisis following multiple shocks.

The Cabinet Spokesman reiterated that the Government remains committed to encouraging investment, while ensuring transparency, accountability and strict adherence to environmental and safety standards.

Dr. Jayatissa explained that the cable car project was offered on 16 June 2023 by the Board of Trustees of the Ambuluwawa Religious Centre and Trust Fund to a private company, Amber Adventures Ltd.

‘The trust was established under Gazette No. 44 of 2009 and is chaired by Dissanayake Mudiyanselage Anuradha Lanka Pradeep Jayarathna. Its board of trustees includes Samaraweera Mudiyanselage Indika Prasad, Godamunne Wedagedara Chandraratne, Sivan Gnanasekaran, Meewature Vajiragnana Thera, M. Asath Sally and J.M. Senanayake Bandara,’ he said.

According to the Cabinet Spokesman, the initial Board of Directors of Amber Adventures Ltd comprised one Chinese national Huwan Yupin, together with Samarasinghe Herath Bandula Karunaratne, Jayasekara Mudiyanselage Senanayake Bandara, who also serves as a trustee of the Ambuluwawa Trust, and Suresh Deepal Subasinghe.

He detailed that Huwan Yupin holds 36 shares in the company, while Jayasekara Mudiyanselage Senanayake Bandara holds 14 shares. Two other private companies hold 16 and 34 shares respectively.

Dr. Jayatissa stressed that the presence of a Chinese individual shareholder should not be misconstrued as Chinese corporate ownership.

Following the warnings of increased landslide risks in the Central highlands, the Government suspended all development activities in the Ambuluwawa area pending a comprehensive technical evaluation.

He said concerns had intensified after assessments by the National Building Research Organisation (NBRO) in the aftermath of Cyclone Ditwah, with preliminary findings indicating that the area is vulnerable to further landslides.

In response, the Environment Ministry has directed that no further development take place until a thorough technical assessment is completed. A technical committee appointed by the Environment Minister is scheduled to conduct a field inspection on 10 February and submit a detailed report thereafter.

‘We as a Government believe that a technical evaluation of the site is essential before greenlighting any project. We have a responsibility to protect human lives and the biodiversity,’ Dr. Jayatissa said, underscoring that public safety would take precedence over development timelines.

He also acknowledged that in 2024 the Auditor General had issued directives calling for a comprehensive investigation into allegations of corruption and misconduct linked to the project.

Dr. Jayatissa said further details on the progress of these investigations would be disclosed next week.

Ambuluwawa is a biodiversity complex and Sri Lanka’s first multi-religious sanctuary, located in the central highlands. In 2023, the Board of Investment announced that it had signed an agreement with Amber Adventures Ltd for a $ 4.5 million investment to develop Sri Lanka’s first cable car experience at the site, in collaboration with the Ambuluwawa Biodiversity Centre.

According to the BOI, the project was to be constructed with technical and product expertise from the China Machine-Building International Corporation. The planned cable car system spans 1.5 kilometres, with three stations providing entry and exit points, and the route designed to pass through the biodiversity centre’s forest range.

‘The Government maintains that while investment is welcome, projects in environmentally sensitive areas such as Ambuluwawa will be subject to rigorous scrutiny to balance development goals with environmental protection and public safety,’ Dr. Jayatissa said.

Most transformation fails for one simple reason: Leaders try to change systems before they change signals.

You can roll out a new KPI dashboard, a new AI initiative, a new org structure, a new ‘values refresh’. and still end up with the same meetings, the same politics, the same excuses, the same silent resistance.

Why?

Because culture isn’t what you announce. that also mean its NOT Values you Impose!

Culture is what people’s brains predict will happen when they speak up, take initiative, or make a mistake.

And prediction lives in the brain. specifically, in the way different people process information, threat, status, and certainty.

That’s where Colored Brain comes in: it gives everyone, even the lowest person in the organisation, a practical, human way to see what’s happening under the surface, so transformation becomes real, measurable, and repeatable. It is NOT personality, it is NOT Behaviour. it is your HOW! How you get clarity and deal with ambiguity.

Transforming your culture

Here’s a question that changes everything:

When people feel uncertainty, do they get clarity, or do they get chaos?

Every human brain tries to reduce ambiguity. That’s not a personality flaw; it’s a survival feature.

But here’s the culture trap:

When ambiguity shows up (new tech, new boss, new expectations, restructuring), people don’t wait for your strategy deck. They look for social signals:

What gets rewarded here?

What gets punished here?

Who is safe to challenge?

What happens if I fail?

Do I Even Know WHATS GOING ON?

Culture is the collective ‘answer’ people learn, often unconsciously.

If your organisation answers ambiguity with blame, confusion, politics, or silence. transformation becomes theatre.

The Colored Brain: Same company, different reality

In every transformation, you’re not leading ‘one organisation.’

You’re leading multiple interpretations of the same reality.

Here’s a quick way to see it:

Some people process through logic and accuracy (they want proof, structure, clear definitions).

Some process through people and relationship (they want trust, inclusion, respect).

Some process through speed and action (they want progress, ownership, momentum).

Some process through possibility and innovation (they want vision, options, experimentation).

Same change announcement. Four different brain reactions.

So ask yourself:

When you say ‘We’re transforming,’ what do you think each Colored Brain hears?

‘This is exciting!’

‘This is risky!’

‘This is vague!’

‘This is more work!’

None of those are ‘wrong.’ They’re predictable.

And leadership is the ability to turn that predictability into alignment.

Leadership is not motivation. It’s translation

Most leaders try to inspire everyone with one message.

That’s like trying to teach four languages using one sentence.

Leadership in transformation means you can translate the purpose into the emotional logic each brain needs to commit.

Here’s what that looks like in practice:

1) Translate purpose into personal meaning

Don’t just say, ‘We need to transform.’

Say:

What problem are we solving?

Who suffers if we don’t change?

What becomes possible if we do?

And then ask:

What does ‘winning’ look like for each team, not just the company?

Purpose is not a poster. Purpose is felt relevance.

2) Translate change into safety and clarity

If people don’t know what ‘good’ looks like, they protect themselves.

So remove ambiguity:

What decisions move closer to the goal?

What behaviors are now expected (and which are not)?

What does success look like in 30 days, not 12 months?

Ask:

Have we made it clear enough that people can act without fear?

3) Translate culture into daily micro-behaviours

Culture doesn’t change with a workshop.

Culture changes when daily behavior shifts:

How leaders respond to bad news

How conflict is handled

How decisions are made

How accountability works

How learning is rewarded

Transformation needs ‘Signal Consistency’

Here’s the harsh truth:

If you want transformation, you must become obsessed with one thing:

Signal Consistency, Walk the Talk, Be Authentic. and all the other cool ways to say ‘you should do what you say’

People watch what leaders do under pressure. That’s the real training program.

If leaders say ‘innovate’ but punish mistakes, the signal is: don’t take risks.

If leaders say ‘collaborate’ but reward solo heroes, the signal is: compete internally.

If leaders say ‘speak up’ but shut down disagreement, the signal is: stay quiet.

So the question is:

What signals are you sending, especially when you’re tired, stressed, or rushed?

That’s your culture.

The Transformation Formula (Simple, not easy)

If you want a transformation that sticks, build it like this:

1. Shared Meaning (people emotionally connect to the ‘why’)

2. Shared Clarity (people understand the ‘what now’)

3. Shared Language (Colored Brain gives a practical translation tool)

4. Shared Reinforcement (signals and rewards match the desired behavior)

5. Shared Ownership (teams feel ‘this is ours,’ not ‘this is imposed’)

And yes. this is where leadership becomes a craft, not a title.

The real test

Let me leave you with three questions you can use immediately:

1. Where is ambiguity highest in our organisation right now?

2. Which Colored Brain styles are being unintentionally ignored, or frustrated?

3. What is one leadership behavior we will reinforce daily for the next 30 days?

Transformation doesn’t start with technology.

It starts with humans feeling clear, safe, and committed, because their brains can finally predict success.

So. what are you transforming first? Your org chart? Or your signals?

The Colombo stock market rebounded yesterday with the main index closing at an all-time high on sustained buying interest throughout the session.

The ASPI closed 0.77% on the up, gaining 182.58 points to close on a new high of 23,806.32 points. The active S and P SL20 closed 1.14% or 74.52 points on the up to 6,619.32.

Market turnover was over Rs. 9.8 billion on nearly 180.3 million shares traded. Foriegn investors were net sellers on a net outflow of Rs. 51.1 million.

NDB Securities said the ASPI closed in green as a result of price gains in counters such as Hayleys, Colombo Dockyard and Sampath Bank.

High net worth and institutional investor participation was noted in Hatton National Bank, Renuka Foods and Central Finance Company. Mixed interest was observed in Colombo Dockyard, Hayleys and ACL Cables, while retail interest was noted in Lanka Credit and Business Finance, Renuka Agri Foods and Hikkaduwa Beach Resort.

The capital goods sector was the top contributor to the market turnover due to Colombo Dockyard, Hayleys and ACL Cables with the sector index gaining 2.66%.

The share price of Colombo Dockyard increased by Rs. 29.50 to close at Rs. 143.25, Hayleys moved up by Rs. 30.50 to Rs. 248.50, and ACL Cables appreciated by Rs. 1.75 to Rs. 107.

The banking sector was the second highest contributor to the market turnover due to Hatton National Bank, while the sector index increased by 0.35%. Hatton National Bank gained Rs. 2.75 to close at Rs. 423.25. Renuka Foods was also included amongst the top turnover contributors with the share gaining Rs. 5.10 to Rs. 71.90.

First Capital Research said the bourse moved up steadily during the day, supported by sustained buying interest throughout the session. Top positive contributors for the ASPI were HAYL, DOCK, SAMP, VONE and SLTL. Daily turnover marked an 86.6% increase over the monthly average of Rs. 5.3 billion.

HNW investor interest were among banking, diversified financials and construction sector counters, while the broad market were keen on export-oriented companies following the recent LKR depreciation. The capital goods sector led the daily turnover by 44%, followed by the banking, and food, beverage and tobacco sectors collectively contributing 28%.

Nations Trust Bank PLC (NTB) has secured a debt financing package of up to $ 70 million from World Bank Group’s private sector arm, the International Finance Corporation (IFC), to support the recovery of small businesses which were disproportionately affected by Sri Lanka’s multiple crises.

This is the IFC’s first debt transaction in Sri Lanka’s financial sector since the 2022 financial crisis. The investment forms part of the IFC’s longstanding partnership with NTB, reinforcing the IFC’s confidence in NTB’s strength and reliability.

The investment package, comprising a $ 50 million senior unsecured loan and $ 20 million Global Trade Finance Program line, is expected to enhance NTB’s capacity to expand support to key economic segments as Sri Lanka’s recovery gains momentum.

The investment is projected to enhance Small and Medium Enterprises (SMEs), especially women-owned businesses, which represent the backbone of the national economy. According to the MSME Financing Gap Database, the SME financing shortfall in Sri Lanka exceeds 20% of GDP, highlighting the critical need for sustained credit access.

NTB…

NTB Director/CEO Hemantha Gunetilleke said: ‘NTB’s longstanding strategic partnership with the IFC has enabled this investment at a pivotal time for Sri Lanka’s economy. This transaction allows NTB to extend essential financing that is vital to the country’s recovery and long-term growth. By expanding access to credit for underserved sectors, NTB remains committed to supporting sustainable economic development.’

IFC Regional Industry Director – Financial Institutions Group (Asia and Pacific) Allen Forlemu said: ‘Our collaboration with NTB is a clear signal of the IFC’s commitment to supporting Sri Lanka’s private sector. Building on our longstanding partnership, this latest investment will expand affordable, long-term financing for SMEs – the engine of the country’s economy. By empowering these entrepreneurs, we are fuelling growth, creating jobs, and securing a more inclusive, resilient future for all Sri Lankans.’

Aligned with World Bank Group priorities for Sri Lanka, this partnership aims to deliver targeted solutions for SMEs, helping businesses overcome challenges and supporting the country’s long-term economic resilience.

Blue Diamonds Jewellery Worldwide PLC has said it is in discussions with a strategic investor in the jewellery industry as part of efforts to restore its capital position, after its net assets fell below the statutory threshold defined under the Companies Act.

The company said the Board has determined that it has incurred a serious loss of capital, triggering the requirement to formally notify shareholders and convene an Extraordinary General Meeting (EGM), which was held yesterday.

It said that its net assets as at 31 March 2024 stood at Rs. 114.56 million, compared to stated capital of Rs. 252.04 million. Based on these figures, the Board concluded that net assets had fallen below 50% of stated capital, constituting a serious loss of capital under the Act.

According to the audited financial statements for the year ended 31 March 2024, Blue Diamonds Jewellery recorded a net loss of Rs. 138.68 million, while cumulative net losses amounted to Rs. 197.86 million as at that date.

The Board attributed the capital erosion mainly to prolonged adverse market conditions affecting the jewellery sector, reduced turnover and margins, high fixed operating, compliance and listing-related costs, and working capital constraints.

Despite these challenges, the company said it continues to operate within a viable industry and retains strategic value as a listed entity.

As part of its remedial action plan, the Board said it has initiated discussions with a strategic investor, subject to the completion of due diligence, resolution of existing non-compliances with Colombo Stock Exchange (CSE) Listing Rules, and the negotiation and finalisation of definitive agreements.

If the negotiations are successful, the company expects to proceed with a capital raising exercise, subject to regulatory approvals from the CSE, the Securities and Exchange Commission of Sri Lanka, and other relevant authorities, as well as shareholder approval where required.

The Board said the anticipated outcomes of the proposed investment include the restoration of the company’s capital base, strengthening of liquidity and working capital, access to an established jewellery business and market opportunities, and improved long-term profitability and sustainability.

In parallel, the company intends to address outstanding corporate governance and listing compliance requirements, including the submission of overdue audited financial statements, matters arising from audit qualifications or disclaimers, regularisation of Board composition, proposed amendments to the Articles of Association where necessary, and settlement of outstanding statutory and professional obligations.

The Board reaffirmed its commitment to transparency, regulatory compliance, and implementing measures aimed at restoring financial stability and protecting shareholder value.

The trading of its shares has been suspended more than a year ago, since 10 December 2024. The company reported net assets of Rs. 0.07 a share as of end-September 2025. Its non-voting shares have a 55.97% public float.

In an increasingly interconnected global economy, the rules governing international taxation are undergoing a profound transformation. The OECD’s Pillar Two framework, formally known as the Global Anti-Base Erosion (GloBE) Rules, introduces a global minimum tax of 15% for large multinational enterprises (MNEs). This initiative, part of the broader BEPS 2.0 project, aims to curb profit shifting and end the ‘race to the bottom’ in corporate tax competition.

As of January 2026, with the recent release of the Side-by-Side Package by the OECD/G20 Inclusive Framework, these rules are firmly in motion across many jurisdictions. For emerging economies like Sri Lanka, heavily reliant on foreign direct investment (FDI) to fuel growth, understanding and adapting to Pillar Two is no longer optional-it is imperative.

What are the GloBE rules and the Global Minimum Tax?

The GloBE Rules form the core of Pillar Two, ensuring that MNEs pay at least 15% effective tax on their profits in every jurisdiction where they operate. If the Effective Tax Rate (ETR) in a country falls below this threshold, a ‘top-up tax’ is imposed to bridge the gap. This top-up can be collected either by the parent company’s jurisdiction through the Income Inclusion Rule (IIR) or by other countries via the Undertaxed Profits Rule (UTPR), with many nations now implementing a Qualified Domestic Minimum Top-up Tax (QDMTT) to retain the revenue domestically.

The rules apply jurisdictionally, meaning profits and taxes are blended across entities in the same country. The objective is straightforward: prevent large corporations from exploiting low-tax regimes, tax holidays, or incentives to erode tax bases elsewhere.

Who is covered?

The scope is limited to large MNE groups with consolidated global revenues exceeding pound 750 million in at least two of the four preceding fiscal years. This threshold captures around the world’s largest 100-200 MNE groups, but excludes certain entities such as pension funds, investment funds, and non-profit organisations. Smaller MNEs and domestic-only companies remain unaffected.

Exemptions and the De Minimis rule

Several exemptions ease the burden. Excluded entities include government bodies, international organisations, and certain transparent entities. A key simplification is the de minimis exclusion: if a jurisdiction’s GloBE income is low (typically tied to minimal revenue or profit thresholds), groups can elect to disregard it for top-up tax calculations, reducing compliance for minor operations.

How is the Effective Tax Rate (ETR) calculated?

At a high level, the ETR is computed per jurisdiction as Adjusted Covered Taxes divided by GloBE Income. GloBE Income starts from financial accounting profit, with adjustments for items like dividends, equity gains, or policy disallowances. Covered Taxes include current taxes paid, plus deferred taxes (recaptured if not reversed timely). If the jurisdictional ETR dips below 15%, top-up tax applies to the shortfall.

Substance-Based Income Exclusion (SBIE)

To reward real economic activity, the SBIE carves out a portion of income from the top-up tax base. It excludes a percentage (starting at 10% for payroll and 8% for tangible assets, phasing down to 5% over ten years) of eligible payroll costs and tangible asset values. This protects profits tied to substantive operations, such as factories or employees, rather than intangible-driven low-tax structures.

Qualified Refundable Tax Credits (QRTCs)

One of the most important compliant tools under Pillar Two is the QRTC. These are refundable credits (cash refunds if exceeding tax liability, paid within four years) treated as income rather than tax reductions. They do not lower the ETR below 15%, making them fully effective in attracting investment without triggering top-up tax. Marketable transferable tax credits can also qualify under similar principles.

Neutralisation of tax holidays and concessionary rates

Traditional incentives like tax holidays, reduced statutory rates, or patent boxes are largely neutralised. They create permanent differences that reduce Covered Taxes without adjusting GloBE Income proportionally, lowering the ETR and inviting top-up tax. Jurisdictional blending may mitigate this if high-tax entities offset low ones, but for investment-heavy jurisdictions relying on holidays, the benefit to MNEs evaporates as top-up tax is collected elsewhere or domestically via QDMTT.

Pillar Two-Compliant Fiscal and Non-Fiscal Tools

Post-Pillar Two, countries are shifting to incentives that preserve attractiveness:

Fiscal tools – QRTCs for R and D, green investments, or employment; grants and subsidies (treated as income); enhanced capital allowances or accelerated depreciation (temporary differences neutralised via deferred tax); incentives boosting SBIE through tangible assets or payroll.

Non-fiscal tools – Streamlined regulations, infrastructure development, skilled workforce training, political stability, and ease of doing business rankings.

The recent OECD Side-by-Side Package (January 2026) introduces further simplifications, including a Simplified ETR Safe Harbour, Substance-Based Tax Incentive Safe Harbour (capping benefits to substance), and relief for certain regimes, ensuring the 15% floor while reducing compliance burdens.

Policy changes in peer countries to attract FDI

Several Asian and European nations traditionally competing on tax incentives have adapted swiftly.

Ireland, long famous for its 12.5% rate, implemented Pillar Two in 2023 while retaining the lower rate for non-in-scope entities. To stay competitive, Ireland is reforming its interest regime, simplifying tax codes, and emphasising non-tax advantages like EU access, English-speaking talent, and R and D grants.

Singapore introduced refundable investment credits (RIC) in 2025 legislation, alongside updates to GloBE rules. It is pivoting to QRTC-like mechanisms and strengthening its ecosystem in finance, tech, and innovation hubs.

Thailand enacted an Emergency Decree in 2025 for top-up tax and is planning Qualified Refundable Tax Credits through BOI amendments. The focus is on substance-linked incentives for manufacturing and digital economy investments.

Vietnam issued Decree 236/2025 for GMT implementation, prioritising domestic collection of top-up tax. It is exploring new incentives beyond tax, such as infrastructure in industrial zones and workforce development.

Malaysia committed to GMT in Budget 2024, with ongoing consultations for implementation. It is enhancing non-tax attractions in electronics and services while aligning incentives to Pillar Two compliance.

These countries recognise that pure tax competition is diminished; they are investing in QRTCs, grants, and broader business environment improvements to lure FDI.

What should Sri Lanka do?

Sri Lanka should adopt dual track strategy for attracting investments. Whilst income tax holidays and rate reductions would be still be attractive for attracting small and medium size investors, the policy makers should develop Pillar Two complaint incentive package to attract large MNEs.

As of early 2026, Sri Lanka has made no formal announcement on Pillar Two implementation, unlike many peers. This lag risks revenue loss if top-up tax on local operations of in-scope MNEs is collected abroad.

More critically, traditional tax holidays under the Board of Investment (BOI), Port City Regulations or Strategic Development Projects Act may no longer effectively attract large MNEs, as benefits are clawed back via top-up tax.

Sri Lanka’s FDI ambitions-targeting significant inflows for recovery and growth-demand urgent action:

1. Implement a QDMTT promptly following required the procedure to secure domestic revenue and signal compliance.

2. Reform incentives toward Pillar Two-compliant tools: Introduce QRTCs for priority sectors like tourism, apparel upgrades, IT/BPO, renewable energy, and manufacturing; offer cash grants or enhanced allowances tied to capital expenditure and jobs.

3. Boost SBIE-friendly investments by encouraging tangible asset deployment and employment creation.

4. Prioritise non-fiscal reforms: Improve ease of doing business (land acquisition, permits, dispute resolution), invest in infrastructure (ports, energy, digital), develop skilled labor through education partnerships, and ensure policy stability and transparency.

5. Target mid-sized MNEs below the pound 750m threshold, where tax holidays and lower rates remain effective, while building substance for larger ones.

By learning from Ireland’s ecosystem focus and ASEAN neighbors’ shift to refundable credits, Sri Lanka can reposition itself. The global minimum tax levels the playing field on rates but amplifies competition on real value-stability, talent, and efficiency.

Proactive adaptation will not only safeguard revenue but position Sri Lanka as a resilient, attractive destination in the post-Pillar Two world.