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Sweeping tax concessions for new hotel company
The Government has announced several tax concessions for the company that will construct and operate the 475-room Hyatt Group city hotel.
Concessions galore for Hyatt project
The venture in Kollupitiya has been identified as a Strategic Development Project with a total investment of US$ 158 million and as a project of “national interest that is likely to bring economic and social benefit and also to change the landscape of the country.”
The project company, Sinolanka Hotels and Spa (private) Limited entered into an agreement with the Board of Investment on July 19 to construct and operate the hotel on the land which was owned by the Ceylinco group and later acquired by the Government under the provisions of the Revival of Underperforming Enterprises and Underutilised Assets Act.
The concessions include a ten-year income tax exemption while the tax on dividends distributed to shareholders out of profits too will enjoy exemption.
The tax exemption period will begin from the first year in which the Project Company makes taxable profit or three years after the start of commercial operations. At the end of the tax exemption period, the company will continue to enjoy special tax concessions, having to pay only six percent or one half of the prevailing tax rate for the hotel industry, for 15 years.
The expatriate staff of the company will also be exempted from the charge and payment of Pay as You Earn Tax (PAYE) for five years subject to a restriction of a maximum of 20 employees. The project company will be required to gradually replace expatriate staff with local employees, under the agreement.
There will also be an exemption from the payment of Withholding Tax on interest on foreign loans taken for capital expenditure, on technical fees to consultants, on management fees, royalty payments and marketing fees, provided these payments are made to any subsidiary or associate of Hyatt Hotel Corporation, USA.
Tax exemption will also be given on the payment of Value Added Tax (VAT) on the importation and local purchases of project related goods and services during the project implementation. The company will have to pay VAT once it begins commercial operations.
The other tax exemption will include the Port and Airport Development Levies as well as Customs duties.
The tax concessions have been gazetted by Economic Development Basil Minister Rajapaksa in his capacity as the minister in charge of investment and tourism.
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