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Tata company undertakes mixed development project in Colombo 2
India’s Tata Housing Development Company has become the latest international firm to be given generous tax concessions for a mixed development project it is building at Slave Island, Colombo 2. This includes a ten-year corporate income tax waiver on the profits of the project, other than from the sale of apartments. The exemption for income generated through the sale of apartments is six years. A second gazette in this regard was issued on November 3, following the granting of Cabinet approval for the concessions. It was signed by Investment Promotion Minister Lakshman Yapa Abeywardena. The first gazette was issued in July, under the provisions of the Strategic Development Projects Act.
TATA has incorporated a local company in Sri Lanka named M/s. One-Colombo Project (Private) Limited. It will redevelop an eight acre plot of land in Slave Island. It will build apartments for low-income families on part of the property.
The project, which is an initiative of the Urban Development Authority (UDA), will cost US$429.5 million. US$130 million of this is foreign direct investment. In addition to the corporate income tax concession, dividends distributed to shareholders out of the exempted profit will be exempted from income tax for ten or six years, as the case may be, and one year thereafter.
Waivers of Withholding tax are also afforded in specified cases. The expatriate staff of the project company will be exempt from the pay as you earn (PAYE) tax, subject to restrictions. Several other concessions have been offered, in keeping with the Act.
The Slave Island project was floated by the UDA, partly as a means of resettling thousands of low income families who had been evicted from the area to free up prime property in Colombo. They have been promised better housing. The project will also include residential and commercial buildings, including luxury apartments.
Last month, the UDA issued a statement saying that construction has started on 15,000 housing units for low-income families in different parts of Colombo. The block in Slave Island has been identified as a “priority project” requiring private sector investment, it said.
The gazette that was issued in July said the redevelopment of the said area “will bring significant change in the landscape of Colombo city through higher standard of living associated with better quality of life to the habitants”. It also said the establishment of the mixed development project will contribute to the economic development of the country.