Hambantota Port project gets tax incentives under Strategic Development Projects Act
The Hambantota Port development and transformation project will get tax exemptions and other concessions under the Strategic Development Projects (SDP) Act which is to be scrapped shortly.
This will be the final project to receive Strategic Development project status under this Act as the government has decided to replace it with a new investor- friendly law, State Minister of Finance Eran Wickramaratne told the Business Times.
This new investor-friendly law will ensure that the country does not suffer revenue loss when incentives are offered to local and foreign investors; he said adding that all new investment projects will be brought under the purview of the proposed bill.
He noted that the decision to grant this status to Hambantota Port development project was taken some time back and no other mega investment project will be given such tax concessions hereafter.
The government will also review the prevailing laws affecting FDI including laws restricting foreign land ownership and the SDP. The procedure of granting SDP status had also been complicated, he said.
Minister of Development Strategies and International Trade Malik Samarawickrama has issued the relevant gazette notification on Monday November 6 in consultation with the Ministry of Finance.
The project company China Merchant Port Holdings will be getting a 25-year tax exemption in addition to be exempt from the payment of withholding tax for seven years and tax on dividends following approval by resolution of parliament.
Expatriate staff of the project company will also be exempted from PAYE and the company will not have to pay VAT, PAL, Cess, etc for seven years.
Deshal De Mel, Economic Advisor to the Finance Minister, said Sri Lanka will not provide ad-hoc concessions for investors but will attract investments to specific sectors, within a broader industrial policy framework and vision,
The granting of tax concessions for the Hambantota Port Development project is a one-off measure, he said adding that very generous incentives, or very low taxes would not be able attract high levels of FDI. Under the SDP, 10 mega projects with an investment of US$5.98 billion were facilitated by the Board of Investment during the previous Rajapaksa regime.