News
Indian IT firm given SDP status for US$ 10.25mn investment here
View(s):The local subsidiary of an Indian multinational IT company has been granted ‘Strategic Development Project’ (SDP) status with multiple tax breaks in exchange for an investment of US$ 10.25mn and jobs for up to 5,325 Sri Lankans in ten years.
The promised outlay is just above the minimum of US$ 10mn required to qualify for SDP status. HCL Technologies Lanka (Pvt) Ltd is owned by HCL Technologies in Noida, Uttar Pradesh. It kicked off operations in September 2020.
SDP status was given this year via a gazette issued by Prime Minister Mahinda Rajapaksa in his capacity as Economic Policies and Plan Implementation Minister. The full investment was expected to have been made by December 31, 2021—last year—by way of US$ 2.4mn equity contribution, US$ 5.90mn loan and US$ 1.95mn as reinvestment of retained earnings.
More than 90 percent of income from services must be received in convertible foreign currency, the gazette says. A total of 2,424 Sri Lankans must be employed by March 2024 before full capacity is reached in 2032.
In return, the company is exempt from corporate income tax for 12 years after which it will be entitled to a concession of 50 percent of the prevailing rate for a further five years.
The tax on dividends distributed to shareholders out of exempted profit will be free of income tax for 12 years and one year thereafter. Up to 20 expatriate workers of the project will not have to pay income tax on gains and profits from employment for five years.
Other benefits include exemptions from value-added tax (VAT), ports and airports development levy, and export development cess on project-related items for 12 years and from customs import duty during the project implementation period.
The Government last year said it would fully implement the SDP Act, the use of which was restricted under Yahapalanaya, together with the BOI Act, the Urban Development Authority Act and other laws related to investment.
A Cabinet paper presented by Prime Minister Rajapaksa said the decision to curb the SPDA was “a primary cause attributable to hampering of international investor sentiment in Sri Lanka”. But the Government has since struggled to attract interest amidst multiple domestic and global challenges.
Ongoing multimillion-dollar projects also recently asked for extensions to start commercial operations. One of them is John Keells’ overdue Waterfront Properties (Pvt) Ltd. It was given a second postponement—14 months and 20 days from October 12 last year—with the first one having been in August 2018.
Earlier last year, the Finance Ministry granted extensions to an Indian investment on Galle Face—Welcomhotels Lanka (Pvt) Ltd— and a Chinese investment on R. A. De Mel Mawatha, Avic International Hotels Lanka Ltd.
While Avic and Waterfront were first gazetted as SDPs in 2014, nearly eight years ago, Welcomhotels goes back further, to October 2012.
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