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Port City seeks new laws on forex transactions; clarity on employee benefits
View(s):By Namini Wijedasa
The Colombo Port City has urged the Government to introduce draft banking and financial services regulations that will allow investors to transact in foreign currencies and deal with counterparts offshore to avoid any mandatory conversion or repatriation of monies, authoritative sources said.
Investors are registered to do business within the Port City as offshore companies under the Colombo Port City Economic Commission Act. They are also seeking clarity on the applicability of Sri Lanka’s retirement benefits—namely, the Employees’ Provident Fund (EPF), Employees’ Trust Fund (ETF), and gratuity—on their employees, the sources pointed out.
“If these businesses set up their offices in Port City and if they pay their employees in foreign exchange earned by doing business overseas, they need assurance that there is no liability on their part to pay EPF, ETF, and gratuity,” they said.
At present, around 30 companies, one bank, and one insurance firm have received “authorised person” (AP) licences to operate within the 269-hectare special economic zone built on reclaimed land.
But while one or two have started operations on a small scale, the big ones haven’t because they do not have enough clarity on how the revenue generated and held in bank accounts will be treated and whether retirement benefits will apply to staff who are paid in foreign currency, they said. “The Act also says employees are not subjected to income tax, and we need clarity on this.”
In 2022, the Central Bank of Sri Lanka (CBSL) sanctioned a special class of bank account called the Colombo Port City Investment Account (CPCIA) exclusively to carry out business. There are two types: investor and investee, and they can be used by companies seeking to attract foreign currency from overseas to establish businesses. The money can be held in foreign currency for investing in the reclaimed financial city.
But these accounts were only considered temporary facilities to service the immediate needs of APs, the sources explained, adding that these would later be moved into banks licensed to do business under the proposed regulations within Port City.
The Colombo Port City is also working with the Insurance Regulatory Commission and the Securities Exchange Commission on other regulations and frameworks that would be conducive to business in the SEZ. But the key party, the sources said, was the CBSL.
“At present, what guarantee do developers have that if they move US$ million into an account in Sri Lanka, it won’t have to be converted based on a policy decision of the Government?” the sources pointed out.
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