Port City to get sweeping tax exemptions
Nov 03, 2016 – Cabinet yesterday approved the Port City venture to be adopted as a Strategic Development Project paving the way for significant tax exemptions including 25 years of corporate tax income, tax on dividends and VAT on construction to be passed by Parliament.
The Port City project, renamed the Colombo International Financial City (CIFC), was restarted by the Government after the signing of a fresh agreement in August. However, the initial exemptions proposed under the Strategic Development Project Act of 2008 under the administration of former President Mahinda Rajapaksa in 2014 expired before they could be presented to parliament.
The $1.3 b project, expected to be implemented over the next eight years, was adopted as a Strategic Development Project by the Cabinet on a proposal made by Development Strategies and International Trade Malik Samarawickrama.
A new set of exemptions for the Port City was outlined in an Extraordinary Gazette Notification released on 19 September. Under the slew of exemptions foreigners working for the Chinese company are exempted from Pay As You Earn (PAYE), ports and airport development levy, CESS, Nation Building Tax of 2% and Customs Duty.
“The provisions of the Inland Revenue Act, No. 10 of 2006 relating to the imposition of income tax on the Project Company on the profit and income generated from the activities from the said Project shall not apply for the period of twenty five (25) years (“Tax Exemption Period”),” the gazette said.
“The said Tax Exemption Period shall commence from the year in which the Project Company makes taxable profit or six (06) years after commencement of construction of the project, whichever occurs earlier,” it added. The gazette is likely to be re-issued ahead of the Government presenting it before parliament for approval.
“The Port City would create a new land of 269 hectares and is a flagship project in the context of the development strategy of the Government. Potential employment generation, attract secondary FDI and develop the Colombo International Financial Centre,” were the reasons listed by the minister in the Cabinet paper for the project to be included as a Strategic Development Project.
The project tripartite agreement was signed by the Megapolis and Western Development Ministry, Urban Development Authority and the China Harbour Engineering Company (CHEC). The Sri Lanka Ports Authority (SLPA), which was a party to the previous agreement made under former President Mahinda Rajapaksa’s Government was exempted from the new version as the Port City would now be part of the new Government’s larger Megapolis project.
CHEC, which is a subsidiary of the Chinese-State run China Communications and Construction Company (CCCC), has also carried out other large scale construction projects in Sri Lanka including the Hambantota port and Sooriyawewa cricket stadium.