The Colombo Port City Economic Commission Bill (“Bill”) published in the Gazette Notification dated 24.03.2021 was passed in Parliament on 20.05.2021 with the amendments proposed by the Supreme Court.
The Bill provides for the (i) establishment of the Colombo Port City as a Special Economic Zone (“Port City”); (ii) establishment of the Colombo Port City Economic Commission (“Commission”) entrusted with the administration, regulation and control of matters connected with business and other operations in and from the Port City.
The Commission must consist of 5-7 members appointed by the President of whom the majority will be Sri Lankan. The Commission is empowered to function as a Single Window Investment Facilitator for engaging in business, investing, residing, seeking employment in and visiting the Port City and facilitate visa, entry or work permits as maybe required. Where so required under applicable written laws, the Commission is obligated to obtain concurrence of any Regulatory Authority (“RA”) in the exercise, performance and discharge of its powers, duties and functions. The relevant RA will be limited to the implementation of the respective written laws applicable to such authorities within the Port City. Relevant RA are required to communicate its decision to the Commission as a matter of priority. Unless otherwise specifically provided in the Colombo Port City Economic Commission Act (“Act”), nothing therein will be deemed to restrict powers, duties and functions vested in any RA by way of any written law within the Port City.
The objectives of the Commission Inter alia are to attract Foreign Direct Investment (FDI) into the country; create a safe and conducive business environment and facilitate ease of doing business in and from the Port City; encourage and promote global and regional investments in international trade, shipping, logistic operations, offshore banking and finance; IT and BPO, corporate headquarters operations, regional distribution operations, tourism and other ancillary services; generate employment opportunities and promote sustainable development.
License to operate in Port City - Authorized Person
Persons seeking to conduct business in the Port City must obtain a license from the Commission as an Authorized Person (“AP License”). In addition, a body corporate must also obtain a Certificate of Registration as an Offshore Company in accordance with Part VII of the Act (“Registration”). In the case of a company intending to engage in offshore banking business an AP License, a Registration and a license to carry on offshore banking business issued under Part VIII of the Act are required. The Commission will enter into an agreement with each Authorized Person setting out inter alia terms and conditions, restrictions, total FDI, concessions or exemptions and the period of the same in relation to the investment.
Land within Port City
From and after the commencement date of the Act, all land situated within the Port City will be vested with the Commission
Government Marketable Land (“Gvt Land”): land situated within the Port City made available for the undertaking of residential commercial, leisure, educational, cultural, community-based developments and other similar developments by the Government.
Project Company Marketable Land (“Project Co. Land”): land situated within the Port City made available to the Project Company (i.e., Developer of the Port City) by way of Master Leases issued by the Urban Development Authority for the undertaking of residential, commercial, entertainment and leisure-based developments and other similar developments.
The Commission may, subject to the provisions of the Act, Land (Restrictions on Alienation) Act, No. 38 of 2014 (as amended) (“LRA”) and other applicable laws:
- lease Gvt Land and Project Co. Land jointly with the Project Company;
- lease or transfer condominium parcels standing on Gvt Land or Project Co. Land jointly with the respective investor or developer or the Project Company as the case may be.
Payment for such transactions must be made in any designated foreign currency. However, the Commission may enter into such transactions in favour of any person or company to whom the restrictions under the LRA do not apply in LKR upon terms and conditions as may be determined by the Commission. Provided however, if such person transfers, leases or rents such property to a third party within 5 years from the date of the first transaction for consideration in designated foreign currency, he will be required to remit such sums to a Resident Foreign Currency Account operated and maintained in Sri Lanka outside the Port City.
Condominium Management Authority Law and the Apartment Ownership Law will be applicable within the Port City and the Commission is empowered to exercise, perform and discharge all functions vested in/assigned to the Condominium Management Authority (“CMA”) subject to obtaining concurrence of the CMA.
Exemptions and Incentives
- Authorized Persons are permitted to engage resident and nonresident employees. Such employees will be remunerated in a designated foreign currency and their employment income will be exempt from income tax.
- Businesses that are identified as Businesses of Strategic Importance (“BSIs”) by the Commission, in consultation with the President (or relevant Minister) will be entitled to exemptions or incentives not exceeding forty years.
- Tax related exemptions may be granted either in full or in part and from all any of the following enactments set out in Schedule II of the Act:
- The Inland Revenue Act, No. 24 of 2017
- The Value Added Tax Act, No. 14 of 2002
- The Finance Act, No. 11 of 2002
- The Finance Act, No. 05 of 2005
- The Excise (Special Provisions) Act, No.13 of 1989
- The Customs Ordinance (Chapter 235)
- The Ports and Airports Development Levy Act, No. 18 of 2011
- The Sri Lanka Export Development Act, No.40 of 1979
- The Betting and Gaming Levy Act, No.40 of 1988
- Termination of Employment of Workmen (Special Provisions) Act, No. 45 of 1971
- The Entertainment Tax Ordinance (Chapter 267)
- The Foreign Exchange Act, No. 12 of 2017
- Casino Business (Regulation) Act, No. 17 of 2020
- The Commission may also extend assistance or facilitate as may be necessary such incentives to attract BSIs to the Port City.
Establishment of a stock, exchange or market
The Bill provides for the establishment of a stock exchange to be established within the Port City in terms of the provisions of the Securities and Exchange Commission Act (“SEC Act”). Regulations issued under the SEC Act will also be operative within the Port City until regulations are made under Part XI of the Act. The Commission is required to obtain the concurrence of the Securities and Exchange Commission of Sri Lanka.
A company incorporated under the Companies Act, No. 07 of 2007 (as amended) (“CA”) will be designated as the Estate Manager which will perform tasks as may be assigned by the Commission such as inter alia assisting service providers with utility services, management and maintenance of common area, collection of area related rates and levies imposed by the Commission etc.
The Bill provides for the establishment of an International Commercial Dispute Resolution Centre (“ICDRC”) within Port City, as a company limited by guarantee under the CA for the purposes of offering conciliation, mediation, adjudication, arbitration and any other alternate dispute resolution services. Any dispute that may arise within the Port City will be resolved by way of arbitration conducted by the ICDRC.
Further in order to ensure international investor confidence in enforcement of contracts, and in the national interest or in the interest of the advancement of the national economy, the Courts are required to give priority to civil and commercial matters where the cause of action has arisen within or in relation to any business carried in or from the Port City including hearing on a day-to-day basis except in exceptional circumstances that warrant postponement in the opinion of Court.
- The Commission may permit an Authorized Person to engage in business from a designated location in Sri Lanka outside the Port City as approved by the President for a period not exceeding 5 years commencing from date of the Act. During such period, the business will be entitled to all privileges accorded to and be deemed to be a business within the Port City.
- The Bill provides that all agreements entered into by the Board of Investment of Sri Lanka in terms of the BOI Law No. 04 of 1978 and the Strategic Development Projects Act, No.14 of 2008 (“SDP Act”) and any order published in accordance with the SDP Act, relating to an investment within the Port City will be deemed to be an agreement entered into by the Commission.
This is only an overview of the applicable law and should not be relied upon as legal advice or recommendation by D. L. & F. De Saram, a leading law firm in Sri Lanka.
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