The Minister of Finance, Economic and Policy Development has with a view to inter-alia maintaining foreign currency reserves, amended Foreign Exchange (Classes of Capital Transactions in Foreign Exchange Carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Gazette Extraordinary Notification No. 2045/56 dated 17.11.2017 issued under the Foreign Exchange Act No. 12 of 2017 (FEA) with the objective of regulating the outflow of foreign exchange by imposing restrictions on the permitted outflow of foreign exchange whilst enabling control free inward remittances with waiver of otherwise applicable conditions. Remittances from Outward Investment Accounts which facilitates ‘permitted investments’ by persons’ resident in Sri Lanka to include investment in shares, debt securities, sovereign bonds and establishing of an overseas company of a Sri Lankan company being limited, with a ‘Special Deposit Account’ being established to facilitate inward remittances.
In terms of Gazette (Extraordinary) No.2169/3 dated 02.04.2020 issued under the FEA effective as of 02.04.2020 for a period of 03 months:
- (I) The general permission granted under the FEA and regulations for outward remittances via an Outward Remittance Account (OIA) held by a person resident in Sri Lanka stands suspended, excluding investments to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the FEA or investments to be made to fulfil the regulatory requirement in that country
- (II) The general permission granted under the FEA and regulations for outward remittances a Business Foreign Currency Account (BFCA) or a Personal Foreign Currency Account (PFCA) held by persons’ resident in Sri Lanka stand suspendedm, excluding, investments to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the FEA or investments to be made to fulfil the regulatory requirement in that country provided that, the Head of Department of Foreign Exchange is satisfied with the fulfilment of such requirement
- The general permission granted under the FEA and regulations for repatriation of funds under the migration allowance through Capital Transactions Rupee Accounts(CTRA) by emigrants who have already claimed a migration allowance under the general permission granted under the relevant Regulation stands suspended; with restrictions on the limit of the migration allowance for emigrants who are claiming the migration allowance for the first time up to a maximum of US$ 30,000 and not US$ 200,000 as was otherwise the authorised maximum.
- The authority of the Monetary Board of the Central Bank of Sri Lanka is limited to grant special permission for investments on case by case basis, exceeding the limits specified in the general permission, only in instances of being satisfied of the criteria (I) and (II) above;
- The restrictions shall apply to only the identified capital transactions and not in respect of already permitted current transactions.
In terms of Gazette (Extraordinary) No.2170/4 dated 08.04.2020 issued under the FEA effective as of 08.04.2020 for a period of 06 months:
- Any Sri Lankan individual resident in or outside Sri Lanka to include Dual Citizens, Citizens of other States with Sri Lankan origin, non- nationals resident in or outside Sri Lanka, any person resident outside Sri Lanka including funds, corporate bodies, associations and other well-wishers, are permitted to open and maintain an account titled “Special Deposit Account” ( SDA) in the form of Term Deposits either as an individual or joint deposit, in any designated foreign currency or in Sri Lanka Rupees with a Licensed Specialised Bank or the National Savings Bank in Sri Lanka. Funds to such account will require to be inward remittances routed through the banking system with permission granted to any person having an Inward Investment Account (IIA) or an account at the Offshore Banking Unit (OBU) with a Licensed Specialised Bank in Sri Lanka being to remit funds through such accounts to the credit of the Special Deposit Account.
[For the purpose of this provision ‘designated foreign currencies’ shall mean United States Dollars (USD), Euro, Sterling Pound, Australian Dollars, Singapore Dollars, Swedish Kroner, Swiss Franc, Canadian Dollars, Hong Kong Dollars, Japanese Yen, Danish Kroner, Norwegian Kroner, Chinese Renminbi and New Zealand Dollars]
The SDA shall be held for a minimum tenure of 06 months from date of deposit and upon maturity be convertible and be repatriated (if relevant) with no special approval required; interest payable shall be calculated at 1 percentage point and 2 percentage points per annum above the deposit interest rates otherwise applicable at the relevant time for a tenure of 6 months and 12 months, respectively, payable at maturity.
- SDA’s will be exempted from any procedural requirements specified in the above mentioned Foreign Exchange (Classes of Capital Transactions in Foreign Exchange Carried on by Authorized Dealers) Regulations No. 1 to include the requirement to have all inward remittances for capital transactions and returns thereon to be routed via an Inward Investment Account (IIA) established by the foreign investor with a licensed Specialised Bank in Sri Lanka.