Port City duty-free complex operational procedure embroils in regulatory snags

The Colombo Port City dutyfree shopping complex set to be opened in April this year has come under extensive scrutiny of the Committee on Public Finance (COPF) at its meeting held on Monday.

The Committee has assessed operational procedures of the duty free shopping complex, its feasibility and potential consequences and directed to conduct a comprehensive study to evaluate the potential effects on local businesses and the taxation framework within Sri Lanka.

Singapore-owned omnichannel retailer, One World Duty Free (ODF), and Port City Colombo have signed two agreements to operate the duty-free shopping complex.

The partnership was underscored with the formalisation of two critical agreements: an Authorised Person Agreement between ODF and the Commission and a lease agreement between ODF and CHEC Port City Colombo Ltd (CPCC).

However the Department of Fiscal Policy (DoFP) has to evaluate and guide the design of all tax incentives, including those based on the Strategic Development Project Act and the Port City Act, Finance Ministry sources said.

Preparing the necessary structures, including data sharing protocols and legal documents that assign authority to the DoFP will take time, it was stated.

There was to be a US$5,000 allowance for returning Sri Lankans and any amount for foreigners, according to concessions gazetted on May 29, 2023.

COPF chaired by Dr. Harsha De Silva MP, summoned officials on the opening of a dutyfree shopping mall soon in Colombo's Port City.

The committee stressed the need of Investment Promotion Ministry Secretary’s intervention to resolve the issues promptly.

The Attorney General and the Port City Economic Commission have submitted different viewpoints regarding the legal framework governing the proposed duty-free shopping mall.

Acting Secretary of the Ministry of Investment Promotion Anoja Herath told the committee that draft regulations relating to duty-free shopping malls had been submitted to the cabinet for review and approval.

Dr. De Silva said the Attorney General's assertion clearly stipulated that the commission lacks jurisdiction to specify duty-free goods valued at up to $5,000 only for locals.

The Port City Commission in a letter through a private law firm disputed this view, stating the commission's full legal authority to legislate on duty-free shopping malls disputing the Attorney General's opinion.