KPMG experts share key insights on foreign exchange rules and regulations

ON 10 September, KPMG Sri Lanka hosted a timely and insightful webinar exploring the evolving regulatory landscape under the Foreign Exchange Act No. 12 of 2017, with a particular focus on the latest amendments introduced via Gazette No. 2441/14, effective from 20 June and valid until 19 December.

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KPMG Principal - Tax Suresh Perera opened the session with an overview of the new regulations issued under Section 22 of the Act. He emphasised that the new Gazette impacts the Outward Investment Account (OIA), Personal Foreign Currency Account (PFCA), and Business Foreign Currency Account (BFCA).

Perera clarified that while outbound investments via OIA are generally suspended, there are several exceptions that one needs to be mindful of. He further stated that remitting of funds for current transactions is permitted, provided they submit appropriate documentation to Authorised Dealers (ADs) to validate the nature of the remittance. Current account transactions are broadly categorised under foreign trade, loan interest, payments for amortisation of loans, family expenses, and miscellaneous etc.

Associate Director Sasiruba Balasubramaniam elaborated on the specific exceptions to the suspension of outbound investments. Eligible investors may invest in ordinary shares of companies incorporated outside Sri Lanka, subject to defined thresholds:

Listed companies: Up to the lower of $750,000 or 20% of net assets.

Unlisted companies: Up to the lower of $ 200,000 or 20% of net assets.

Additionally, Sri Lankan companies may invest overseas if the investment is entirely financed through:

Other permitted outbound investments

The regulations also allow:

Followup investments to meet regulatory requirements in the investee’s country.

New overseas office setups by Sri Lankan companies (up to $100,000).

Additional investments in offices established prior to the Gazette's effective date (up to $30,000).

Licensed banks to invest in overseas subsidiaries and branches.