A Step By Step Guide To Foreign Exchange Transactions

Exchange Earners’ Account (FEEA) or sell to abank and obtain Sri Lanka rupees.1.7 How can I send my salary into Sri Lanka fromabroad? You can send money to Sri Lanka:o through bankso through money transfer services who havearrangements with banks You can send money to the following accounts:o Non-Resident Foreign Currency (NRFC)Account/ Resident Foreign Currency (RFC)Accounto Special Foreign Investment Deposit Account(SFIDA) maintained by youo Any rupee account1.8 If I am a Sri Lankan working abroad, can Iget a loan from a bank in Sri Lanka?(a) Loans in foreign currency You can also obtain loans in foreign currency forconstruction or purchase of residential houses inSri Lanka. You can obtain loans for any purpose upto 90%of your NRFC balance.These loans should be repaid in foreign currencywhile you are employed abroad.(b) Loans in Sri Lanka Rupees You can obtain a rupee loan if you are a NRFCaccount holder for any purpose. However, youshould repay the loan in foreign currency whileyou are employed abroad.1.9 Payments using Electronic Fund TransferCards (EFTC) including debit cards andcredit cards(a) If you are living in Sri Lanka, you can makepayments using EFTC for goods and services ofpersonal nature obtained from abroad as follows:12A Step by Step guide to Foreign Exchange Transactions

Services including travel, accommodation,medical, living and educational expenses Purchase of goods for personal use abroad Import of goods into Sri Lanka for personaluse, upto USD 5,000 Registration fees, tuition fees, examinationfees and membership fees for professional oracademic institutions Insurance premium on travel and healthinsurance Payments while in Sri Lanka for overseas traveland accommodation(b) When you are migrating or leaving Sri Lankafor foreign employment, you have to hand overyour EFTC to the bank.(c) If you have a Non-Resident Foreign Currency(NRFC), Resident Non-National ForeignCurrency (RNNFC), Resident Foreign Currency(RFC) accounts or an account maintained in theOff-Shore Banking Unit (OBU), you can obtainan EFTC and you can use such EFTC for anytransaction permitted under the accounts.B.Business1.10 How can I receive payments for export ofgoods?You can receive export income into any rupeeaccount or into a Foreign Exchange Earners’Account (FEEA). You can also retain exportincome abroad, however, you cannot use suchfunds for acquisition of capital assets abroad.1.11 How can I receive payments for export ofservices?You can receive export income into any rupeeaccount or into a Foreign Exchange Earners’Account (FEEA). However, you cannot retainsuch proceeds abroad.1.12 Can I make payments for Imports?You can make payments for imports subject tothe trade policy of the Government implementedby the Controller of Import and Export.A Step by Step guide to Foreign Exchange Transactions13

1.13 Can I make payments for services obtainedfrom abroad?You can make payments through any bank onsubmission of the documents requested by thebank.1.14 Can I open an account abroad?If you are:(i) a person resident in Sri Lanka who hasproceeded outside Sri Lanka temporarily forbusiness, studies or for medical purposes;(ii) an individual or a company or a firmregistered in Sri Lanka who provideprofessional or vocational services outsideSri Lanka while being a resident in SriLanka;(iii) an individual or a company or a firmregistered in Sri Lanka who has beenpermitted by the Minister of Finance andPlanning to invest outside Sri Lanka;(iv) an exporter of merchandise goods;(v) a person who has obtained a valid permanentresidency permit from another country; or(vi) a dual citizenyou can open an account abroad.14A Step by Step guide to Foreign Exchange Transactions

Chapter 2How can I take money fromSri Lanka if I am migrating?2.1 What is the Migration Allowance? If you have the Permanent Residency (PR) inanother country and if you are 18 years andabove, you can take USD 150,000 out of SriLanka, when you are migrating from Sri Lanka. After 12 months from taking USD 150,000 infull, you can take USD 20,000 every year. You need to open a Migrant Blocked Account(MBA) with any bank, to apply for theseallowances. If you received the PR before 12th June 2013,you need to obtain the approval of theController of Exchange to take the allowancesby submitting the documents at Annex 2. If you received the PR after 12th June 2013, youcan apply for this allowance through any bank. You can take your provident fund, gratuity,pension and income received after 12th June2013 separately from your migration allowance. From your MBA, you can deposit yourallowances into a Non-Resident ForeignCurrency (NRFC) account or to one of youroverseas accounts.2.2 What is a Non-Resident Blocked Account(NRBA)? You can open this account with any bank in SriLanka in the form of savings or current accounts. You can deposit all your income and moneyreceived from selling your property in Sri Lankainto this account.A Step by Step guide to Foreign Exchange Transactions15

2.3 How can I open a Migrant Blocked Account(MBA)? You can maintain only one MBA. To open an MBA, go to any bank with thefollowing: - National Identity Card- Sri Lankan passport- Foreign passport (if applicable)- PR documents2.4 How can I sell property I own in Sri Lankaand take money abroad?16 The buyer do not need permission from theController of Exchange to pay you and you donot need permission to sell the property youown in Sri Lanka and receive sale proceeds fromthe sale. If you bought the property with funds you havesent to Sri Lanka from overseas, you can take thefull amount received from the sale, apart fromthe migration allowance through any bank in SriLanka. If you did not buy the property with moneyyou sent to Sri Lanka from overseas, you cantake the money received from the sale as a partof the migration allowance.A Step by Step guide to Foreign Exchange Transactions

Chapter 3If I am resident outsideSri Lanka, how can I makeInvestments in Sri Lanka?3.1 Who can invest in Sri Lanka? Foreign Institutional Investors includingcountry funds, regional funds or mutual funds A corporate body incorporated outside SriLanka Citizens of foreign states whether living in SriLanka or outside Sri Lanka Non-resident Sri Lankans3.2 What are the investment opportunitiesavailable in Sri Lanka? Shares in companies incorporated in Sri Lanka(both listed and unlisted) Units in Unit Trusts Treasury bonds Treasury bills Sri Lanka Development Bonds Debentures Deposits (i.e. Special Foreign Investment DepositAccounts -SFIDA) Setting up of places of business in Sri Lanka Immovable property Lending money to Sri Lankan companies (undergeneral or special permission)3.3 Can I invest in Shares?You can acquire upto 100% of the shares of acompany in Sri Lanka.A Step by Step guide to Foreign Exchange Transactions17

(a) However, you are not allowed to invest in sharesof companies in the following business areas:(i) Money lending(ii) Pawn broking(iii) Retail trade with a capital of less than USD1 million(iv) Coastal fishing(v) Provision of security services(b) Further, you will only be permitted to invest upto40% of the capital of the companies engaged inthe following areas of business, unless the Boardof Investment of Sri Lanka (BOI) has approvedof a higher percentage:(i)Production of goods where Sri Lanka’sexports are subject to quota restrictions(ii) Growing and primary processing of tea,rubber, coconut, cocoa, rice, sugar andspices(iii) Mining and primary processing of nonrenewable national resources(iv) Timber based industries using local timber(v) Fishing (deep sea fishing)(vi) Mass communications(vii) Education(viii) Freight forwarding(ix) Travel agencies(x) Shipping agencies(c) To invest in the following areas of business, youneed to obtain permission from the relevantgovernment authority.(i) Air transportation(ii) Coastal shipping(iii) Industries which are involved in followingactivities:18A Step by Step guide to Foreign Exchange Transactions

manufacturingarms,ammunitions,explosives, military vehicles and equipment,aircraft and other military hardware manufacturing poisons, narcotics, alcohols,dangerous drugs and toxic, hazardous orcarcinogenic materials producing currency,documentscoinsorsecurity(iv) Large scale mechanized mining of gems(v) Lotteries3.4 Can I invest in Units in a Unit Trust?You can invest in units in a unit trust in SriLanka which operates on a license issued bythe Securities and Exchange Commission of SriLanka (SEC).3.5 Can I invest in Treasury bonds (T-bonds) andTreasury bills (T-bills)?You can invest upto 12.5% of the totaloutstanding stock of T-bonds and T-bills at agiven time.3.6 Can I invest in Sri Lanka Development Bonds(SLDBs)?The following investors can invest in SLDBs:i.Primary Dealers appointed by the CentralBank of Sri Lanka.ii. Citizens of foreign states whether living inSri Lanka or outside Sri Lanka.iii. Citizens of Sri Lanka who are living outsideSri Lanka, permanently.iv. Citizens of Sri Lanka who have proceededoutside Sri Lanka to take up employment orto set up a business or engage in a profession.v. Companies or firms established outside SriLanka.vi. Companies registered to carry on insurancebusiness in Sri Lanka.A Step by Step guide to Foreign Exchange Transactions19

3.7 Can I invest in listed debentures?You can invest upto 100% of the issue of listeddebentures.3.8 Can I make investments in Special ForeignInvestment Deposit Accounts (SFIDA)?If you wish to maintain deposits in Sri Lanka,you can open a SFIDA with any bank. SFIDAscan be opened as time or saving deposits indesignated foreign currencies or in Sri Lankarupees and can be held jointly, subject tomaintaining of a minimum balance of USD10,000.3.9 Can I open places of business in Sri Lanka?(a) You can establish branch, liaison, project,representative, regional or other similar offices(Overseas Companies) in Sri Lanka.(b) An Overseas Company engaged in permittedcommercial, trading, or industrial activity needsto invest a minimum of USD 200,000.(c) Overseas Companies are not permitted to carryout operations in the following business areas:i.Money lendingii. Pawn brokingiii. Retail trade with a capital of less than USD2 millioniv. Coastal fishingv. Growing and primary processing of tea,rubber, coconut and ricevi. Mining and primary processing of nonrenewable national resourcesvii. Freight forwardingviii. Shipping agency businessix. Mechanized mining of gemsx. Lotteriesxi. Security services including securitymanagement, assessment and consulting toindividuals or private organizations.20A Step by Step guide to Foreign Exchange Transactions

(d) To engage in the following businesses, you haveto obtain the permission of the Controller ofExchange:i.Production of goods where Sri Lanka’sexports are subject to internationallydetermined quota restrictionsii. Growing and primary processing of sugar,cocoa and spicesiii. Timber based industries using local timberiv. Deep sea fishingv. Mass communicationvi. Educationvii. Outbound travel agency businessviii. Local air transportationix. Coastal shippingx. Any industry manufacturing or producing: Arms, ammunitions, explosives, militaryvehicles and equipment, aircraft and othermilitary hardware Poisons, narcotics, alcohols, dangerousdrugs and toxic, hazardous or carcinogenicmaterials Currency, coins or security documents3.10 How can I fund my Investments in Sri Lanka? You need to open a Securities InvestmentAccount (SIA) with any bank to channel thefunds for the above investments. SIA can be opened in the name of the investorand can be held jointly. It can be maintained in Sri Lanka rupees or inany designated foreign currency. You can use the same SIA for remitting backsale proceeds/ dividends/ profits or othersimilar receipts related to the investments freely,A Step by Step guide to Foreign Exchange Transactions21

without coming to the Central Bank.3.11 In the event of making remittances to anOverseas Company (branch, liaison, project,representative, regional or other similaroffices): The investment have to be made through anSIA. Once the proposed Overseas Company isregistered with the Registrar General ofCompanies, the required funds may betransferred from the SIA to the rupee accountof the Overseas Company in Sri Lanka. The Overseas Company can transfer profit,royalty, franchise or other similar payments orsurplus funds (net of taxes) into the SIA of theinvestor without coming to the Central Bank.3.12 How can I buy immovable property in SriLanka? You can buy immovable property in Sri Lankaas per the laws relating to lands in Sri Lanka. The funds to buy the property can be channeledthrough an SIA. If the purchase was made through an SIA, thesale proceeds of the immovable property can befreely remitted back through the SIA. If the purchase was made through a directinward remittance, you need to provide proof ofremitting funds to Sri Lanka to buy the propertyprior to remitting the sale proceeds.3.13 Can I lend money to Sri Lankan Companies?You can lend money to companies in Sri Lankaunder the External Commecial BorrowingScheme (ECBS) or to companies to whichspecial permissions have been granted by theController of Exchange.22A Step by Step guide to Foreign Exchange Transactions

Chapter 4How can I obtain aforeign currency loan?4.1 If you are living in Sri Lanka, you can obtaina foreign currency loan from any bank if youhave: a Foreign Exchange Earners’ Account (FEEA)or a Non-Resident Foreign Currency (NRFC)account and if you are working abroad.To obtain a loan, you need to have a regularincome in foreign currency.4.2 If you are a company incorporated underthe Companies Act, No. 07 of 2007, you cannow obtain a foreign currency loan underthe External Commercial Borrowing Scheme(ECBS). Under the ECBS, you can borrow: from a foreign source up to USD 10 million in any one year for the period from 01.01.2013 to 31.12.2015However, if you are a company limited by aguarantee or an individual or a partnership, youwill not qualify to borrow under the ExternalCommercial Borrowing Scheme(ECBS).4.3 If you do not qualify to borrow under ECBSor if you want to exceed the limits of ECBS,you can make an application to the Controllerof Exchange for special permission for suchborrowing.4.4 List of documents to be submitted for specialpermission:i.A request addressed to the Controller ofExchangeA Step by Step guide to Foreign Exchange Transactions23

ii. A completed application form as per Annex 3iii. A statement of purpose of the loan withprojected repayment and cash flowsiv. Latest audited financial statementsv. A confirmation by the applicant’s bank onforeign exchange earnings of the applicant ifanyvi. A copy of the Certificate of Incorporationand Articles of Association of the companyvii. Evidence with regard to the lending partyviii. A certified copy of the draft loan agreementix. A statement including an analysis of thebusiness performance of the applicantduring the past five years4.5 If you are studying abroad and you wantto obtain a loan to meet tuition fees andliving expenses abroad, you can now obtaina students’ loan from foreign financialinstitutions.24A Step by Step guide to Foreign Exchange Transactions

Chapter 5How can I make investmentsoutside Sri Lanka?5.1If you are living in Sri Lanka, you can now makeinvestments overseas in foreign companies andin foreign sovereign bonds. You can also investto set up a branch of a Sri Lankan companyabroad.5.2 To make such an investment, you do nothave to come to the Central Bank to obtainpermission, if: you are a company listed in the Colombo StockExchange (CSE), and are buying shares orforeign sovereign bonds upto a value of USD500,000 in any one year. you are a company not listed in the CSE, andare buying shares or foreign sovereign bondsupto a value of USD 100,000 in any one year. you are an individual or a partnership, and youare buying shares or foreign sovereign bondsupto a value of USD 100,000. you are a company or a partnership, and youare setting up an overseas office, where you areinvesting upto a value of USD 100,000 peroffice. you are an employee who is entitled to anEmployee Share Option Scheme (ESOS) of aforeign company, where such foreign company’sESOS to all its Sri Lankan employees is less than5% of the total shares issued by the company.However, if you are:(a) a company limited by a guarantee(b) a Non Governmental Organization (NGO)or(c) an individual, company or a partnershipA Step by Step guide to Foreign Exchange Transactions25

which has a case pending under theExchange Control Act, you will not beeligible to make investments as above.5.3If you do not qualify to make investments as per5.2 above, but you still wish to invest abroad,you may still do so, provided you make anapplication to the Controller of Exchange tomake such an investment.5.4Whenever you make investments outside SriLanka, you have to make those investmentsthrough an Outward Investment Account(OIA), which can be opened in any bank, in anyof the designated foreign currencies. However,rupees converted for sending abroad throughan OIA cannot be retained in the OIA withoutmaking the investment.5.5 You need to submit the following documentsto the bank at the time of making theinvestment:i.A duly filled application obtained from thebankii. A recommendation from a fellow memberof the Institute of Chartered Accountants ofSri Lanka on the proposed investmentiii. An affidavit stating that no outwardremittance has been effected through anybank for the same investment and noapplication has been forwarded to obtainthe foreign exchange allowance for thepurpose of migrationiv. Clearance from the Exchange ControlDepartment that there is no pendinginvestigation under the provisions of theExchange Control Actv. Other documents as may be required by thebank.5.6 Also you need to submit the followingdocuments after making the investmentabroad:(a) Within three months from the outwardremittance of foreign exchange:26A Step by Step guide to Foreign Exchange Transactions

i.Copies of the Certificate of Incorporation,Memorandum and Articles of Associationof the new company incorporated outsideSri Lanka in case of an investment in theshares of an unlisted companyii. A copy of the Registration Certificate ofoverseas officesiii. Copies of the share certificates issued or anyother proof in respect of a share investmentin an unlisted company incorporatedoutside Sri Lankaiv. Copies of share investment/enrolmentcertificates issued to all Sri Lankanemployees who subscribed to an EmployeeShare Option Scheme.(b) On a monthly basis, statements from relevantCentral Depositary Systems of overseas stockexchanges with regard to th

A. Foreign Currency Accounts 7.1 Non-Resident Foreign Currency Account (NRFC) 34 7.2 Non-Resident Non-National Foreign Currency Account (NRNNFA) 35 7.3 Diplomatic Foreign Currency Account (DFA) 36 B. Rupee Accounts 7.4 Diplomatic Rupee Account (DRA) 37 8. Chapter 8 : Do I need Exchange Control approval to