EPF submits offer to exchange portfolio of Treasury Bonds under DDO

On Sep 14, 2023

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The Employees’ Provident Fund (EPF/the Fund) informs its members that as an eligible participant and with the approval of the Monetary Board of the Central Bank of Sri Lanka, it has submitted an offer to exchange the portfolio of Treasury Bonds of the EPF under the Domestic Debt Optimization (DDO) programme in terms of the invitation made by the Ministry of Finance, Economic Stabilisation and National Policies (MOF) following a Resolution adopted by Parliament.

Accordingly, the following are brought to the notice of the members: a. On July 4, 2023, MOF announced the Government’s policy on domestic public debt optimization strategy, which was approved by the Parliament by a Resolution on July 1, 2023.b.

As per the announcement, MOF has identified, inter-alia, the conversion/exchange of existing treasury bonds of superannuation funds into new Treasury bonds to constitute the DDO, to avoid superannuation funds incurring a substantially higher tax of 30% on taxable income from Treasury bond investments. This tax will be applied from 01 October 2023, as per the Inland Revenue (Amendment) Act, No. 14 of 2023.

At present, the tax rate applicable to the income of the EPF including the income from Treasury bonds is 14% and the continuation of a concessionary tax rate of 14% beyond September 30, 2023 is contingent upon the effective participation of the EPF in the DDO as defined in the Act. c.

The Exchange Memorandum dated July 4, 2023 and subsequent amendments issued by MOF contained comprehensive details of the debt conversion/exchange.

Further, the MOF held an investor presentation on July 7, 2023, outlining the proposed terms of the debt exchange and its implications, and subsequently issued clarifications to questions raised following this presentation.

As per the Exchange Memorandum, eligible holders were required to analyse the implications of making or not making an offer by reference to the legal, tax, financial, regulatory, accounting and related aspects of the DDO. All communications in this regard can be accessed through https://treasury.gov.lk/web/ddo.

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