FREQUENTLY ASKED QUESTIONS
Under section 16 of the BOI Act, the entry of foreign investment is permitted without any fiscal concessions. These projects are governed under Normal laws of the country and are subjected to Inland Revenue Laws, Custom Laws and Exchange Control regulations.
Section 17 of BOI Act paves path for foreign investors to get their investments qualified for the concessions extended by the BOI, provided that the project fulfills the required amount of investment.
This investment requirement differs according to the sector
Tourism and leisure projects – US$ 500,000
Retail Trade Activities – remitting a minimum of US$ 1 Mn
Exemption on Exchange Control -Exchange Control exemption is granted for Export-oriented projects under Sec. 17 of BOI Law and Strategic Development Projects. At present, a project is considered as an export oriented project only if it exports 90% of goods produced [60% for Apparel & Ceramic] or services [with 70% turnover in convertible foreign currency]. Parts I, IA, II, III, IV V & VI of the Exchange Control Act are exempted for these companies and they are entitled to open and operate Foreign Currency Banking Unit (FCBU) account in any commercial bank in Sri Lanka.
BOI recommends applications of visa for the investors, employees and their dependents (spouse and Children) of the BOI approved projects under the section 16 & 17 of the BOI Law.
An annual resident’s visa could be obtained for the investor and his/her dependents whereas renewable working visa for 1 year could be obtained for foreign employees. A Resident Guest Scheme has been introduced as an incentive for prospective foreign investors and professionals who would contribute to the economic and socio-cultural development of the country. The scheme is open to all foreign nationals. Any foreign investor/professional who could contribute to the economic and socio – cultural enrichment of the country can apply.
To obtain a Residence Visa, it is necessary to arrive in Sri Lanka on an Entry Visa issued by a Sri Lanka Mission abroad with the concurrence of the Controller General of Immigration and Emigration. Visit Visas issued without the Controller General’s approval will not be considered for conversion into Residence Visas.
Yes. However, under the BOI Act, the activities of a company have to go in line with the minimum investment requirement, to be able to have 100% foreign ownership. As long as a company does not possess the ownership of land in Sri Lanka, it is possible for foreigners to have 100% ownership of a company.
Outright purchase rights for land might be granted to foreign investors by the government of Sri Lanka, for exceptionally large projects under special terms.
In such scenario, a company should partner with a local party in order to purchase land in Sri Lanka if not the option would be to acquire land on lease basis.
However, as per the prevailing law of Sri Lanka, outright purchase of land is prohibited to the following unless a local partner is involved for a major stake;
- A foreign national
- A foreign company
A company incorporated in Sri Lanka, of which, 50% or more of its shares are held by a foreign national or a company
There are various laws which regulate the employer-employee relationship, including provisions relating to maximum working hours and annual leave entitlements.
All employees are required to contribute at least 8% of their earnings to the Employee’s Provident Fund. This is matched by an employer’s contribution of 12%. In addition, employers must also contribute 3% to Employees Trust Fund.
The Sri Lanka National Arbitration Centre (SLNAC) having been established and incorporated in 1985 functions as the leading institution that furthers the goals and objectives of commercial arbitration in Sri Lanka. It handles all operations related to the conduct of arbitration while being a facilitator, registrar, coordinator of accommodation facilities, provider of secretarial services and other necessary duties. As for now, arbitration services are provided in Singapore.
Consumption driven growth was largely reflected in deceleration in domestic savings ratio.2015 recorded the lowest domestic savings ratio since 2012 (from 27.2% to 22. 6% as a percentage of GDP). The drop in savings ratio was driven by slowdown in private savings and reflecting the increase in public consumption expenditure (which grew at 5.5% in 2015 compared to 8.3% in 2014) and government dissaving which grew by 93% in 2014/15.
Consumption expenditure drove the growth in aggregate demand attributed to the decline in global commodity prices and the increase in disposable income (the combined result of low interest rates and inflation rate and fiscal stimulus of the January 2015 budget).
This was reflected both in domestic consumption (6.9% in real terms) and surge in import demand. As a result the domestic FMCG sector, consumer durables sector and demand for motor vehicles (less than 1000cc) enjoyed significant volume growth in 2015. (source – Central Bank Report, 2016 )
In 2015, Sri Lanka reached 99th Rank in the EoDB index, above countries such as Maldives, Myanmar, Pakistan, Bhutan, Bangladesh and even India.
Securities Investment Account (SIA) is a special account designated for eligible investors residing outside Sri Lanka to route funds to invest in the permitted investments. Authorized dealers are permitted to open and maintain SIA in the Domestic Banking Unit of a licensed commercial bank in the name of the investor resident outside Sri Lanka, subject to the terms and conditions stipulated in the Direction given below. A SIA may be maintained in Sri Lanka rupees or in any designated foreign currency and may be held jointly by eligible investors.
The returns of investments made through the SIA such as sale proceeds/dividends/ profits or other similar receipts can be remitted without referring to the Exchange Control Department, subject to the terms and conditions stipulated.
Domestic consumption rebounded as incomes grew, particularly among public sector workers. Agriculture and services related activities grew by 5.5% and 5.3% respectively, while industry related activities grew by 3.% during 2015. Inflation, as measured by the year on year change in the Colombo Consumers’ Price Index (CCPI) was in negative territory during July-September 2015, mainly due to subdued commodity prices. This was the first time that inflation turned negative since March 1995.
An increase in the labor force participation was shown in year 2015, particularly by women, despite the increase in the unemployment rate which reached 4.6% from 4.3%. There was a notable increase in unemployment among youth and those who are with GCE A/L or higher academic qualifications. The labor force participation rate increased to 53.8% from 53.3% and the labor productivity increased during 2015 with positive contributions from all three sectors of the economy.
If not the following taxes must be paid:
Corporate Tax: Tax Rates (Subject to change as per proposed draft by Ministry of Finance 2017 May)
• Where the Company’s Taxable Profit over Rs.5,000,000, the tax is follows
• Public Quoted @ 30%
• Others @ 32.5%
• Where the Companies Taxable Profit is less than Rs.5,000,000, the tax is at 20%
• Generally, Companies with tax concessions, exports, construction, Tourism are taxed at 15%.
• Agriculture is exempt for five years from 2005/06.
• All Dividends paid will be liable for a Tax of 10%.
• Dividends received does not form part of Assessable Income.
• Gross Interest is liable for Income Tax and the 10% withholding Tax can be deducted.
• Interest Income on Secondary Market transactions should gross up and taxed and withholding tax deductible.