The Board of Investment of Sri Lanka (BOI) is the central facilitation point for foreign investors. BOI provide assistance and advice throughout the investment process from initial point of inquiry through project approval, implementation, monitoring and aftercare facilities. The BOI currently facilitates investors on a sector-focused approach. And has established a the “Investor Facilitation Centre at the World Trade Center, for this purpose. The entire process will be coordinated by a project officer with the assistance of other relevant departments of the BOI. Board of Investment of Sri Lanka is empowered to approve projects under the following categories.
Projects approved under Section 16 of BOI Law, where 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.
These approvals are granted;
- Only to facilitate the entry of foreign investment
- To setting up of a new company with foreign shareholding or
- For the purpose of transferring or issuance of new shares in an existing non-BOI company to foreign investors.
At present the minimum investment requirement to qualify for the section 16 projects is US$ 250,000. This can be either 100% foreign investment or a joint venture investment with a local collaboration. Foreigner has to remit a minimum of US$ 1 Mn if they are to undertake trading activity.
The proposed foreign investment should be effected from funds remitted through a Securities Investment Account (SIA) as indicated in the Gazette Extraordinary No.1232/14 published by the Controller of Exchange. Projects approved under Section 17of BOI Law, it is empowered to approve projects and enter into agreements with enterprises and to grant exemptions from laws such as Inland Revenue, Exchange Control and Customs, subject to fulfillment of the investment threshold or any other specified requirement. as per BOI Application(s) Under Section 16 & 17
How to register a business
Starting a business involves making many key decisions, both financially and legally. This guide provides the information to help you plan, prepare and operate your business in Sri Lanka.
Researching and Planning
To increase your chance for success, take the time up front to explore the investment opportunities in Sri Lanka. Then use this information to build a comprehensive and well thought-out business plan that will help you reach these goals.
Choosing a Location
It’s important to consider several factors when deciding on the location of your business. For the most part, the ideal location for your business will be dependent on what kind of business you run. Ease of access, proximity to competitors, zoning (free Zone by the Sri Lankan govt.) and signage regulations are all things to keep in mind. Get advice about choosing your best location and complying with zoning laws.
Financing Your Business
Every business needs capital at some point to start up or expand. The most frequent source of funding is to look for some kind of business loan or to set up a fund by gathering partners.
Choosing a Business Structure
When beginning a business, you must decide which form of business entity to establish. Your form of business determines the amount of paperwork you have to file, liability regarding investments into your business, and the taxes you have to pay.
Choosing a Fictitious Business Name
A fictitious business name statement is required if the company name is different than your own. Fictitious business name statements are obtained through your local county business registration office.
Registering for Taxes
Register with government of Sri Lanka, and find out about corporate, payroll, income, and sales tax, as well as learn more about different tax assistance programs for your type of business or investment.
Registering for Permits
The business activity type chosen largely determines the licenses and permits needed to operate a business legally. Keep in mind, business licenses are obtained through your country of business operation and the export destinations you have planned.
Learn the legal steps you need to take to hire new employees. There are specific state and local requirements regarding equal opportunity employment, employee safety and health protection, taxes and insurance – find out more from the BOI of Sri Lanka or
HOW TO OBTAIN A NAME APPROVAL
You must first search the database of the registered companies through this portal or using the books kept on the information counter of Registrar-General of Companies (ROC) for possible similar names..
After you verify the availability of the Name, fill the Name search form ( ie A16) in this portal or manually using the form collected from the information counter of the ROC
The form A 16 is examined by at the public information counter (if you hand over the form). More information may be requested depending on the manner in which the forms have been filled. This may be done by e-mail if portal is used. If the name includes initials please indicate what those initials stand for.
You can either send a Name search application using this portal paying Rs. 1151.63 (fees Rs. 1000/= + 11% VAT + Processing charges) (only Sampath e-Wallet, Mater and Visa cards are accepted) or submit manually paying Rs. 1110.00 (Fees Rs1000/= +11% VAT) to the Shroff counter at the Department of ROC
The Name verification document is sent to the database administrator who will run a search for similar names which he will list and submit send it to the Registrar-General of Companies
The Registrar-General of Companies (or his Officers) have the sole discretion to approve the name s delegate authority to approve. He may approve the name OR request more information OR a change to the proposed name. If the name is approved. Approval Number can be collected over the information counter of ROC or if sent through the portal will be e-mailed the following day.
This Reservation valid only for a period of 3 months from the date of application
There are many areas where tax incentives are available. Section 3.3 above details some of the areas where incentives are available for foreign investments.
In general, the preferred areas are exports of goods or services, tourism, agriculture, infra-structure development, construction, Information Technology & software.
- Value Added Tax (VAT)
- Turnover Tax
- Income Tax (Personal and Corporate)
- Economic Service charge (ESC)
- Custom Duties
- Remittance Tax
- Others-Social Responsibility levy.
A Value Added Tax system was introduced on 1st August 2002. Value Added Tax is charged on the destination principle & is liable on supply of goods & services in Sri Lanka. It is a consumption tax, thus goods imported into Sri Lanka and goods & services supplied within the territorial limits of Sri Lanka are the subject matter of this tax. For clarity, the table below states the rates applicable. For clarity, the table below states the rates applicable.
Category Rate Input Credit
- Essentials 5% Not entitled (except for motor vehicles for transport & production machinery)
- Standard Rate 15% 15%
- Luxury Rate 18% Limited to 15%
- Zero Rate is applicable on Exports and Supply of services in Sri Lanka to be consumed outside
- Sri Lanka (includes services provided by a Garment Buying office).
- VAT is not collected on listed Exempt Supplies of Goods & Services and no input credit is available.
- A special rate of 25/= per piece of garment supplied to the Local market by a BOI manufacture cum Exporter with the approval of BOI/Director General of Customs.
In 1981, the Business Turnover Tax introduced by Finance Act No.11 of 1963 was replaced by the Turnover Tax Act No. 69 of 1981 and is effective from 13th November 1981.
Goods & Services Tax was introduced w.e.f. 01.04.1997 (and presently Value Added Tax) to mitigate the cascading effect on domestic consumption Goods & Services. Turnover Tax is collected only from Wholesale & Retail sector and payable to Provincial Councils. Turnover Tax is charged for every quarter from every person who carries on any Wholesale or Retail business in Sri Lanka. The tax is payable for a quarter in respect of any business, if the Turnover for that quarter is not less than Rs.25,000
The main rationale and the primary function of Income Tax is the raising of revenue for Government expenditure. The other functions include social & economic purposes such as;
- A more equitable income re-distribution
- Increasing savings and Capital formation
- Channelling investment in desired directions through the allocation of resources
- The existing income Tax in Sri Lanka is based on the Inland Revenue Act No: 38 of 2000 and up to 31st March 2000 it was based on Inland Revenue Act No: 28 of 1979 with its subsequent amendments
The principles of Taxation and its main characteristics are as follows:
- The Tax is levied on the Income of any person arising in or derived from Sri Lanka. A resident is taxable on world income, and any other person is taxable only on income arising or derived in Sri Lanka.
- The Tax is based on Global System, i.e income from all sources are aggregated, except
- Interest & Dividend Income is Taxable on Scheduler system w.e.f. 2002/2003.
- The Income Tax is based on self assessment system, where every person has to make his own Return of Income, compute his Tax liability and pay taxes estimated on previous year tax payable on quarterly basis.
- The Statutory date for filing of Return of income is 30th November immediately succeeding the year of assessment.
- There are number of Tax holidays and Investment incentives, and exemptions and reliefs for emoluments and Income derived from abroad.
- Concessionary tax rates are applicable for Charitable Institutions, Insurance Companies Trusts, Executors, Clubs and Associations etc.
- A system of Withholding Tax is also in use, where Tax is levied at source.
- 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%.
Interest and Dividend Income
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.
Economic Service Charge (Esc)
A new tax was introduced called ESC from 1st April 2004, which could be setoff against Income Tax of the same year, with the provision to carry forward the unutilized balance for the next two years.
Every person or Partnership in every business, profession or vocation other than trading, which has been operating for three years or more, whose aggregate Turnover (excluding sale proceeds of capital assets & VAT) is Rs.50 million in the relevant year is liable, and ESC Payable is limited to Rs.50.mn in that year. The relevant year refers to the turnover of the previous year. Trading becomes liable even below three year rule.
In terms of section 57 (1) of the Inland Revenue Act, a Non- Resident Company is liable to pay remittance tax at 10% on total remittances for that year, from year of assessment 2003/04.
Social Responsibility Levy
Under the Finance Act No 5 of 2005 a Fund was established for the National Action Plan for Children. For this purpose a Social Responsibility Levy of .25% on all Tax payable is charged w.e.f.2005/06 except on GST, VAT & ESC.
Capital Gain Tax
Capital Gain arising on a transaction was treated as a different source of Income in Sri Lanka up to 31st March 2002 and was withdrawn since then.
Non Citizen Employees
Non Citizen Employees are deemed to be non-residents for a period of 3 years from the commencement of employment in Sri Lanka. In this period they will be liable on employment income at concessionary rate of 15% and if they continue to be employed for a further 2 year period the 15% tax continues. Any other income in Sri Lanka is taxed at normal rates.
There is also a system of withholding Tax where tax is levied at source.
Following are some of the withholding tax rates applicable at present:
- All Dividends 10%
- Lottery Prize > Rs.500,000 10%
- Interest 10%
- Treasury Bills 10%
- Non Residential Rental Income > Rs.50,000 p.m 10%
- Specified Fees paid by Specified Persons 5%
- International Treaties & Agreements
Sri Lanka’s tax treaties have generally followed the following two basic principles for granting relief:
(a) the foreign tax credit principle,
(b) the exemption principle
Under the exemption method, income exempted is not taken in to consideration for the determination of tax to be imposed on the taxpayer’s other income.
Tax Sparing Credit relief is also provided in some double taxation agreements, to prevent the loss of double taxation credit negating the incentives offered to taxpayers in the form of tax holidays and tax concessions in developing countries. Such credits are generally given for Dividends, Interest or Royalties or tax spread under a tax holiday or on the profits of subsidiaries out of which dividends have been paid.
Legal guide gives what steps should be taken by a foreign investor to invest in Sri Lanka.The purpose of this Guide is to provide general information on the prevailing Laws and Regulations applicable to foreign investors who wish to invest in Sri Lanka.
The Board of Investment of Sri Lanka (BOI) is the sole Government Agency responsible for facilitating Foreign Direct Investment (FDI) to the country. The BOI’s Legal Department
- Identify the business activity and submit an Application to BOI with a Project Proposal (applications available at www.investsrilanka.lk)
- Incorporate a local company in Sri Lanka in terms of the Companies Act No. 7 of 2007
The following Acts and the Regulations framed thereunder mainly apply to and govern the foreign investment in Sri Lanka
- BOI Act No. 4 of 1978 as amended and its Regulations
- Companies Act No. 7 of 2007
- Exchange Control Act No. 24 of 1953 and its Regulations
- Strategic Development Projects Act No. 14 of 2008 as amended
- Finance Act No. 12 of 2012 Part (iv) as amended (Hub Operation Regulations)
To find the comprehensive guideline click hear.
The Sri Lankan banking and financial services industry is stable, vibrant and market driven and hence as a customer you are at an advantage. There are around 80 institutions spanning hundreds of branch located islandwide, including commercial banks, licensed specialised banks (savings banks and development banks) and licensed finance companies.
3 categories serve different purposes and your interaction will be mostly with commercial banks, of which there are currently 25 institutions. These Banks include local and foreign banks, where the local banks are very well represented around the country and the foreign banks are mostly available to you in the main cities (Colombo, Kandy and Galle).
The Sri Lankan banking industry is known to offer interest rates ranging from 3% to 8% which is relatively high compared to other frontier and emerging markets. The advantage of this scenario is, as an individual you will earn more by saving your money in LKR denominated accounts.
Further down the discussion we will illustrate to you the different types of accounts available to you for your LKR and foreign currency deposits.
Most of the Banks now offer internet banking in order for you to be able to access your accounts and carry out transactions from your home. In terms of physical presence too, the Banks are very committed to be present in every town and city as the level of competition is high. Some banks have even tied up with supermarkets, which also have a wide reach and increases the time available for transactions. Furthermore as the industry is automated you can carry out transactions from any Branch of the Bank you choose, and not restrict yourself to the Branch you opened your accounts.
- Current accounts
- Saving products – you can either have savings accounts or fixed deposit accounts.
Borrowing – there are a host of borrowing products like, personal loans, housing loans, student loans, vehicle loans, loans to fund your children’s education abroad etc.
The above services are offered by some or all of the three categories of institutions described below.
Some popular banks
- Hatton National Bank
- People’s Bank (State-owned)
- Bank of Ceylon (State-owned)
- Commercial Bank
- National Savings Bank (State-owned)
- Standard Chartered Bank
- Deutsche Bank
Types of institutes
- Commercial Banks:
These banks will offer to you all the above services, their accessibility will be the widest, however in terms of the interest rate on LKR deposits it will not be as attractive as finance companies.
- Licensed Specialised Banks:
As mentioned above, this category includes savings banks and development banks. In terms of products, their offering to you is limited. However in terms of housing loans the National Savings Bank will offer to you the best interest rate.
- Licensed Finance Companies:
You will earn the most for your LKR deposits from these institutions. How ever the product offering to you is limited to saving deposits, fixed deposits and vehicle leases or hire purchase.
Workmen’s Compensation in Sri Lanka: The Workmen’s Compensation Ordinance of 1935 and subsequent Amendments is to provide for the payment of compensation to workers who are injured in the course of their employment by an accident arising out of the and during the course of their work.
The Workmen’s Compensation Ordinance of 1935 and subsequent Amendments is to provide for the payment of compensation to workers who are injured in the course of their employment by an accident arising out of the and during the course of their work.
Who is entitled to claim compensation under the Workmen’s Compensation Ordinance?
A workman is defined as “any person who has entered into or works under a contract with an employer for the purposes of his trade or business in any capacity, whether the contract is specified in writing or on an oral agreement, or whether it is a contract of service or apprenticeship or contracted personally to execute any work or labour”.
The payment is calculated by time done, or work done or otherwise. The Ordinance considers ‘period of service’ as a continuous period which has not been interrupted by a period of absence from work not exceeding fourteen days
The law applies to:
- Government Department and local bodies.
in the case of workmen who are masters of registered ships or seamen subject to certain modifications detailed in Section 25 (As per Part IV of the Ordinance)
However, persons working as members of the Armed Forces of Sri Lanka, other than those persons employed in a civilian capacity in those Forces, and members of the Police Force are not included under this Ordinance.
A Sri Lankan visa is an endorsement on a passport or a similar document to facilitate the legal entry of non Sri Lankans into the country and to regulate the period of their stay and the conditions governing such stay.
What are the Types of Sri Lankan Visas?
There are four kinds of visas which permit a person to enter and/or stay in Sri Lanka.
A Visit Visa is an entry permit signifying the consent of the Sri Lankan Government for the admission of a foreign national to the country. The Visa contains details of the period of time and the condition/s of the stay.
There are two sub-categories which come under visit visas :-
- Tourist Visit Visa
A Tourist Visa is issued to bona-fide tourists who want to enter Sri Lanka for sightseeing, excursions, relaxation, visit relatives or yoga training for a short period of time.
- Business Purpose Visa
A Business Purpose Visa is issued to foreign nationals who visit Sri Lanka for business purposes for short period of time. This visa may be issued for single or double journeys.
- Residence Visa
A residence visa is permits for a non-Sri Lankan to obtain residence facilities for special purposes.There are eight sub-categories which come under residence visas.
What Eligibility category do I belong?
- Employment Category
- Project Professional personnel whose services are required for projects approved by the state and expatriate personnel employed in projects under Board of Investment (BOI) of Sri Lanka and their dependants
- Personnel employed at banks and their dependants
- Personnel attached to Non-Governmental Organizations
- Personnel employed in a project, institution or organization under diplomatic missions in Sri Lanka
- Personnel employed in a private company and their dependants
- Investor Category
- Who desire to invest monetary capital in Sri Lanka
- Who engage in business activities in Sri Lanka.
- Religious Category
- Members of the Clergy
- Student Category
- University Students
- Students in Educational Institutions approved by the State
- Other Institutions
- Registered Indians covered by the 1954 Indo-Lanka Agreement.
- Ex- Sri Lankans and their dependants
- Family Members of a Sri Lankan
- Children holding foreign nationality.
- Diplomatic and Official visa
- My Dream Home Visa Programme
- Resident Guest Visa Programme
- Transit Visa
A Transit Visa is an entry permit granted to a foreign national for admission into Sri Lanka for a brief period which is incidental and in the course of his journey to another destination.
- Gratis Visa
The holder of a Diplomatic or Official Passport or a passport with a valid Diplomatic or Official endorsement will not be required to pay any fees for the visa.
Who are eligible for Visa Exemptions?
- Sri Lankan dual citizens.
- Children whose birth has been registered under section 5(2) of Citizenship Act – 1948 upto 21 years of age.
- Children born in Sri Lanka for Sri Lankan parents under 21 years of age.
What are the general eligibility requirements for Sri Lankan Visas?
Sri Lanka Immigration and Emigration may grant or issue a visa to you if –
- Sri Lanka Immigration & Emigration is satisfied that you are suitable to enter Sri Lanka.
- Sri Lanka Immigration & Emigration approves the purpose for which you are entering Sri Lanka.
- You hold a passport valid for a minimum period of six months from the date you arrive in Sri Lanka.
- Sri Lanka Immigration & Emigration is satisfied that you have adequate funds for your maintenance whilst in Sri Lanka and for the payment of your return passage to the country which issued your passport.
- You are in possession of a written assurance (ticket) to return to the country of domicile or a visa to the next country of destination if you are a visit visa holder.
What are the general conditions of a Visit Visa?
- You should not engage in any form of employment, paid or unpaid, or in any trade or business other than that specified in the visa during the period of your stay in Sri Lanka.
- Your visa must be utilized before the date of expiry noted on the visa.
- Validity of your visa is subject to entry into Sri Lanka during the indicated entry period.
Applications for the extension of all visas should be made to the Department of Immigration and Emigration.