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Sri Lanka is a beautiful island country with a free-market ideology that offers several benefits for foreign investment. However, the foreign ownership rules are different across various sectors in the country, and it is important for every foreign entrepreneur seeking company registration in Sri Lanka and investor to understand the foreign ownership rules. Sri Lanka welcomes international investors, but it does not offer 100% foreign ownership in all sectors; a few sectors only allow 40% foreign ownership and some sectors are completely restricted.
Foreigners are also not allowed to buy land in Sri Lanka, and there are restrictions on certain services and industries. These foreign ownership rules are designed to protect the local interests while supporting foreign investment. The Board of Investment (BOI) is the authority responsible for overseeing and supporting the Foreign Direct Investment (FDI) in the country.
Through this blog, you will understand the important foreign ownership rules in Sri Lanka, and Enterslice will offer expert guidance on investing in Sri Lanka as a foreigner.
To legally operate your business in Sri Lanka, you will have to register your company with the Registrar of Companies (ROC). The steps for company incorporation as a foreigner in Sri Lanka include:
The authority responsible for promoting and overseeing foreign investment in Sri Lanka is the Board of Investment (BOI). The BOI provides various investment opportunities, particularly for businesses that contribute revenue through export and support economic growth in the country.
Some specific businesses are required to first take permission from the BOI. These industries also require an investment of around $5 million USD. The first step will involve discussing your business activities and goals with the BOI, then preparing an application to apply for approval. Once your application is ready, you will have to submit it to the Investment Appraisal Department of BOI. After which, a case officer will be assigned to the investor during the approval process.
After you receive the letter of approval, you will have to agree to the terms and conditions in writing and complete company registration with the Registrar of Companies. After completion, you will have to submit the company documents to BOI.
As a foreign founder in Sri Lanka, you will have to understand the foreign ownership rules. The country has different rules and regulations, including varying limits on foreign ownership. Some sectors allow 100% foreign ownership, while other sectors are restricted to 40% and some are entirely restricted for foreign entrepreneurs.
Sri Lanka has an investor-friendly environment that offers attractive opportunities for foreign founders. The country’s legal framework is also stable, making it beneficial for businesses established in the country. The thriving industries for foreign entrepreneurs in Sri Lanka include tourism, real estate, healthcare, renewable energy, export and manufacturing.
The key industries that allow 100% foreign ownership in Sri Lanka include:
The industries that offer 40% foreign ownership in Sri Lanka include:
Specific industries in Sri Lanka require pre-approval from the Sri Lankan government or the specific line Ministry. The percentage of ownership will also be dependent on the Ministry after approval. The industries that require prior approval for foreign entrepreneurs in Sri Lanka include:
The standard corporate income tax rate in Sri Lanka is 30%. However, the foreign entrepreneurs and investors are only taxed on the income sourced within Sri Lanka. If your income is correctly remitted through the local banking system, there is a reduced concessionary tax rate of 15% for foreign companies offering service exports such as BPO, IT and consulting for the residents in Sri Lanka.
If your business deals with the betting, tobacco and gaming sectors, there will be a tax of 45%. However, the country has over 50+ Double Tax Agreements (DTAs), allowing companies to avoid being taxed twice on the same income. Sri Lanka’s Tax Incentives and tax holidays are also another benefit of the country. Meeting tax compliances for businesses is essential.
To do business in Sri Lanka as a foreigner, you will have to ensure compliance with the regulations of the country’s investment laws, such as registering your foreign company with the Board of Investment (BOI), fulfilling the minimum share requirement, and understanding the tax repatriation and policies of Sri Lanka. The businesses in the country are governed by the Foreign Exchange Act No. 12 of 2017 and other industry-specific regulations.
Sri Lanka offers numerous benefits for foreign investors. Therefore, foreign founders looking to enter this South Asian country can access a wide range of incentives and opportunities. The country has a business-friendly legal system and a strategic location, with other key benefits of investing in the country, such as:
As a foreign entrepreneur in Sri Lanka, you can have access to many opportunities and benefits the country offers. Sri Lanka offers an investor-friendly environment and a strategic location for business. To set up a company in the country, you will first have to understand the foreign ownership rules and mandatory laws of company incorporation. These rules help you understand where you can invest and where the limits apply.
When you are aware of the foreign ownership, restrictions and sector-specific rules and ownership, you will be able to plan your business activities. Sri Lanka actively welcomes foreign investment, but it also protects a few sectors from foreign investment by promoting the employment of residents. Therefore, as a foreign entrepreneur, you will have many opportunities to explore in Sri Lanka with varying ownership percentages depending on your favourite business activity.
Enterslice is a leading business and legal consultant that offers extensive help to global entrepreneurs. Our expert professionals will help you understand the foreign ownership rules in Sri Lanka and guide you to choose the best business idea.
Contact us today to speak with our experts or visit our website to learn more: visit https://enterslice.com
In Sri Lanka, 100% foreign ownership is allowed in most of the industries; however, there are a few industries that are restricted and require a local partner. Some industries allow 40% foreign ownership with 60% local ownership. The foreign investment is protected in the country with no restriction on the repatriation of earnings.
Different industries in Sri Lanka impose restrictions on foreign investment. While some industries like tourism, manufacturing and real estate, etc., allow 100% foreign ownership, the restricted industries include coastal fishing, telecommunications and media. Other sectors only allow 40% foreign ownership in rubber cultivation, extraction of natural resources and transfer of land to foreigners. Prohibited Sectors in Sri Lanka for Foreigners· Land ownership as the foreign nationals in Sri Lanka are not allowed to own land in the country. · Specific sectors, like highly regulated industries, are required to first take prior approval from the BOI before incorporation. · Companies that do not wish to comply with the rules and regulations of company laws in Sri Lanka will also be prohibited.
In Sri Lanka, the foreign investors are allowed to enjoy 100% foreign ownership in most sectors. However, some sectors only allow 40% foreign ownership, including restrictions on owning land. Additionally, foreign investment is protected by the constitution in Sri Lanka, offering repatriation of earnings without any restrictions. The country also launched the Personal Data Protection Act, which protects the data storage of all businesses, including foreign investors.
The industries that allow 100% foreign ownership in Sri Lanka include IT sectors such as software development and digital solutions. The country also offers full ownership in tourism and hospitality, which offers growing opportunities every year. Export-based businesses that are involved in the export and lodging sector are open to 100% foreign investment. Other sectors like construction, Business Process Outsourcing (BPO) and accounting services also allow 100% foreign ownership in Sri Lanka.
Yes, all foreigners are allowed to start a business in Sri Lanka. The country offers an investor-friendly environment for all companies with varying ownership percentages. Although many sectors allow 100% foreign ownership, there are a few sectors that have restrictions on foreign ownership. To enter the Sri Lankan market, you will first need a business visa and prior approval from the BOI.
The standard corporate income tax in Sri Lanka for foreigners and residents is 30%. As a foreign entrepreneur in the country, you will also get a concessionary tax rate of 15% for the income from service exports if the earnings are coming through the local banking system. Companies that are dealing in betting, gaming, the sale of liquor, and tobacco will be subject to an income tax of 45%.
Sri Lanka has made changes in the tax holidays for foreign investors on qualifying investments and industry-specific projects, particularly for export-focused businesses. The government has reduced the maximum tax holidays from 25 years to 10 years under the Strategic Development Projects (SDP) Act. This move is to enhance and improve fiscal discipline, accountability, and transparency in granting tax holidays.
Yes, Sri Lanka has a minimum capital requirement for foreign investment, which will depend on the threshold of the specific industry. While there is no specific general minimum capital requirement for all foreign investment, the investment requirement is dependent on specific sectors. Specific Investment Requirement· Retail Trade: In retail trade, a minimum of $5 million is required in Sri Lanka.· Overseas Companies: For an overseas company, like a parent branch company, you will need a minimum share capital of $200,000 in Sri Lanka.
Yes, it is generally mandatory for foreign investors to get permission from the Board of Investment (BOI) in Sri Lanka if the foreign ownership is more than 40% or requires the transfer of ownership of more than 40% shares from a non-BOI entity to a foreign investor. Strategic Development Projects (SDP) are also required to take prior approval from the BOI. The Board of Investment (BOI) in Sri Lanka· To establish a foreign company within Sri Lanka with more than 40% ownership, you will need approval from the BOI. · Specific SDP (Strategic Development Projects) businesses in Sri Lanka will need special approval from the BOI.· Non-BOI companies transferring more than 40% of the ownership to a foreign entity will need pre-approval from the BOI.
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02 Jul, 2024
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