Foreign entities can establish a business presence in Sri Lanka subject to Exchange Control laws and other regulatory requirements.
Methods of Establishing Presence:
1.Incorporating a Company: Fully owned subsidiaries, majority control, or minority stake in local companies.
2.Acquiring Shares: Purchase of shares in existing Sri Lankan companies.
3.Registering as an Overseas Company: Includes offshore companies with investment concessions under commercial hub operations.
Key Registration Steps:
•Submission of statutory forms and constitutional documents to the Registrar-General of Companies.
•Payment of stipulated registration fees.
Foreign Investment Regulations:
•Investment must be remitted via a Securities Investment Account (SIA) at a local bank.
•Profit Repatriation: 100% of profits can be repatriated through the SIA.
Disclosure Obligations:
•Both local and registered overseas companies must comply with continuous public disclosure requirements by filing with the Registrar-General of Companies.
Industry-Specific Restrictions:
Foreign ownership is restricted in protected sectors, including:
•Agriculture (tea, rubber, spices).
•Mining and timber industries.
•Deep-sea fishing.
•Mass communications, education, and travel agencies.
Foreign investment in certain sectors requires Board of Investment (BOI) approval, especially for industries like air transportation, military manufacturing, and large-scale mining.
Prohibited Sectors for Foreign Investors:
•Money lending (except margin provision for listed securities).
•Pawn broking.
•Retail trade under USD 1 million.
•Coastal fishing.
•Security services.
Investment Incentives:
Foreign investors may secure exemptions and concessions (tax holidays, duty waivers) through registration under the BOI Law No. 4 of 1978 or recognition as a Strategic Development Project under relevant legislation.
Employment of Foreign Nationals:
•Employment is restricted to cases where expertise is essential to the national economy.
•Valid visas are mandatory for all foreign workers.
Exchange Control Highlights:
•Restricted foreign ownership (up to 40%) in certain sectors unless BOI approval is obtained.
•Full compliance with remittance and investment laws is required.
Foreign corporations should consult local legal and tax advisors to navigate Sri Lanka’s regulatory landscape effectively.
