SRI LANKA Investment Guide 2019 - Board of Investment of Sri Lanka
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SRI LANKA
Investment Guide
2019
Board of Investment of Sri Lanka
SRI LANKA : Investment Guide to Sri Lanka 2018
Preface
This brochure provides an insight for prospec ve investors
exploring available investment opportuni es or seeking to
expand their investment por olio in Sri Lanka. It contains
informa on needed for first me investors and also
provides the correct direc on for further assistance.
The Government is commi ed in facilita ng, protec ng
and promo ng a liberal investment climate in Sri Lanka by
con nuing to re-align their systems and procedures to suit
the modern business needs. The prospec ve investors are
encouraged to take advantage of these untapped
investment opportuni es in the island.
First me investors may contact the Board of Investment of
Sri Lanka (BOI) to seek further informa on on Sri Lanka
Business and Investment Climate. The BOI is always
commi ed and prepared to provide advice on ma ers
rela ng to doing business in Sri Lanka.
1
SRI LANKA : Investment Guide to Sri Lanka 2018
SRI LANKA
Profit from South Asia’s
Most Dynamic Investment
Des na on
Sri Lanka is the most compe ve business center in the
South Asian Region and there are compelling good reasons
for investors to locate their business en es in Sri Lanka. As
an island na on that radiates beyond its size, Sri Lanka is
renowned for its strategic loca on, scenic beauty and
harmonious blend of races and cultures. The strong
macroeconomic environment and suppor ve government
policies, poli cal stability, close links with foreign markets,
excellent educa on and healthcare systems, outstanding
infrastructure and mineral resource endowments are few
important factors that investors consider when making a
decision to invest in Sri Lanka.
With the rela vely robust economic growth in last three
decades, Sri Lanka has transited to lower-middle income
country and maintains a stable posi on compared to the
peer countries in the region.
Sri Lanka has preferen al market access under the Indo-
Lanka FTA and Pakistan-Sri Lanka FTA which allows 100%
duty free access for more than 4,200 products for both
countries. Further, recently signed Singapore-Sri Lanka FTA According to the Sri Lanka government's policy framework
will provide more opportuni es for investments while “Vision 2025”, which was launched in 2017 to strengthen
regaining EU GSP Plus allows duty free access to the EU democracy and reconcilia on, inclusive and equitable
Market for over 6,000 products. growth while ensuring good governance in the country, it is
expected to posi on the country as an export-oriented
economic hub at the Centre of the Indian Ocean.
Ongoing nego a ons with China and India for
comprehensive agreements will provide more
opportuni es in the near future. “The Vision 2025 Sri Lanka” aims to raise per capita income
to USD 5,000 per year, create one million new jobs,
increase FDI to USD 5 billion per year, and double exports
Moreover, Sri Lanka has an admirable quality of life
to USD 20 billion per year. These intermediate targets lay
indicated by the standard health care facili es, world-class
the founda on for Sri Lanka to become an upper-middle
educa on system, pres gious hotels/leisure facili es,
income country by 2025.
modern office complexes, luxury residen al apartments
and banking facili es in the country.
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SRI LANKA : Investment Guide to Sri Lanka 2018
Why Invest in Sri Lanka?
1. Strong Economic Growth
2. Unparalleled Strategic Loca on
3. Improved Investment Environment
4. Educated & Adap ve Workforce
5. Fast Developing Infrastructure
6. Access to Key Markets
7. Quality of Life
8. Natural Resources Endowment
9. Advanced Facilita on
10. Incen ves
11. Investment Poten al in Sri Lanka
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SRI LANKA : Investment Guide to Sri Lanka 2018
1. Strong Economic Growth
Na onal Output (2017) GDP Distribu on (2017)
GDP (Current Market Price) : USD 87.2 bn Agriculture : 6.9%
Industry : 26.8%
Per Capita GDP : USD 4,065 Services : 56.8%
Real GDP Growth : 3.1% Taxes Less Subsidies on Products : 9.5%
Demography
Labour Force : 8.2 Mn
Unemployment Rate (% of Labour Force) : 4.2
Popula on : 21.4 Mn
Agriculture
External Trade Taxes Less 6.9% Industry
Exports : USD 11,360 Mn Subsidies on
26.8%
Imports : USD 20,980 Mn Products
9.5%
Trade Balance : USD (9,619) Mn
Infla on
CCPI Annual Average : 6.6 %
Services
56.8%
External Finance
FDI : USD 1.7 bn (2017)
FDI % of GDP : 2% (2017)
Source : Central Bank of Sri Lanka & Board of Investment of Sri Lanka
Key Trade Partners of Sri Lanka
Sri Lanka's Top 10 Export Des na ons - 2017 Sri Lanka's Imports by Country (Top Ten) - 2017
(USD Mn.) (USD Mn.)
United States 2,911 India 4,498
United Kingdom 1,035 China 4,193
India 689 Singapore 1,293
Germany 538 Japan 1,039
Italy 529 USA 813
China 415 Malaysia 642
Belgium 347 Thailand 519
UAE 274 Taiwan 482
Turkey 233 Hong Kong 439
Netherlands 220 Saudi Arabia 39
500 1,000 1,500 2,000 2,500 3,000 1,000 2,000 3,000 4,000 5,000
Source : Export Development Board Sri Lanka Source : Sri Lanka Customs
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SRI LANKA : Investment Guide to Sri Lanka 2018
Major Exports and Imports
Sri Lanka's Exports by Product in 2017 (Top 15) Sri Lanka's Imports by Product in 2017 (Top 10)
Apparel 4,739
Tea 1,512 Petroleum Products 3218
Rubber & Rubber products 873 Textiles 2663
Coconut & Coconut based products 563
Food, Feed, Beverages & Tobacco 390
Machinery & Equipment 1678
Electrical, Electronic and Machinery 372 Vehicles & Equipment 1499
Spices 353 Electronic & Electrical 1383
Petroleum Products 292
Boat Building 279 Iron & Steel Products 1234
Textiles 277 Diamond & Precious Stones 773
Diamonds, Gems & Jewellery 266
Fish
Plastic Products 724
256
Chemical & Plastic Products 140 Cement 526
Base Metal Products 116 Pharmaceulticals 435
Non Metallic Mineral Products 110
500 1,000 1,500 2,000 2,500 3,000 3,500
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000
USD Mn. USD Mn.
Source : Sri Lanka Customs Source : Sri Lanka Customs
Foreign Direct Investments
FDI Inflow (2005-2017) FDI by Country (Cumula ve FDI 2005–2017)-Top 25
China 1,738
Malaysia 1,540
1800 1,710 Hong Kong 1,441
1,616 India 1,164
1600 U.K. 1,067
Netherlands 850
1,391 Singapore 665
1400 1,338 Mauritius 610
UAE 593
1200 USA 444
1,066 Japan 331
970 Luxembourg 326
1000 Sweden 227
889
Australia 190
800 801 Canada
734 159
British Virgin Island 145
600 604 602 Belgium 124
516 Germany 102
Italy 82
400 Switzerland 81
287 Korea 65
Thailand 65
200 France 38
Norway 37
Saudi Arabia 33
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 200 400 600 800 1000 1200 1400 1600 1800
USD Mn. USD Mn.
FDI Received (Cumula ve) from 2005-2017
Sector wise Breakdown
IT and BPO 2%
Hotels & Restaurants Other
9% 9%
Manufacturing
26%
Port Development
7%
Agriculture
Fuel, Gas, Petrolium 0%
2%
Housing, Property
Telephone & Development and
Power Genera on Telecommunication Shopping & Office
4% Network complexes
27% 14%
Source : Board of Investment of Sri Lanka
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SRI LANKA : Investment Guide to Sri Lanka 2018
2. Unparalleled Strategic Loca on
Sri Lanka is situated strategically at the crossroads of major as a gateway to a market of 1.3 billion people. These factors
shipping routes to South Asia, the Far East, the Middle East, have combined to generate keen interest in the country's
Africa, Australasia and the con nents of Europe and logis cs sector, as well as from manufacturers looking for
America, making the country a convenient port of call for opportuni es in the South Asian region.
shipping lines and airfreight services. Further, Sri Lanka's
proximity to the Indian sub-con nent posi ons the country
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SRI LANKA : Investment Guide to Sri Lanka 2018
3. Improved Investment Environment
Investment Policy
Sri Lanka's Investment policy is geared towards the realiza on of na onal sustainable development goals and grounded in
the country's overall development strategy. Investment policy priori es are based on a thorough analysis of the country's
compara ve advantages and development challenges and opportuni es. Its strategic priori es, include:
- Investment in specific economic ac vi es, i.e. as an integral part of an industrial development strategy.
- Areas for mutual reinforcement of public and private investment (including a framework for public-private partnerships).
- Investment that makes a significant development contribu on by crea ng decent work opportuni es, enhancing
sustainability, and/or by expanding and qualita vely improving produc ve capacity and interna onal compe veness.
In this context, the key legisla ons facilita ng investments in Sri Lanka are;
The Board of Investment Law No. 4 of 1978 and its amendments is the principal law
applicable to investments in Sri Lanka. This law established the na onal investment
promo on agency, the Board of Investment of Sri Lanka, which is structured to func on as
Board of the 'Central Facilita on point' for investors and empowered to enter into agreements with
Investment Law
No. 4 investors providing incen ves to a ract investments.
of 1978
This legisla on was introduced to promote Sri Lanka as an emerging trading hub and
facilitates related specific trading and services ac vi es. Free Ports and Bonded Areas have
Finance ACT No. been set up to create trade related infrastructure to facilitate Sri Lanka's import and export
12 of 2012 of goods and services with freedom to carry out transac ons in conver ble foreign currency.
(Hub opera ons)
as amended
in 2013
This legisla on has simplified the taxa on law in Sri Lanka while introducing new incen ve
regime for investors. While maintaining the standard corporate income tax rate at 28%, this
law provides for a reduced rate of 14% for specific sectors such as SMEs, Exports of Goods
Inland Revenue and Services, IT, Educa on, Tourism and Agriculture. Enhanced Investment allowance has
Act No.24 been offered to investors for their fixed capital investment over and above the normal
of 2017 deprecia on.
The above Foreign Exchange Act repeals the Exchange Control Act (Chapter 423) while
introducing a liberal exchange regime for Sri Lanka. Foreign exchange controls have been
greatly liberalized and investors are allowed to directly deal with the banks for their
Foreign Exchange transac ons unless Central Bank approval is specifically needed. Free flow of transfers are
Act No.12
of 2017 allowed through Inward Investment Accounts and through Outward Investment Accounts.
Land Policy
The foreign investors are eligible to lease lands in Sri Lanka to establish their projects. A
new land law was promulgated in 2014 which permi ed lease of land for foreign
investments and outright transfers will only be permi ed when the foreign shareholding is
Land (Restric on less than 50%. The land lease period is subject to a maximum tenure of 99 years. Foreign
on Aliena on) investors are not liable to pay any lease tax when leasing a land. However condominium
Act No.38
of 2014 proper es can be purchased outright with no restric ons on na onality.
(Please refer Appendix I for detailed informa on.)
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SRI LANKA : Investment Guide to Sri Lanka 2018
Bilateral Investment Promo on and Protec on Trea es
Sri Lanka has entered into 28 Bilateral Investment Promo on and Protec on Trea es (BITs) so far, providing a protec on to
foreign investments within the country. Sri Lanka is developing its model BIT with a view to cater to the needs of covering
the aspects of sustainable development principles in a rac ng foreign investments.
Australia France Korea, Republic of Singapore
Belgium-Luxembourg Germany Kuwait Sweden
China India Malaysia Switzerland
Czech Republic Indonesia Netherlands Thailand
Denmark Iran Norway United Kingdom
Egypt Italy Pakistan USA
Finland Japan Romania Vietnam
Agreements on Avoidance of Double Taxa on
Sri Lanka has entered into Double Taxa on Avoidance Agreements with 44 countries to eliminate or mi gate the incidence
of juridical double taxa on and avoidance of fiscal evasion in the interna onal trade (or transac ons).
Australia Germany Mauri us Russia
Bangladesh Hong Kong Nepal Saudi Arabia
Bahrain India Netherlands Seychelles
Belarus Indonesia Norway Singapore
Belgium Iran Oman Sweden
Canada Italy Pakistan Switzerland
China Japan Pales ne Thailand
Czech Republic Republic of Korea Philippines U.A.E.
Denmark Kuwait Poland United Kingdom
Finland Luxembourg Qatar USA
France Malaysia Romania Vietnam
8SRI LANKA : Investment Guide to Sri Lanka 2018
4. Educated and Adap ve Workforce
A skilled workforce is a key indicator in the labour market, government to cater to the future demand in emerging
which is very important for the economy of Sri Lanka with sectors including Light Engineering and Automo ve
its ambi ous and far-reaching development plans. Labour manufacturing, Construc on, Hospitality and Tourism and
is the most abundant factor in Sri Lanka in comparison to Informa on Communica on and Technology. With the
other factors o f p produc on such as, capital, easily trainable nature of Sri Lankan youth, upgrading their
entrepreneurship, technology and informa on. Sri Lanka's skills to match those required by fast growing industries in
Labour force has increased by 1.2 per cent during 2016 to the country is an easy task.
8.311 million, from 8.214 million in 2015.
Sri Lanka stands out as the country with the second largest
literacy rate (a er the Maldives) in the Indian subcon nent
and is as par with many more developed na ons both in
Asia and Globally. The country's popula on has a literacy
rate of 92% with a youth literacy rate of 97%. Schooling is
compulsory for children from 5 to 13 years of age with state
funded educa on offered free of charge at all levels,
including university. The government gives high priority to
improving the na onal educa on system and access to
educa on including voca onal training.
Sri Lanka has always priori zed employment for youth,
placing them at the heart of development. Skills
development has been iden fied as an important aspect in
reducing youth unemployment. Various voca onal
training programs have been introduced by the
9SRI LANKA : Investment Guide to Sri Lanka 2018
5. Fast Developing Infrastructure Australia
Sri Lanka enjoys extensive infrastructure facili es which have Telecom
received much government a en on. The Sri Lankan Sri Lanka's telecoms market is highly developed when
Government has priori zed infrastructure development as a compared to neighbouring countries. A good start has been
na onal priority considering its importance in a rac ng and made on expansion and provision of suppor ng infrastructure
facilita ng foreign direct investments. for telecommunica ons services. As at end of 2017, cellular
Roads mobile subscrip on in Sri Lanka recorded at 28.2 mn, while
Sri Lanka has a well-developed transport system, including a fixed access telephone subscrip on stood at 2.5 mn.
road network of approximately 100,000 km and a rail network Sri Lanka's mobile market has experienced strong growth over
consis ng of about 1,944 km linking Colombo with the rest of the last five years. Mobile penetra on has risen from 96% in
the country. Major highway development projects namely 2012 to 126% in 2017. The last three years in par cular have
Katunayake Expressway and Southern Expressway have seen very strong growth led by the market leader Dialog
already been completed and the construc on works are Axiata. Slow to moderate growth is predicted over the next five
con nuing in the Southern Express Way Extension project, years to 2022. The market will be constrained from higher
Outer Circular Highway and the Central express way; that growth due to very strong local compe on and a saturated
enhance the connec vity between Western, Southern, North mobile market.
Central and Central Provinces. In addi on, Northern Road Sri Lanka has seen a very strong increase in mobile broadband
Connec vity Project and several bridge construc on projects penetra on over the past five years with market penetra on
are ongoing improving the connec vity throughout the island. increasing from 8% in 2012 to 21% in 2017, driven by a rising
Ports level of mobile subscribers.
Sri Lanka is located at the intersec on of major interna onal Ongoing growth in the telecoms market is likely to be
shipping routes within the world's busiest mari me spearheaded by data services (from both mobile and fixed
transporta on lanes. Due to this loca onal advantage, Sri sources). Demand for broadband data services driven by 4G
Lankan ports have become very important assets which adop on and increased smartphone penetra on should drive
contribute immensely to the development of the country. The reasonably strong growth in the local market over the next few
developing port infrastructure in main three ports; Colombo, years. The market is now moving from 4G towards 5G mobile
Hambantota and the Trincomalee, is con nuing considering services. Dialog Axiata carried out a 5G' network capability trial
much higher economic benefits it would bring to the country. with technology partners Ericsson and Huawei in Colombo.
Airports The availability of e-commerce applica ons including mobile
Bandaranaike Interna onal Airport is the main interna onal banking, e-bus cke ng, and mobile points of sale (POS)
airport in Sri Lanka located 30 KM North of the island na on’s con nues to increase.
capital of Colombo and the Ma ala Rajapaksa Interna onal Key developments in the sector includes;
Airport is the second interna onal airport, placed in the deep - The market movement from 4G towards 5G mobile services.
south of the country. - A strong increase in mobile broadband penetra on over the
past five years.
- Con nuous increase in e-commerce applica ons.
10SRI LANKA : Investment Guide to Sri Lanka 2018
Export Processing Zones
already opera ng and proposed under BOI Services provided by BOI in zones
- Approval and facilita on for Export / Import
Documenta on & Recommenda on of the
expatriate visa
- Engineering approvals such as building plans, site
clearance, issuance of cer ficate of conformity &
Existing Zones provision of dedicated infrastructure facili es
such as centralized water and sewerage
New Zones treatment facili es
- 24 x 7 Cargo Verifica on
Mawathagama-Phase II
- Advisory service & guidance on industrial
rela ons
Mawathagama EPZ
- 24 x 7 fire service with firefigh ng, monitoring
& advisory services
- 24 x 7 overall security coverage
Polgahawela EPZ - Environment monitoring, advisory & laboratory
Kandy IP services
Bingiriya
- Day care centers, Sport and recrea on facili es
, leisure parks- Internal transport
Malwatta EPP facili es, bus terminals
Mirigama EPZ - Centralized solid waste handling mechanism
Katunayake EPZ - Provision of lands for prospec ve projects
Wathupitiwela EPZ
Biyagama EPZ
Services provided by Available commercial
Horana EPZ other State Agencies facili es
Wagawatta IZ - Free healthcare - Commercial Banks
facili es for workers - Industrial Waste Handling &
Milleniya
- Medita on & Disposal Facility
Counseling Centers - Freight Forwarding & Container
Seethawaka EPZ Mirijjawila EPZ - Sri Lanka Customs Yard
services - Postal Services
Koggala EPZ
- Ambulance service - Insurance
- Cab and transport facili es
BOI Zone Details
Distance to Distance to Distance to Total Land Enterprises in
Katunayake Port of Hambantota Extent Commercial
Intl. Airport Colomb0 Port (Acres) Opera on (as at
(Km) (Km) (Km) 31/12/2017)
(a) Katunayake EPZ 3 33 232 532 84
(b) Biyagama EPZ 39 22 208 451 57
(c) Koggala EPZ 160 139 122 227 22
(d) Kandy IP 116 130 248 205 24
(e) Wathupi wala EPZ 30 41 203 123 18
(f) Mirigama EPZ 37 66 220 261 09
(g) Malwa a EPP 26 37 207 33 06
(h) Mawathagama EPZ 85 106 249 54 05
(i) Polgahawela EPZ 65 91 229 65 05
(j) Horana EPZ 78 59 221 396 20
Wagawa a IP 78 59 221 76 7
Wagawa a IZ 78 59 221 223 -
(k) Mirijjawila IP 218 221 14 588 05
(l) Seethawaka EPZ 57 49 177 431 26
EPZ - Export processing Zone, IP - Industrial Park, IZ - Industrial Zone
BOI Zone Management Department focuses on providing central facilita on to investors to operate industries in a
conducive environment without interference and outside disturbances. The BOI Zone model has been implemented to
obtain all enterprises related services efficiently and effec vely from a one place, without going to any other place
facilita ng industries to operate smoothly. As such, the following facili es have been established in a zone to maintain an
investor friendly atmosphere.
11SRI LANKA : Investment Guide to Sri Lanka 2018
6. Access to Key Markets
India - Sri Lanka Free Trade Pakistan - Sri Lanka
Agreement (ISFTA) Free Trade Agreement (PSFTA)
The Indo-Sri Lanka Free Trade Agreement (ISFTA), which was Sri Lanka's second Free Trade Agreement (FTA) between Pakistan
signed on 28 December 1998 and entered into force with and Sri Lanka was finalized and was commenced on 12th June
effect from 1 March 2000. 2005. Since March 2009 Sri Lanka has duty free market access
for more than 4,500 products. Sri Lanka has also completed all
Since the end of March 2003, Sri Lanka has received total duty her phasing out commitments in November 2010.
free access to the vast Indian market under the ISFTA for more
than 4,200 products (HS Codes at 6 digit level).
Classifica on of Duty Concessions Schedules Classifica on of Duty Concessions Schedules under
under Indo - Lanka FTA Pakistan - Sri Lanka FTA
Sri Lanka's India's Sri Lanka's India's
Type of Duty Reduc on Type of Duty Reduc on
Commitment* Commitment* Commitment* Commitment*
Nega ve List (No Concession List) 1,220 198 Nega ve List (No Concession List) 695 498
Tariff Rate Quota (TRQ) Tariff Rate Quota (TRQ)
Tea - 5 Basma Rice and Potato 2 -
Garments - 235 Garments - 21
Vanaspathi, Bakery Shortening, - 5 Tea - 04
Margarine and Pepper Margin of Preference (MOP)
Margin of Preference (MOP) Ceramics - 05
Tex les - 553 Cosme cs - 11
100% Duty Free List 4,004 4,228 Betel Leaves - 01
(Zero Duty List) 100% Duty Free List 4,527 4,684
Total 5,224 5,224 (Zero Duty List)
* No. of items at six digit level
Total 5,224 5,224
* No. of items at six digit level
Rules of Origin (ROO)
Rules of Origin (ROO)
Ÿ 35% Domes c Value Addi on (DVA) (25% DVA if raw
materials are imported from partner country) Ÿ 35% Domes c Value Addi on (DVA) (25% DVA if raw materials
Ÿ Change of Tariff Heading criteria at 4-digit level and are imported from partner country)
Ÿ A sufficient process Ÿ Change of Tariff Heading criteria at 6-digit level and
Ÿ A sufficient process
The focal point and the authority for issuing Indo - Lanka FTA
Cer ficates of Origin is the Department of Commerce, Sri Lanka The focal point and the authority for issuing Pakistan - Sri Lanka
and Federa on of Chamber of Commerce. FTA Cer ficates of Origin is the Department of Commerce in Sri
Lanka.
Sri Lanka - Singapore FTA Entering into Trade and Comprehensive
Partnerships Agreements
The Free Trade Agreement (FTA) between Sri Lanka and Singapore Sri Lanka's strategic loca on provides great opportuni es to
was signed on 23rd January 2018. The Sri Lanka-Singapore FTA enter into free trade and partnership agreements with several of
(SLSFTA) is a landmark agreement as it is the first comprehensive Asia's trade powerhouses. Sri Lanka is pursuing a more proac ve
agreement for Sri Lanka that includes investments and services free trade agreement (FTA) strategy and FTA nego a ons are
beyond trade in goods. The Singapore-Sri Lanka FTA is part of a ongoing with China while nego a ons are ongoing to establish a
broader strategy of looking “East” to renew the country's trade deeper economic arrangement with India to supplement the
rela onships in the process of diversifying its markets towards near two decade old FTA.
Asia and focus on plugging into ASEAN supply chains.
It is expected that the protec on to be given under SLSFTA to
investors and to their investments will result in substan al
increase in FDI u lizing the provisions of this agreement.
12SRI LANKA : Investment Guide to Sri Lanka 2018
7. Quality of Life
Sri Lanka is truly a great place to live and a great place to There is a wide selec on of comfortable housing in Sri
work. A country of many facets, if offers a spectrum of Lanka including luxury condominium apartments ideal for
experiences, people and places that awaits to be expatriates. Interna onally recognized ins tu ons of
discovered. For those who choose to make Colombo their Healthcare market have chosen Sri Lanka as a des na on
home, a cosmopolitan living environment awaits. Social life for health tourism. A dozen of private and public hospitals
is never amiss in this city, with abundant nightlife, world- with state-of the-art medical facili es are opera ng in
class shopping, theatre, cafes, art and a host of star class Colombo and in all other main ci es. It offers
hotels that dot the island. revolu onized private hospitaliza on and healthcare
facili es and is ranked 76 posi on out of 190 countries in
The expatriates and their families will enjoy a quality living WHO's World's Health Systems Ranking in 2016. A pre-
environment in Sri Lanka with comfortable housing, good hospital care ambulance service; 1990 Suwasariya
healthcare and medical facili es, excellent educa onal Ambulance Service, is also available covering the Western
ins tu ons with interna onal standards, and world-class and Southern Provinces free of charge.
recrea onal sites.
Seven UNESCO World Heritage sites, a salubrious climate in
Leading Interna onal Schools that provides quality the central hill country, 250 acres of botanical gardens, 15
educa on for the children of expatriates includes; Asian Wildlife and Nature reserves and miles of pris ne beach,
Interna onal School, Bri sh School in Colombo, Colombo are concentrated within a mere 645,610 square
Interna onal School and Colombo Overseas School. kilometers. Sri Lanka is renowned for its varied biodiversity
fauna and flora.
22
13SRI LANKA : Investment Guide to Sri Lanka 2018
8. Natural Resources Endowment
Sri Lanka is well-endowed with industrial minerals Three main types of clay - kaolinite, ball clay and brick clay
including Graphite, Ilmenite, Ru le, Zircon, Quartz, are used for export industries. Yellow, red and blue colour
Feldspar, Clay, Kaolin, Apa te (Phosphate Rock), Silica ball clay is found in Sri Lanka's hill country. These are used
Sand, Garnet sand, Mica, Calcite and Dolomite. to make casts and as refractory material because of their
a ributes of strength and high plas city. Brick clay is found
Pulmoddai beach sand deposit is the most important non- in most of the river valleys and is commonly used in the
ferrous mineral reserve in Sri Lanka. This deposit contains produc on of bricks and les.
minerals including one of the most expensive and sought
a er metals in the world: tanium. Quartz, ball clay, silica and feldspar are u lized in the
ceramics and glass industries with great success; the
Ilmenite (FeTiO₂) and ru le (TiO₂) are found in enormous country’s porcelain is ranked among the best in the world.
concentra ons in the Pulmoddai beach sand deposit area.
Several other beach mineral-sand deposits of Monazite, Sri Lanka's natural resources include another valuable
Zircon, Garnet and Ilmenite are found in various parts of
the island and are now being exported. economic mineral reserve known as apa te rock
phosphate. It is es mated that the reserve consists of 60
The use of graphite in Sri Lanka has a long history that dates million tons of apa te which is generally used to produce
back to 1675. Sri Lankan graphite has gained popularity all phosphate fer lizer.
over the world for its high purity and offers many
processing applica ons in graphite lubricants, flake
graphite, carbon brushes, refractory bricks and midget
electrodes and nano-technology.
Ilmenite Graphite
Ÿ The Total Reserves (Ilmenite) : 4.3 Million Ÿ The only country in the world where
Tons crystalline graphite or lump (vein) graphite
Ÿ The Pulmoddai Deposit : is available.
- Six kilometers in length with an average Ÿ Benchmark Graphite Purity within the
width of 100 meters Industry (Carbon range)
- Es mated to contain six million tons of Ÿ Global: 94% - 97%
heavy sands with an average composi on Ÿ Sri Lanka: 97% - 99.9%
of 70-72 % ilmenite, 8-10 % zircon, 8 % Ÿ The total reserve: 5 Mn. tons
ru le and 0.3 % monazite Ÿ Major graphite deposits : Bogala &
- Ilmenite (FeTiO2) and ru le (TiO2) found Kahatagaha
in enormous concentra ons Ÿ The largest graphite mine is Kahatagaha
- Experiments have shown that TiO2 Kolongaha (K/K), situated 27 km north east
concentra on of ilmenite is about 53% of Kurunegala. This is deeper than 650 m
while that of ru le is about 95%
14SRI LANKA : Investment Guide to Sri Lanka 2018
9. Advanced Facilita on
High Powered Commi ees to Facilitate Single Window Investment Facilita on
Investment Approvals Task Force (SWIFT)
The BOI has in place several ini a ves to reduce Being the investment facilitator, BOI has taken an
the me taken for approval processes and to ini a ve to improve service delivery by
resolve investor issues in efficiently, thereby introducing SWIFT which will act as a facilita on
assis ng investors to navigate the necessary arm of investment approvals process and will
administra ve processes in the shortest possible provide necessary linkages to the relevant line
me. These consist of several high level commi ee agencies in order to expedite the project
which meet at regular intervals to accommodate approving process through a func on based
investor needs, with the sole purpose of virtual pla orm. SWIFT will improve the investor
expedi ng projects. awareness regarding the compliances and will
The Project Screening Commi ee (PSC): guide the investor throughout the approval
process.
This commi ee which consists of cross func onal
representa on of the BOI immediately screens all Once the project is preliminary approved by the
investment applica ons jointly across all relevant Single Window Investment Approval Commi ee
departments to grant approval in an expedi ous (SWIAC) and BOI, applica on will be referred to
manner. SWIFT to commence the facilita on process with
regard to the line agency approvals. Any issue in
Single Window Investment Approval Commi ee respect of the project will be referred to the
(SWIAC): Investment Approval Facilita on Commi ee
Any projects which needs further clearance on (IAFC) for a solu on.
opera onal issues will be referred to this higher Under this ini a ve, it has improved the
level commi ee which is chaired by a Senior informa on transparency of regulatory processes
Advisor to the Hon. Prime Minister. and process simplifica on of the line agencies.
Twenty-four of the most important line agencies
Investment Approval Facilita on Commi ee are linked under one pla orm with this
(IAFC): mechanism and have agreed to follow a phased
Ma ers requiring policy level interven on are approach as a strategy to achieve the outcome.
referred to this commi ee chaired by the
Secretary to the Treasury, for speedy resolu on.
15SRI LANKA : Investment Guide to Sri Lanka 2018
Registering your company
The Department of the Registrar of Companies (DROC) enables investors to establish
business and other ins tu ons under the relevant acts in accordance with the economic
and trade policies of the government of Sri Lanka. In the case of a BOI enterprise it must be
incorporated under the Companies Act No. 7, of 2007 as a joint venture or a sole ownership.
Sri Lanka has no restric ons on 100% foreign ownership of a registered company.
Companies
The DROC offers a web based single window aimed at reducing delays through a one day
service. This web portal allows a prospec ve investors to both ini ate the registra on of
their company as well as to view the status of registra on from anywhere in the world. A
foreign investor can their for register their company in Sri Lanka while based in their home
country.
16SRI LANKA : Investment Guide to Sri Lanka 2018
Visa Facilita on
Being the Investment Promo ng Agency of the country, the Board of
Investment (BOI) plays a vital role in facilita ng the companies to
Visa category / Project type &
enhance the smooth opera on of doing business in Sri Lanka. As such,
Validity period
BOI recommends the visas for investors and skilled workers under
iden fied categories to the issuing authori es, the Department of Entry Visa
Immigra on and Emigra on under Ministry of Internal Affairs,
Wayamba Development and Cultural Affairs. 01 month from the date of arrival
The BOI recommends different type of visas for Investors, dependents,
and expatriate workers of BOI approved projects under sec. 17 & sec. Residence Visa
16 of the BOI Law. 01 year from the date of arrival
Type of visa recommenda on
Extension of Residence Visa
- Entry Visa / Mul ple Entry Business Visa
- Residence Visa / Special Residence Visa 02 years for (Sec.17 Projects)
- Extension of Residence Visa
01 year for (Sec.16 Projects)
- Temporary Visa (maximum 03 months only)
Investors and expatriate employees should arrive in Sri Lanka using Temporary Visa
Entry Visa or business visa and within one month from the date of
arrival Entry Visa to be converted to Residence Visa with the Installa on work – expatriates only
recommenda on of the BOI.
If the applicant leaves from the country within the Entry Visa period Special Residence Visa
(One month), no provisions are available to convert the same Entry
01 year
Visa to Residence Visa, unless a fresh Entry Visa applica on is (Investor on Electronic Travel
submi ed. Authoriza on – ETA Visa)
(e.g. Sri Lankan / Child Born in Sri Lanka)
Temporary Visa will be recommended for contracted technical workers
(expatriates) for a period of 3 months for specific assignments a er
evalua on of such ac vi es.
17SRI LANKA : Investment Guide to Sri Lanka 2018
Import/export facilita on
The Board of Investment of Sri Lanka, structured to func on as the central facilita on point for investors, is also responsible
for permi ng imports and exports of projects under sec on 17 of the BOI Law as well as providing other investor related
services. These facili es are provided by the Investor Services Department of the BOI.
Services Offered by the Investor Services
Department Customs Declara on (CusDec)
Processing and Approving Import / Export Request for clearance of Import cargo has to be
Documents, Examina on of Import / Export Cargo, made on the form iden fied as CusDec (Customs
Issue of Cer ficates of Origin for Apparel and Declara on/Customs form 53). This form is
Tex le products, Approval for Subcontracts, designed as CusDec I, which is, used when only one
Transfers, Loans of raw material, Re-Import and Re- item is declared and CusDec II, if there is more than
Export of Items, Recommenda ons to the one item to be declared. For new investors, it is
Controller General of Immigra on & Emigra on for recommended to obtain the services of a clearing
issue of expatriate visas, Indirect Export Web Sub- agent registered with the Associa on of Clearing
mission, Other Investor related approvals. and Forwarding Agents (ACFA) and who is familiar
with BOI Import/Export procedures which would
avoid delays in clearing cargo and payment of
demurrages.
Investor Service Centres Procedure for Clearance of Import Cargo
To provide the above-men oned services, the BOI An Investor who has signed an agreement under
has Investor Service Centres located at; sec on 17 of the BOI Law, is eligible to import
C o l o m b o H e a d O ffi c e , Ka t u n ay a ke ,
project related items approved by the Investment
Biyagama, Koggala Export Processing Zones
Department without Customs Import Duty (CID).
and Kandy Industrial Park.
However, the investor is required to pay other taxes
A er signing the agreement with the BOI, to obtain liable under the customs tariff.
the relevant services from one of the above
Centres, the investor should first register with the
respec ve Investor Service Centre.
18SRI LANKA : Investment Guide to Sri Lanka 2018
Industrial Labour Rela ons
Labour laws of the country are applicable to all enterprises, Ÿ Organizing the programme / workshop to educate
including BOI enterprises, and the Ministry and the the employees on posi ve thinking / Industrial Safety
Department of Labour are responsible for labour and Health Services etc.,
administra on func ons, including labour law enforcement Ÿ Encourage to offer special career development
and Industrial Rela ons. programme for the employees (e.g. Foreign
The Board of Investment of Sri Lanka promotes and facilitates training).
labour management co-opera on and industrial harmony in Ÿ Facilitate to resolve the industrial disputes speedily.
the enterprises coming under its purview and towards that
end, provides advisory services and guidance to employers Ÿ Establishment of Day Care Centres in EPZs for the
and employees through its Industrial Rela ons Department. children of EPZ employees.
Officers from this department will offer advisory services and
guidance to employers and employees on all aspects in the
area of industrial rela ons. Enterprises should bring to the The BOI is also commi ed to promote the applica on of the
no ce of the department any apprehended or exis ng principles undertaking the Global Compact and related
disputes or problems faced by them in this area so that they Interna onal Labour Standards by the employers in the BOI
could be a ended to promptly with a view to speedy enterprises, both within and outside Export Processing Zones.
se lement by the appropriate authori es. Accordingly, Labour Standards and Employment Rela ons in
the BOI enterprises will be governed, inter alia, by the
The Labour Standards and Employment Rela ons Manual following policies and principles;
issued by BOI lays down good Industrial Rela ons principles
and prac ces and sets out the basic terms and condi ons of Ÿ Respec ng the right of the workers to form and join trade
employment to be observed by BOI enterprises opera ng both unions of their own choosing.
within and outside the Export Processing Zones of Sri Lanka. Ÿ Respec ng the right of the workers to bargain collec vely
All BOI enterprises are expected to observe the Industrial through their trade unions, or in the absence of a trade
Rela ons principles and prac ces laid down in the Labour union, through other organiza on or body consis ng of
Standards and Employment Rela ons Manual, the provisions their elected representa ves in the workplace.
of the relevant labour laws and terms and condi ons of Ÿ Affording protec on to workers' representa ves and trade
employment no less favourable than the basic standards set union officers against any act prejudicial to them, including
out in this Manual. They are also required to maintain a dismissal based on their status or ac vi es as workers'
healthy and harmonious industrial labour rela ons climate representa ves.
conducive for higher efficiency and produc vity. Ÿ Elimina ng forced or compulsory labour.
Ÿ Abolishing child labour.
Services provided by the Industrial Rela ons Department Ÿ Elimina ng discrimina on in employment, occupa on
and remunera on against workers on such grounds as
1) Provide Advisory Services race, sex, religion, poli cal opinion.
Ÿ Distribu on of Labour Standard & Employment Ÿ Ensuring stability in employment.
Rela ons Manual. Ÿ Providing safe and hygienic working condi ons.
Ÿ Issuance of clarifica ons / opinions on IR related Ÿ Establishing appropriate machinery for consulta on and
ma ers. co-opera on between elected representa ves of workers
Ÿ Organizing discussion / mee ng / workshops for and employers on ma ers of mutual concern.
sharing the knowledge. Ÿ Establishing grievance procedures for the examina on of
workers' grievance.
2) Monitor the Compliance of Labour Standards by BOI Ÿ Offering fair wages and benefits and condi ons of
employment to workers.
Enterprises
Ÿ Elimina ng harsh and inhuman treatment of workers.
Ÿ Conduc ng rou ne Labour inspec on.
Ÿ Elimina ng excessive working hours and over me work.
Ÿ Verifying the project status prior to gran ng special
facilitates. e.g: Visas for expatriates, green channel Ÿ Affording appropriate facili es to workers' in the
facility etc. undertaking to carry out their func ons promptly and
efficiently.
Ÿ Sharing informa on with liaison authori es.
Ÿ Formula ng effec ve communica on policy within the
Ÿ Inves ga on into complaint / grievances of workplace to promote rapid dissemina on and exchange
employees. of informa on rela ng to various aspects of the
undertaking and to the social condi ons of the workers.
3) Promote Social Dialogue Ÿ Providing advisory services on labour and industrial
rela ons ma ers to employers and employees and
Ÿ Facilitate to form and operate the Employees' promo ng and facilita ng effec ve preven on and
Councils. se lement of Industrial Disputes.
Ÿ Harmonizing and media ng the trade union
ac vi es.
Ÿ Encouraging to implement ILO Core Labour
Standards.
4) Facilitate to maintain a produc ve labour force
Ÿ Facilitate to meet the manpower requirement
through job placement centres (Job Banks).
19SRI LANKA : Investment Guide to Sri Lanka 2018
Ensuring Environment Friendly Development
Environment Management Department of the BOI is Ÿ Providing advice and guidelines for investors in
concerned on importance of striking a balance between industrial si ng and pollu on control including
development and environment – where commitment to waste treatment & disposal.
protect the natural environment goes hand in hand with Ÿ Carrying out post compliance monitoring.
industrial development. In this context, the Environment Ÿ Liaising with other agencies, organiza ons and
Management Department remains firmly commi ed to departments in ac vi es related to Natural
environmentally friendly development. Resources Management and Environmental
Pollu on Control.
In this context, the Department assist the investors by way
of; The environmental approval procedure in respect of BOI
projects are in accordance to the Na onal Environmental
Ÿ Gran ng environmental approvals for projects. Regula ons made under the provisions of the Na onal
Ÿ Issuing Environmental Protec on Licences. Environmental Act (NEA) of Sri Lanka. This procedure is
Ÿ Inves ga ng public complaints and recommending executed by the Environment Management Department of
suitable mi gatory measures. the BOI in consulta on with the Central Environmental
Ÿ Execu ng the func ons related to Environmental
Authority (CEA), which is the authorized body in Sri Lanka
Impact Assessment procedures under the EIA for the implementa on of the Na onal Environmental Act
regula ons in instances where the BOI acts as the and its Regula ons.
Project Approving Agency.
Ÿ Making recommenda on for chemical imports.
20SRI LANKA : Investment Guide to Sri Lanka 2018
10. Incen ves
FISCAL INCENTIVES
The Inland Revenue Act No. 24 of 2017 provides an Incentive Regime granting reduced tax rates (for speci ic
sectors) and Enhanced Capital Allowances based on capital investments made by the investors, and this will be
effective from 1st April 2018.
Reduced Tax Rates Duty Exemp ons on Importa on of Project
Related Capital Goods
• Concessionary rate of 14% for ;
Exemp on on Customs Duty
• Small and Medium Enterprises,
Customs Duty Exemp on on imports of project
• A company predominantly; related capital goods (plant, machinery and
- conduc ng a business of expor ng equipment).
goods and services
- conduc ng an agricultural business Exemp on on Ports & Airport Development Levy
- providing educa onal services
- engaged in an undertaking for the • Large scale export-oriented manufacturing
promo on of tourism companies with an investment of over USD
- providing informa on technology 200 million, which has entered into an
services agreement on or a er November 1, 2016, with
• Standard rate remains at 28% the Board of Investment of Sri Lanka will be
exempted from paying Ports and Airports
• Higher rate of 40% for Be ng & Gaming and Liquor
Development levy (PAL) for impor-ta on of
& Tobacco
project related capital goods during the
project implementa on period.
Enhanced Capital Allowance (ECA)
• Investment incen ves and temporary conces- • PAL Exemp on for selected capital goods
sions in the form of Enhanced Capital Allowance Out of a total of 652 Machinery & Appliances
(ECA) in addi on to normal deprecia on items (Chapter 84 under HS Code classifica-
allowance. (For details see Appendix I) on), PAL is exempted for 118 items and Lower
rate of 2.5% applicable for 52 items.
Duty Exemp ons on Importa on
of Raw Materials foe Export
Customs Duty, VAT, PAL, and NBT are exempted for
importa on of raw materials for export oriented
projects.
NON-FISCAL INCENTIVES
Foreign Equity Repatria on of Earnings
100% foreign ownership permissible. However, foreign
ownership is not permissible for Pawn Broking, Retail All income, proceeds on sale of the investments can be
Trade (where a capital contributed by a person resident repatriated through an Inward Investment Account
outside Sri Lanka) with a capital of less than five million opened by the Investor.
USD and Coastal Fishing.
21SRI LANKA : Investment Guide to Sri Lanka 2018
11. Investment Poten al in Sri Lanka
Key Target Sectors
Sector Subsectors Sri Lanka's Strength
Manufacturing • Automo ve components, • Growing global demand with an opportunity to link to the
(High Value medical devices, Global Value Chains
Added /High pharmaceu cals, solar • Strong market opportunity and economic impact poten al
Tech) panels, fabricated metal for Sri Lanka
parts, value added • Precision and adaptable workforce
minerals
Manufacturing • Lingerie • Proven track record and compelling value proposi on
- Apparel • Smart tex les (wearable • Interna onally compe ve on metrices such as skills and
(High value-added) technology) educa on level; efficient and highly compe ve port for
• Other poten al high-value apparel trade
clothing items (especially • Growing demand from India (with FTA benefits) and beyond
niche products)
• Innova on & research
IT-Enabled • IT so ware • Job crea on track record and poten al
Services • BPM • Strong exis ng cluster and value proposi on
• KPM • Interna onally compe ve wage and real estate costs
Tourism • Hotels • Strong market opportunity and economic impact poten al
• Recrea onal ac vi es for Sri Lanka
(theme parks) • Strong Sri Lankan value proposi on
• Adventure sports & leisure • Interna onally compe ve on numerous metrics (natural
facili es & cultural assets; compe ve infrastructure; rapid sector
growth etc.)
Food Processing • Fish / seafood • Strong value proposi on (diverse selec on of raw
• Fruit and vegetables products; good domes c infrastructure; a rac ve local
• Dairy and regional market)
• Strong food processing poten al compared to compe tor
markets in the region
Logis cs • Entrepot trade • Compe ve strength of regional loca on, water depths
• Transporta on and shipping routes
• Warehousing & storage • Strong poten al as a Mul -Country Consolida on (MCC)
hub
• Improving infrastructure
• Geo strategic loca on with efficient port facili es
Educa on • Voca onal and higher • Requirement of matching the skills with growing industry
educa on demand
3
Large Scale • Mixed Development • Growing demand for high- end apartments, office spaces
Infrastructure • Industrial Zone Development and shopping centers with interna onal standards
22SRI LANKA : Investment Guide to Sri Lanka 2018
Western Region Megapolis Planning Project
Western Region Megapolis also called Western Region Megapolis Planning Project (WRMPP) is an urban planning, zoning,
and development project aimed at crea ng a planned Megapolis in Sri Lanka's Western Province by 2030. The main goals of
the project are for economic growth and prosperity, good governance, crea on of an efficient and well-planned region,
social equity and harmony as well as environmental sustainability.
The 10 Mega Sectors Under Megapolis Project Plan
i) Transport, Energy and Water
ii) Housing and Reloca on of Administra on
iii) Environment and Waste Management
iv) The Aero Mari me Trade Hub
v) ‘The High Rise’ - Central Business District
vi) Industrial and Tourist Ci es
vii) Science and Technology City
viii) ‘Eco Habitat' and Planta on City
ix) ‘Smart Na on'- The Smart City Development Project
x) ‘Tranquility' – The Spiritual Development Facilita on
Opportuni es in Colombo Interna onal Financial City (CIFC)
Spanning 269 hectares of reclaimed land from the sea, Port City Colombo will be South Asia's premier residen al, retail and
business des na on, offering unmatched planned city living along the warm waters of the Indian Ocean. The Port City Colombo
has been designed with five unique precincts; Financial District, Central Park Living, The Marina, Interna onal Island and Island
Living.
Renamed as the Colombo Interna onal Financial City (CIFC), it has already a racted numerous investment enquiries from all over
the world as much as 60% of reclama on has now been completed and once fully opera onal, expected to a ract investment of
USD 15 Bn with 83,000 new employment opportuni es.
23SRI LANKA : Investment Guide to Sri Lanka 2018
Opportuni es in the Port of Hambantota
The Port of Hambantota faces the Southern Indian Ocean, The primary investment opportuni es related to
with direct access to the interna onal shipping routes Hambantota Interna onal Port are as follows:
approximately 10 nau cal miles away, which links the Asia
Pacific region with Europe and North America. Further, the Port Services
short transit me to India, Africa and the Upper Gulf - Break Bulk Terminals
creates an opportunity to access the expanding markets of - Container Terminals
the Indian Subcon nent. - Ro-Ro Terminals
- Bunkering Terminals
Hambantota Interna onal Port is a joint venture between
China Merchants Port Holdings (CMPort) and the Sri Lanka Mari me Services
Ports Authority (SLPA). The Hambantota Port and - Ship Repair
development site covers approximately 11.51 Km2 of the - Ship chandlers
land and Port Development is carried out as a mul phase, - Seaman Club
mul -sector project.
Port Related Industry
The port has been developed in two phases to date. - Export Oriented Manufacturing
- Warehousing
Phase 1 is complete and opera onal with a 17 m deep - Advanced Technology related Services
harbor basin with 210m wide entrance channel, 600m - Heavy Industry which require Port & Je y Facili es
long general-purpose berth of 100,000 DWT capacity, - Export Oriented Oil Refinery
approximately 3,500m quay structures and yard area, - Power Plant
300m oil berths, including a range of port equipment, tugs, - Cement Plant
pilot launches and bunker barges, and buildings including a
14-storey administra ve building. Integrated Logis cs
- Warehousing
Phase 2 comprises addi onal berths and yard areas, and - Mul modal Logis cs
an ar ficial island of 42.6ha.
Business Incubator
In addi on to Phase 1 and Phase 2, a tank farm was - Supplying pla orm for Sri Lanka young talent to
constructed approximately 2km from the oil berths on the start their business
East side of the port. - Support the development of small business
24SRI LANKA : Investment Guide to Sri Lanka 2018
Appendix 1 - Legal Framework
Board of Investment Law No. 4 of 1978
- Board of Investment of Sri Lanka (Amendment) Act. No. 43 of 1980
- Board of Investment of Sri Lanka (Amendment) Act. No. 21 of 1983
- Board of Investment of Sri Lanka (Amendment) Act. No. 49 of 1992
- Board of Investment of Sri Lanka (Amendment) Act. No. 9 of 2002
- Board of Investment of Sri Lanka (Amendment) Act. No. 36 of 2009
- Board of Investment of Sri Lanka (Amendment) Act. No. 3 of 2012
(Refer: www.investsrilanka.com)
Inland Revenue Act No.24 of 2017
Summary of the investment incen ves
Loca on Expenses incurred on Depreciable Enhanced Extended Period Exemp on from
Assets* Capital for Deduc ng Dividend tax &
Allowance Unrelieved losses Exemp on of
employment income
from WHT
Northern > US$ 3 Mn and < = US$ 1 000 Mn 200% 10 X
Province > US$ 1000 Mn 200% 25
P
Other than > US$ 3 Mn and < = US$ 100 Mn 100% 10 X
Northern > US$ 100 Mn and < = US$ 1,000 Mn 150% 10 X
Province > US$ 1000 Mn 150% 25 P
* Other than intangible assets (Class 5)
Classifica on of Depreciable Assets
Class 1 : computers and data handling equipment together with peripheral devices
Class 2 : buses and minibuses, goods vehicles; construc on and earthmoving equipment, heavy general purpose or specialised trucks, trailers and
trailer-mounted containers; plant and machinery used in manufacturing.
Class 3 : railroad cars, locomo ves, and equipment; vessels, barges, tugs, and similar water transporta on equipment; aircra ; specialised public
u lity plant, equipment, and machinery; office furniture, fixtures, and equipment; any depreciable asset not included in another class.
Class 4 : buildings, structures and similar works of a permanent nature
Class 5 : intangible assets, excluding goodwill – applicable only for normal deprecia on
Special incen ves for Sate Owned Company
Category Expenses incurred Enhanced Extended Period Exemp on from
on Assets or Shares Capital for Deduc ng Dividend tax &
Allowance Unrelieved losses Exemp on of
employment income
from WHT
State owned company > US$ 250 Mn 150% 25 P
“state owned company” means any company, where fi y per centum or more of the shares are held by the Government and includes a company of which
forty per centum or more of the shares held by the Government are acquired by a person for an amount not less than USD 250 million
26SRI LANKA : Investment Guide to Sri Lanka 2018
Temporary Concessions
Loca on Expenses incurred on Enhanced Capital
Depreciable Assets* Allowance
Northern Province Up to US$ 3 Mn 200%
Other than Northern Province Up to US$ 3 Mn 100%
* (a) Class 1 : computers and data handling equipment together with peripheral devices and
Class 4 : buildings, structures and similar works of a permanent nature and
(b) Depreciable assets (other than intangible assets) comprising plant or machinery that are used to improve business processes or
produc vity and fixed to the business premises.
Above temporary concessions will expire in 3 years.
Sector Incentives Period
(after commencement
of the Act)
Business of Life Insurance Reduced CIT rate of 14% 3 years
Information Technology Additional deduction equal to 35% ceiling of
- conducts a business which predominately (of the total amount deducted for the 5 years
consists of providing information technology year under the IR Act that represents
services payments made by the company
- has at least 50 employees during the whole of which are to be included in calculating
the year the taxable income of its employees)
- report those employees in the statement that * Not entitled for enhanced capital
the company, as a withholding agent, is allowance
required to file under section 86
Headquarters Relocation CIT Rate at 0% 3 years
(established on or after October 1, 2017)
Renewable Energy Reduced CIT rate of 14% 3 years
(Which entered into a Standardized Power
Purchase Agreement on or before November 10,
2016 with the Ceylon Electricity Board )
Research and Development Additional deduction equal to 3 years
100% of the total amount of research
and development expenses
27SRI LANKA : Investment Guide to Sri Lanka 2018
Foreign Exchange Act No. 12 of 2017
Exchange Control Laws Applicable for foreign Investments
In accordance with the Foreign Exchange Act No 12 of 2017, the Minister in charge has gaze ed relevant regula ons in the
Extraordinary Gaze e No 2045/56 dated 17-11-2017 with the Exchange Control Provisions applicable for foreign
investments which read as follows;
A person resident outside Sri Lanka is permi ed to Invest, acquire or hold all classes of shares or an en tlement of shares
issued by companies incorporated in Sri Lanka subject to the exclusions & limita ons as follows;
Exclusions:-
The permission hereby granted shall not apply in respect of shares of a company proposing to carry on any of the following
businesses:
I. Pawn broking
ii. Retail trade with a capital of less than Five Million US Dollars
iii. Coastal Fishing
Limita ons:-
(a) Foreign investments in the areas listed below will be approved only up to 40% of the stated capital of such company or
if a special approval has been granted by the Board of Investment of Sri Lanka for a higher percentage of foreign
investment in any company, only up to such higher percentage.
I. Produc on of goods where Sri Lanka's exports are subject to interna onally determined quota restric ons
ii. Growing and primary processing of tea, rubber, coconut, cocoa, rice, sugar and spices
iii. Mining and primary processing of non-renewable na onal resources
iv. Timber based industries using local mber
v. Deep Sea Fishing (as defined by the Ministry assigned the subject of Fisheries)
vi. Mass Communica on
vii. Educa on
viii. Freight Forwarding
ix. Travel Agencies
x. Shipping Agencies
(b) The permission shall apply in respect of shares in a company carrying on or proposing to carry on any of the businesses
specified below only up to the percentage of the stated capital of the company, for which percentage either general or
special approval has been granted by the Government of Sri Lanka or any legal or administra ve authority set up for the
approval of foreign investments in such businesses
a. Air transporta on;
b. Coastal shipping (as defined by the Ministry assigned the subject of Shipping);
c. Industrial enterprise in the Second Schedule of the Industrial Promo on Act, No. 46 of 1990, namely –
I) any industry manufacturing arms, ammuni ons, explosives, military vehicles and equipment aircra
and other military hardware;
II) any industry manufacturing poisons, narco cs, alcohols, dangerous drugs and toxic, hazardous or
carcinogenic materials; any industry producing currency, coins or security documents;
d. Large scale mechanized mining of gems;
e. Lo eries
General Condi ons for Permi ed Investments
- Capital Investments shall be made through an “Inward Investment Account (IIA)”
- Income from such investments and proceeds of disposal shall be credited to IIA
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