How to Register a Tax Free Company in Sri Lanka?

Board of Investment of Sri Lanka acts as the country’s apex agency of promoting foreign direct investments, diversifying the sources of foreign exchange earnings, and increasing export earnings, encouraging, and fostering the establishment and development of industrial and enterprises within the Republic. It attracts and retains quality investments that leads diversify the sources of foreign exchange earnings and increase export earnings, encourage, and foster the establishment and development of industrial and enterprises within the Republic.

How BOI connects with you?

The BOI acts as the first point of contact for investors who intend to set up projects in high value added/ high-tech manufacturing, high value-added apparel, IT enabled services, tourism, food processing, logistic, education and large-scale infrastructure or any other chosen sectors in Sri Lanka. Information and guidance are provided, and approvals required from other Line Agencies are coordinated by the BOI to facilitate the investors.

Moreover, Investment applications in respective sectors are evaluated by the BOI for approving and granting concessions and facilitate visa issuance for expatriates.

BOI provides assistance to investors throughout the project cycle from start-up to implementation and successful operation of project by facilitating and attending to import/export clearance for import of capital goods and raw materials and export of final products.

What are the Minimum Qualifications need to be entitled to have BOI approval?

Following minimum qualifying investment criteria should be met by the mentioned projects applying the BOI approval under sec.17 of BOI Law.

What is Foreign Exchange Act?

Foreign Exchange Act refers to the act passed by Sri Lankan Parliament to provide tax concessions to persons who remit or bring to Sri Lanka any foreign currency held by such persons outside Sri Lanka in general.

Foreign Exchange Act No.12 of 2017 which is the latest version has been implemented by Department of Foreign Exchange in Central Bank of Sri Lanka with effect from November 10, 2017., repealing the Exchange Control Act No.24 of 1953.

What is Foreign Exchange Act No.12 of 2017 permitting?

A person resident outside Sri Lanka is permitted to invest, acquire, or hold all classes of shares or an entitlement of shares issued by companies incorporated in Sri Lanka subject to the exclusions and limitations stated in the Foreign Exchange Act No.12 of 2017.

Permissions are not applicable for Pawn Broking, Retail Trade with a capital less than 5 million USD and Coastal Fishing.

Permissions for 10 specified foreign investment areas are approved only up to 40% of the stated capital of such company. Permission for a higher percentage is granted only if a special approval has been granted by BOI Sri Lanka.

What is Land Act?

Land Restriction on Alienation act which consists of 25 sections, is the act passed by Sri Lankan Parliament to make provisions to stipulate restrictions on Alienation (transferring) of Lands in Sri Lanka to foreigners, foreign companies, and certain institutions with foreign shareholding in general. New land law was promulgated in 2014 (as amended in 2017 and 2018) and is implemented by Ministry of Land and Land Development of Sri Lanka at present.

A brief of Land (Restriction on Alienation) Act No.38 of 2014.

Outright Transfers
An outright transfer in Land Act No.38 of 201 refers to a complete and exclusive transfer of the land lease to a foreigner, a foreign company, or an institution with foreign shareholding.

Under this, foreign investors are eligible to lease lands in Sri Lanka to establish their projects. Land Act permits lease of land for foreign investments and outright transfers will only be permitted when the foreign shareholding is less than 50%. Land lease period is subjected to a maximum tenure of 99 years. Foreign investors are not liable to pay any lease tax when leasing a land. However, condominium properties (properties individually owned by several owners) can be purchased outright with no restrictions on nationality.

Leasing of lands to foreigners
Any land transferred or leased to a person, or a company referred to in Section 2 (1) and 5 (1) of Land (Restrictions on Alienation) Act, after the date on which the certificate of the speaker is endorsed in respect of this Act (October 29, 2014) shall not be mortgaged or pledged to any licensed bank, for a period of 5 years from the date of execution of the transfer or lease.

• The provisions of Land Reform Act No.01 of 1972 on the maximum extent of land that can be owned by any person shall apply to any transfer.

Concessions for development projects

Where a state land is transferred or leased to a project approved by the Cabinet of Ministers as a Development Project for which the freehold right (free ownership for perpetuity) or leasehold right (temporary ownership) of the state land to be transferred, such project shall be granted a deduction amounting to 25% of the land value or total lease rental, determined under section 13. This context is valid for projects implemented by citizens of Sri Lanka, Companies Incorporated in Sri Lanka, where the Sri Lankan shareholding is 50% or above.

• Fees and Application Processing Charges applicable for Investors seeking the guidance of Board of Investment are stated below for your information.