Foreign investment
There is a strong relationship between foreign investment and economic growth. Larger inflows of foreign investments are needed for the country to achieve a sustainable high trajectory of economic growth. Foreign direct investment refers to direct investment equity flows in an economy.
It is the sum of equity capital, reinvestment of earnings, and other capital. Direct investment is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy. Ownership of 10 percent or more of the ordinary shares of voting stock is the criterion for determining the existence of a direct investment relationship. This series shows net outflows of investment from the reporting economy to the rest of the world.
Why investing in Sri Lanka
Sri Lanka has Bilateral Investment Protection Agreements exist between United Kingdom, United States of America, Germany, Canada, China, Denmark, Egypt, Finland, France, Iran, India, Italy, Indonesia, Japan, The Republic of Korea, Luxembourg, Malaysia, Netherlands, Norway, Pakistan, Romania, Singapore, Sweden, Switzerland, Thailand and Belgium/ Luxembourg.
These agreements offer.
- Protection against, nationalization.
- Prompt and adequate compensation if required.
- Free remittances, of earnings, capital and business fees.
- Settlement of disputes, under “International Convention for the Settlement of Investment Disputes (ICSID)”.
How we can help?
We are negotiating, consulting, collaborating with the “BOI” officials, central bank officials and other government authorized bodies on tax holidays, preferential tax rates, tax issues, exemption from custom duties, foreign exchange controls and various banking & finance issues associate with foreign investments.
We can facilitate the following.
- Consultancy and sort agreements with BOI.
- Facilitating with Inward Investment Account [IIA].
- Facilitating with Offshore Banking/FCBU Accounts.
- Facilitating with opening Personal foreign currency Accounts [PFCA’s]and Bussines Foreign Currency Accounts [BFCA’s].
- Facilitating Purchase or lease property.
- Local company Incorporation.
FOREIGN INVESTMENTS FAQs
Sri Lankan government laws, regulations, and official institutions such as:
- Board of Investment of Sri Lanka (BOI)
- Central Bank of Sri Lanka (CBSL)
- Companies Act No. 07 of 2007
- Foreign Exchange Act No. 12 of 2017
- Sri Lankan Constitution
- Colombo Port City Economic Commission Act
The language is written for search engine visibility, investor clarity, and legal accuracy.
Is Sri Lanka open to foreign investment?
Yes. Sri Lanka actively encourages foreign direct investment under a liberalized investment regime supported by constitutional and statutory protections.
What law governs foreign investment in Sri Lanka?
Foreign investment is governed mainly by the Board of Investment Law, Foreign Exchange Act, Companies Act, and the Sri Lankan Constitution.
What is the main government authority for foreign investment?
The Board of Investment of Sri Lanka (BOI) is the primary authority facilitating and regulating foreign investments.
Are foreign investors legally protected in Sri Lanka?
Yes. Article 157 of the Constitution protects investment agreements from unilateral changes by the State.
Can foreign investors own 100% of a Sri Lankan company?
Yes, except in a few restricted sectors specified by law.
BOARD OF INVESTMENT (BOI) FAQs
What is the BOI of Sri Lanka?
The BOI is a statutory body established to promote, approve, and facilitate foreign investments.
Is BOI approval mandatory for all foreign investments?
No. BOI approval is required mainly for large-scale projects, tax incentives, or restricted sectors.
What is a BOI Section 16 project?
A Section 16 project is a standard investment approval without tax incentives.
What is a BOI Section 17 project?
A Section 17 project qualifies for tax holidays and special incentives under a BOI agreement.
How long does BOI approval take?
Typically 2–6 weeks, depending on project complexity.
FOREIGN OWNERSHIP & RESTRICTIONS
Are there restricted sectors for foreign investment?
Yes. Sectors like retail trade (under USD 5 million), coastal fishing, pawn broking, and local legal practice are restricted.
Can foreigners invest in retail trade?
Yes, if the minimum investment exceeds USD 5 million.
Is foreign ownership allowed in real estate?
Foreigners cannot directly own land but may lease land long-term or invest through approved structures.
Can foreigners invest in listed companies?
Yes, subject to sectoral limits imposed by the Colombo Stock Exchange.
Are joint ventures required?
No, unless the sector is restricted.
COMPANY FORMATION FAQs
How does a foreigner register a company in Sri Lanka?
By incorporating under the Companies Act No. 07 of 2007 with the Registrar of Companies.
What company types can foreigners register?
Private limited companies, branches, subsidiaries, liaison offices, and project offices.
Is a local director required?
No, but a local company secretary is mandatory.
Can a foreign company open a branch office?
Yes, subject to Central Bank and Registrar approval.
Is a local address required?
Yes, a registered office in Sri Lanka is mandatory.
FOREIGN EXCHANGE AND REPATRIATION
How must foreign investment funds be remitted?
Funds must be remitted through an Inward Investment Account (IIA).
Can profits be repatriated freely?
Yes. Profits, dividends, and capital can be repatriated without restrictions.
Which law governs foreign exchange?
The Foreign Exchange Act No. 12 of 2017.
Are there currency conversion restrictions?
No, authorized dealers may freely convert funds.
Can foreign loans be obtained?
Yes, subject to Central Bank guidelines.
Do foreign companies pay tax in Sri Lanka?
Yes, they are taxed on income sourced in Sri Lanka.
TAXATION AND INCENTIVES
Are BOI companies tax-exempt?
BOI companies may receive tax holidays depending on investment size and sector.
What incentives does BOI offer?
Tax holidays, customs duty exemptions, VAT exemptions, and concessional tax rates.
Are incentives guaranteed?
Yes, once granted under a BOI agreement.
Can tax incentives be revoked?
No, incentives are protected by law and the Constitution.
LABOUR AND EMPLOYMENT
Can foreign companies hire expatriates?
Yes, with BOI or Department of Immigration approval.
Are work visas required?
Yes, employment visas are mandatory.
Are Sri Lankan labour laws applicable?
Yes, all companies must comply with local labour laws.
Is there a minimum wage?
Yes, as prescribed by law.
Are trade unions permitted?
Yes, under Sri Lankan labour laws.
COLOMBO PORT CITY FAQs
What is Colombo Port City?
A special economic zone governed by the Colombo Port City Economic Commission Act.
Is Port City open to foreign investors?
Yes, with 100% foreign ownership allowed.
Are Port City taxes different?
Yes, Port City offers special tax and regulatory incentives.
Is Port City governed by Sri Lankan law?
Yes, but with a special regulatory framework.
Can financial institutions operate in Port City?
Yes, under Port City licensing rules.
LEGAL AND COMPLIANCE
Are foreign investors protected from expropriation?
Yes, expropriation without compensation is prohibited.
Can disputes be resolved through arbitration?
Yes, Sri Lanka recognizes international arbitration.
Are BITs in place?
Yes, Sri Lanka has multiple Bilateral Investment Treaties.
Is corporate governance regulated?
Yes, under Companies Act and securities laws.
Are annual filings mandatory?
Yes, all companies must file annual returns.
LEGAL AND COMPLIANCE
Can foreign companies export from Sri Lanka?
Yes, without restrictions.
Are export incentives available?
Yes, through BOI and Export Development Board schemes.
Are customs concessions available?
Yes, for BOI-approved projects.
Is Sri Lanka WTO-compliant?
Yes.
Are free trade agreements available?
Yes, including with India and Pakistan.
JOINT VENTURES AND PROPERTY
Can foreigners enter joint ventures?
Yes, freely.
Are shareholder agreements enforceable?
Yes, under contract law.
Can foreigners lease land?
Yes, subject to lease tax rules.
Is stamp duty payable?
Yes, depending on the transaction.
Can companies own land?
Yes, subject to land laws.
INVESTMENT THRESHOLDS
Is there a minimum investment?
Varies by sector and BOI approval type.
Are infrastructure projects incentivized?
Yes, heavily encouraged.
Are renewable energy projects promoted?
Yes, with specific incentives.
Can thresholds be negotiated?
Yes, for large strategic projects.
Are PPPs allowed?
Yes, under government policy.
PROCEDURAL FAQs
How long to start a business?
Typically 2–4 weeks.
Are environmental approvals required?
Yes, for certain industries.
Are sector-specific licenses required?
Yes, depending on the industry.
Can BOI assist with utilities?
Yes.
Are local bank accounts required?
Yes.
RISK AND INVESTOR SUPPORT
Is Sri Lanka politically stable for investment?
Yes, with constitutional investment protections.
Does the government support investors?
Yes, through BOI and other agencies.
Can investors seek legal remedies?
Yes, through courts and arbitration.
Is corruption regulated?
Yes, under anti-corruption laws.
Are compliance audits required?
Yes.
FINAL PRACTICAL QUESTIONS
Can foreigners exit investments easily?
Yes, with full capital repatriation.
Are mergers allowed?
Yes, under Companies Act.
Can shares be transferred?
Yes, subject to law.
Are financial statements mandatory?
Yes.
Are auditors required?
Yes.
Can foreign directors be appointed?
Yes.
Are visas renewable?
Yes.
Can investors obtain permanent residency?
Possible under investment schemes.
Are incentives transparent?
Yes, governed by written law.
Where should investors seek legal advice?
From Sri Lankan corporate and investment law firms.