Sri Lanka company registration

Sri Lanka company registration

DOING BUSINESS IN SRI LANKA

Since 2003, Healy Consultants has assisted our Clients to start their business in Sri Lanka. Our services include i) Sri Lanka business registration ii) government license registration iii) business bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.

SummaryLLCFree zone LLCBranch OfficeRepresentative Office
Best use of company?SMEsManufacturing and tradingBank branchesMarketing
Legally tax exempt if properly structured?NoYesNoYes
Corporate bank account location?CitibankDeutsche BankSCBHSBC
Client must travel to Asia?NoNoNoNo
Can secure trade finance?YesYesYesNo
Limited liability entity?YesYesNoNo
GST payable on sales to local customers?11%11%11%No sales
Withholding tax on payments to shareholders?10%0% (up to 11 years)10%0%
Government foreign investment approval is required?NoYesYesNo
Average total engagement costs?US$11,550US$16,550US$13,450US$11,300
Average total engagement period?17 weeks21 weeks15 weeks15 weeks
Accounting and tax considerationsLLCFree zone LLCBranch OfficeRepresentative Office
Statutory corporation tax payable?25%0% (up to 11 years)28%0%
Must file an annual Sri Lankan tax return?YesYesYesNo
Effective corporation tax rate of net profits of US$250,0000.280% (up to 11 years)0.280
Must file annual financial statements?YesYesYesYes
Investment income is tax exempt in Sri Lanka?NoNoNoNo
Access to double taxation treaties?YesYesYesNo
This entity enjoys Government incentives?YesYesYesNo
Monthly GST reporting to the Government?YesYesYesYes
Legally tax exempt entity?NoYesNoYes
Dividends received are legally tax exempt?NoNoNoNo
Company registrationLLCFree zone LLCBranch OfficeRepresentative Office
Resident director\partner\manager required?NoNoYesYes
Minimum number of shareholders\partners?11Parent companyParent company
Minimum number of directors/managers?1111
Minimum paid up share capital?US$1US$1US$200,000US$1
Shelf companies available?YesNoNoNo
Time to incorporate a new entity?7 weeks7 weeks5 weeks5 weeks
Can easily convert to a local PLC?YesYesNoNo
Can have preference shareholders?YesYesNoNo
Business considerationsLLCFree zone LLCBranch OfficeRepresentative Office
Can invoice local customers?YesYesYesNo
Can hire local staff?YesYesYesYes
Can rent local office space?YesYesYesYes
Secures a residence visa for business owner?YesYesYesNo
Good entity for trademark registration?YesYesYesYes
Other useful informationLLCFree zone LLCBranch OfficeRepresentative Office

Sri Lanka has signed free trade agreements?Yes
This country is a member of WIPO and TRIPS?Yes
The country is a member of the ICSID?Yes
Average customs duties suffered?7%
Average monthly office rental? (US$ per sq m)US$20
Minimum statutory annual salary?US$69
Average monthly US$ salary for local employees?US$108
Sri Lankan rupee deposit interest rate? (1 year average)4.75%
US$ deposit interest rate? (1 year average)2.5%
Overseas remittance currency controls?Yes
Public register of shareholders and directors?Yes
Banking considerations
Multi-currency bank accounts available?Yes
Corporate visa debit cards available?Yes
Quality of e-banking platform?Good
Crowd funding available in this country?Yes

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  • Advantages and disadvantages

    Advantages of Sri Lanka company registration

    Sri Lankan business registration information

    1. It is possible to register a limited liability company in Sri Lanka within 2 weeks, with i) two shareholders and ii) one director, who all can be of any nationality. There is also no minimum paid-up share capital required and our Client will not need to travel to complete the engagement.

    Disadvantages of Sri Lanka company registration

    1. A Sri Lanka limited liability company requires a company secretary ordinarily residing in the country to complete incorporation. If required, Healy Consultants will supply our Client with secretarial services to comply with this requirement;
    2. Our Clients planning to sell their products in Sri Lanka should expect low earnings: the average purchasing power of local consumers barely amounts to US$190 per month and most of it is spent on housing and food;
    3. Our Clients opening a company in Sri Lanka can pay a fair amount of tax because:
      • Corporate tax on Sri Lanka limited liability companies is fairly high, at a flat 28% rate on their worldwide earnings, although a reduced rate of 12% applies for eligible activities (see accounting and tax section for further details);
      • Dividends distributed to both residents and nonresidents are subject to withholding tax at a rate of 10% (unless reduced by a double taxation avoidance treaty);
      • Healy Consultants recommend our Clients to establish a Sri Lanka LLC rather than a branch office. In addition to corporate tax, Sri Lanka branch companies are indeed required to pay an additional Branch tax levied at 10% on all funds remitted abroad;
      • Labor tax and social contributions represent on average 23% of an employee’s gross salary, an higher amount than in most other South Asian countries;
      • For all reasons listed above, the total amount of taxes paid by a business represents on average 56% of its annual earnings, against 40% in other South Asian countries.

  • Best uses for a Sri Lankan company

    1. Our Clients often choose to establish a Sri Lanka company when expanding in South Asia because government requirements and administrative red tape are less extensive than other South Asian countries. Sri Lanka is indeed ranked as South Asia’s i) best country for the ease of doing business by the World Bank and ii) 2nd least corrupt country by Transparency International;
    2. Sri Lanka is an attractive place to setup manufacturing and agro-processing companies because:
      • Our Clients’ labor costs will be low. Average monthly wages for local workers are only i) US$104 in agriculture ii) US$150 in the industry and iii) US$186 for service occupations;
      • Sri-Lanka based businesses engaged in construction, tourism and export activities benefit from a reduced corporate tax of 12%. Foreign entrepreneurs registering a Sri Lanka LLC can also benefit from a tax holiday during four years, provided they make an initial investment of US$190,000 related to agro-processing and fisheries activities;
      • After registration of their business in Sri Lanka, it will also be relatively easy for our Clients to secure a loan in order to build a factory and acquire manufacturing equipment. Sri Lanka is indeed ranked as the 3rd best place in South Asia for the ease of access to loans, according to the World Economic Forum;
      • Exporting products from Sri Lanka is convenient as the country is an island and has seven international harbors and excellent port infrastructure, ranked as the best in South Asia by the WEF;
      • Most manufactured products and raw material will be exempt from custom duties when sold in i) the United States ii) the European Union iii) Australia iv) New Zealand v) Russia vi) India vii) Pakistan and viii) Bangladesh as these countries have either signed a free trade agreement with Sri Lanka or granted this country’s export preferential treatment.

Company registration

  • Time to incorporate: Seven weeks
  • Cost to set up: US$11,550
  • Minimum capital: 0 (no par value)
  • Physical office required: No

Required appointments

  • Shareholders: 1
  • Directors: 1
  • Company secretary: Yes
  • Resident director: No

Key facts

  • Corporate tax rate: 28%
  • Corporate tax base: Worldwide
  • Shelf companies: Not Available
  • Main company type: LLC

Contact us

For additional information on our business registration services in Sri Lanka, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Paavan Chhabra, directly: