Sri Lanka company registration

DOING BUSINESS IN SRI LANKA

Since 2003, Healy Consultants Group PLC 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.

SummaryLLCFast business setup solutionFree zone LLCPublic limited companyRepresentative officeBranch office
Best use of company?All purposesClose a customer deal nowManufacturing and export tradingTo secure public fundingMarketing & researchSpecific projects
How soon can you invoice Clients\sign sales contracts?2 months1 week7 months2 months1 month1 month
How soon can you hire staff?2 months1 week7 months2 months1 month1 month
How soon can you sign a lease agreement?2 weeks1 week1 month2 weeks2 weeks2 weeks
How long to supply corporate bank account numbers?3 months1 week3 months3 months2 months2 months
How long to supply company registration numbers?2 months1 week2 months2 months1 month1 month
Corporate tax rate on annual net profits?28%28%0% (up to 11 years)28%0%28%
Limited liability entity?YesYesYesYesNoNo
Government grants available?YesYesYesYesNoYes
Group HQ tax incentives available?YesYesYesYesNoNo
Minimum paid up share capital?US$1US$1US$250,000US$656,000NoneUS$200,000
Corporate bank account?CitibankSCBHSBCCitibankDeutsche BankSCB
Can secure trade finance?YesYesYesYesNoYes
VAT payable on sales to local customers?15%15%15%15%No sales allowed15%
Average total business set up engagement costs?US$12,550US$16,340US$20,020US$23,550US$11,300US$13,450
Average total engagement period?4 months7 months8 months8 months3.5 months3.5 months

See full table

Accounting and tax considerationsLLCFast business setup solutionFree zone LLCPublic limited companyRepresentative officeBranch office
Statutory corporate tax payable?28%28%0% (up to 11 years)28%0%28%
Legally tax exempt if properly structured?NoNoYesNoYesNo
Must file an annual company tax return?YesYesYesYesNoYes
Must file annual financial statements?YesYesYesYesYesYes
Must appoint an auditor?YesYesYesYesNoYes
Access to double taxation treaties?YesYesYesYesNoYes
Withholding tax on remittance to parent company?10%10%10%10%None10%
Company RegistrationLLCFast business setup solutionFree zone LLCPublic limited companyRepresentative officeBranch office
Resident director/manager/ legal representative required?NoNoNoNoYesYes
Minimum number of directors/managers?111211
Minimum number of shareholders/partners?2222Parent companyParent company
Maximum shareholding for foreigners?100%100%100%100%100%100%
Minimum statutory paid up share capital?US$1US$1US$250,000US$656,000NoneUS$200,000
Shelf companies available?YesYesNoNoNoNo
Time to incorporate a new entity?2 monthsNone2 months2 months1 month1 month
Can easily convert to a PLC?YesYesYesYesNoNo
Can have preference shareholders?YesYesYesYesNoNo
Business ConsiderationsLLCFast business setup solutionFree zone LLCPublic limited companyRepresentative officeBranch office
Good entity for trademark registration?YesYesYesYesNoYes
Can secure an import and export license?YesYesYesYesNoYes
Can bid for Government contracts?YesYesYesYesNoYes
Government approval required for foreign owners?NoNoYesYesYesYes

Public registrar including directors and shareholders?Yes
Sponsorship by a local citizen required?No
Our Client needs to travel to Sri Lanka for business set up?No
Temporary physical office solutions available?Yes
You need a local resident as bank signatory?No
Can be wholly foreign owned?Yes
The entity will likely be regulated by?Registrar of Companies
Security deposit to be kept with Government?No
Monthly VAT reporting to the Government?Yes
Must sign an office lease agreement during incorporation?No
Shareholders & directors documents to be attested\translated?Yes
Each foreign director needs a personal income tax number?No
Foreign non resident director needs a work permit?No
Maximum number of staff allowed?None
Expatriate to local staff ratio?None
Can secure residence visa for business owner?Yes
Other useful information
What will be included in my customer sales invoice?Click here
This country has signed free trade agreements?Yes
This country is a member of WIPO/TRIPS?Yes
This country is a member of the ICSID?Yes
Average custom duties suffered?8%
Average monthly office rental? (US$ per sq m)US$20
Minimum statutory monthly salary?US$69
Average monthly US$ salary for local skilled employees?US$560
US$ deposit interest rate? (1 year average)3%
Overseas remittance currency controls?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: