How to start a business in Sri Lanka

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How to start a business in Sri Lanka
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How to start a business in Sri Lanka

• If youre thinking about starting a business in
  Sri Lanka, youd be wise to arrive with a plan
  and a bit of capital. The World Bank ranks the
  country 109th out of 189 countries on its Ease
  of Doing Business index. However, Sri Lanka has
  seen the emergence of more startups within the
  past decade. The government has made efforts to
  encourage trade and entrepreneurship.
• While setting up a company involves minor
  administrative hurdles, the process is quick and
  straightforward. Registration is best done
  in-person, not online. Here are some important
  tips for the potential entrepreneur in Sri Lanka.

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• What are my company options?
• There are several types of business structures in
  Sri Lanka. These are
• sole proprietorship
• partnership
• limited liability company
• public limited company
• overseas company
• offshore company
• Sole Proprietorship
• The structure of a sole proprietorship is similar
  in most countries. When you register as a sole
  trader, youre taxed at a personal income rate.
  Youre responsible for all company obligations.
  This is the easiest and quickest business to set
  up. As a sole trader, youll still be able to
  employ other individuals.

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Partnership A registered partnership is similar
to a sole proprietorship, but the ownership is
shared. From a legal and tax perspective, all
partners share the obligations of the company.
Partnerships arent taxed as separate legal
entities, so partners are subject to personal
income rates. Limited Liability
Company The limited liability company is the most
common type of business in Sri Lanka. It requires
one director and two shareholders. Minimum share
capital isnt required. The company secretary
must be an individual who resides in Sri Lanka.
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Public Limited Company A public limited
company doesnt require minimum share capital,
either. This type of business is required to have
two shareholders and two directors. Directors are
required to file annual returns, along with
audited accounts and financial statements. Shares
are allowed to be issued on the stock
exchange. Overseas Company An overseas company
can be foreign-owned and can serve as a branch.
This type of companys operations are defined by
the parent company. The company must register
with the Treasury and is subject to a 10 branch
tax on profits.
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Offshore Company An offshore company can conduct
business outside of Sri Lanka. However, it cannot
conduct business within the country, but will
still be registered there. How do I register my
company? The process for registering a company in
Sri Lanka is straightforward. On average, the
entire process takes about ten days from start to
finish.
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• Here are the steps
• Through the Registrar of Companies online, youll
  need to search for and reserve your company name.
  This reservation will remain valid for three
  months. It costs 1,000 Sri Lankan rupees or the
  equivalent of about 6. Your registration will be
  confirmed within two days.
• Next, the company secretary and director must
  sign a consent form. This is done in person and
  only takes a day. If you dont have a secretary
  in mind, local organizations will serve to
  provide a company secretary for a small monthly
  fee (between 30,000 LKR and 45,000 LKR).

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• Submit the following forms through the Registrar
  of Companies
• Form 1 (Registration of a Company), Form 18
  (Consent and
• of Director), Form 19 (Consent and
  Certificate of Secretary) and
• copies of your Articles of Association.
  This process is typically
• completed within 3 days. The cost is a flat
  fee of 15,000 LKR for
• Form
• plus a flat fee of LKR 1,000 plus 11 VAT for
  each of the other forms.Give public notice
  of your companys incorporation at the Daily
  Newspapers and Government Publication Bureau. You
  must give this notice within 60 days of
  incorporating, and the newspaper will publish
  your notice within two weeks. It will cost LKR
  7,000.

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5. Obtain a Tax Identification Number (TIN) from
the Taxpayer Services Unit of the Inland
Revenue Department. Theres no charge and it
takes one day. This must be done in person. 6. If
applicable, register for Value Added Tax (VAT)
with the VAT Registration Branch of the
Inland Revenue Department. It takes one day
and theres no cost. If you turn over more than
3,750,000 LKR per quarter you may obtain
permanent VAT registration. 7. Obtain an
(EFP) Number from the Department of Labour.
Companies register here in order to pay
gratuities to employees of more than five
years through Sri Lankas Central Bank. This
takes one day and theres no cost.
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As this is all best done in person, and youll
need to pay your fees on the way, itll help to
get a bank account set up in Sri Lanka. And if
you need to send money to your new Sri Lankan
account, youll get the best deal with transfer
Wise. With Transfer Wise, youll get the exchange
rate you see on Google, and a transparent,
up-front fee for your transfer so you know
exactly how many Rupees youll be getting. What
are my legal obligations and responsibilities? The
Sri Lankan Department of Inland Revenue lays out
the tax structure required for individuals,
partnerships and companies. Depending on your
situation, you may be entitled to tax-free
allowance in Sri Lanka, provided that your income
is under a certain amount.
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The Institute of Chartered Accountants in Sri
Lanka created a code of corporate governance with
respect to all company financial procedures.
Within the code, they suggested that companies
should develop a transparent policy on executive
and director compensation. Corporate governance
standards are now mandatory for all listed
companies and they must cover training,
compliance reporting and board structure. Accordin
g to Sri Lankan labour law, an employee is
entitled to 14 days of paid annual leave after
serving 12 months continuously at the company.
Workers are entitled to one and a half days off
per week, as well as pay on all public and
religious holidays. They are also entitled to
half a months salary for each completed year of
service after five or more years in the event of
a termination. Maternity leave is 12 weeks in Sri
Lanka. Theres no pension scheme for private
sector employees in Sri Lanka. However, companies
must pay gratuities to employees after five years
in companies of 15 people or more.
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• What if I need more help setting up my business?
• There are many public bureaus, private companies
  and documentation available to assist
  entrepreneurs in Sri Lanka. Theres also a robust
  entrepreneur community within the country. Here
  are some of your options
• The Sri Lankan Central Bank has created a guide
  for entrepreneurs. They walk you step-by-step
  through the process of setting up a business in
  the country. You can also explore their website
  for general articles about transacting business
  within Sri Lanka.
• The Sri Lankan Government Information Centre will
  guide you through the registration process for
  each type of company if you get stuck.

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• The Sri Lankan Department of Labour can educate
  you on labour legislation, statistical
  information, important forms, current events and
  news.
• The Institute of Chartered Accountants in Sri
  Lanka provides documentation on business
  structures.
• If youre willing to pay a little bit, many
  private consultancies will work with you to sort
  out your needs, provide you with a company
  secretary and answer any questions you may have.
• Now youre at a great starting point to make sure
  your Sri Lankan business is a roaring success.

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