Basic legal and organisational forms of entities established in Sri Lanka that may be of interest to a potential foreign investor are as follows:

* Private limited liability company
* Public limited liability company
* Offshore company

Private limited liability company

Private limited liability company may be established by two shareholders (physical and legal persons, residents and non-residents of Sri Lanka) without their paying any charter capital, and is characterised as follows:

* maximum number of shareholders – 50;
* it is managed by the Board of Directors (composed of physical persons - residents or non-residents of Sri Lanka);
* if the company’s capital or annual turnover is more than LKR 500’000 (US$1 is approximately LKR 350), a professional secretary is required;
* only registered shares may be issued; the shares may not be freely transferred to third parties.

Public limited liability company

Public limited liability company may be established by at least seven shareholders (physical and legal persons, residents and non-residents of Sri Lanka) without their paying any charter capital, and is characterised as follows:

* maximum number of shareholders is not limited
* it is managed by the Board of Directors (composed of physical persons - residents or non-residents of Sri Lanka);
* a professional secretary is needs to be appointed;
* both registered and bearer shares may be issued.
* shares may be freely transferred to third parties.

Offshore company

Offshore company is not an independent legal entity, but is considered in Sri Lanka as a foreign company’s representative office, subsidiary or branch. Offshore companies’ purpose is basically to monitor the local market, to maintain communication with local producers, to check the quality of products, etc.

All Sri Lanka entities are required to periodically file their financial and other statements audited by local auditors.

Issues related to foreign investment are in the competence of Sri Lanka Investment Authority.  The law does not restrict foreign participation in local entities, except for the following activities where the foreign capital’s share is restricted as follows:

* banking institutions – up to 49% of the capital;
* insurance companies - in each case to the extent prescribed by the Government;
* companies engaged in housing construction and field development – up to 40% of the capital.

The Investment Authority may provide foreign investment entities with various tax benefits, tax holidays, and release them from customs duties and currency control.

Foreign investors may also seek free repatriation of profits, fees and capital, release from the Import and Export Control Act and other benefits. Being established by the law, those advantages are preserved throughout the entity’s operations and may not be cancelled by subsequent Government regulations. Tax and other benefits may be sought by entities carrying out IT projects as well as companies investing in new plants, production facilities and equipment.

A company is deemed resident if it is established in Sri Lanka or is wholly controlled by an office located in Sri Lanka.

Net profit of resident companies and foreign companies receiving income from sources in Sri Lanka are subject to income tax at a rate of 35%.

Money transfers in Sri Lanka are subject to taxation. It is 1/3 of the amount transferred abroad or 1/9 of the company’s taxable profit (whichever is less).

Offshore companies are released from taxation in Sri Lanka provided that their entire business is carried out outside Sri Lanka.

Dividend tax is withheld at source at a rate of 15%.

Imported goods and services are subject to taxation at a rate of 12.5%.

Sri Lanka Double Taxation Agreements

Australia, Bangladesh, Belarus, Belgium, Canada, China, Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Iran, Italy, Japan, Korea, Kuwait, Luxembourg, Malaysia, Mauritius, Nepal, Netherlands, Norway, Oman, Pakistan, Palestine, Philippines, Poland, Qatar, Romania, Russia, Saudi Arabia, Seychelles, Singapore, Sweden, Switzerland, Thailand, United Arab Emirates, United Kingdom, USA.

99 classical offshore, onshore and midshore jurisdictions of Europe, America, Middle East, Asia, Africa and Oceania‍