How To Start A Business In Sri Lanka As A Foreigner!

Since living in Sri Lanka and starting my business here, I would have to say this is by FAR one of the most common questions I get asked by other foreigners wanting to move here, and that question is as follows...HOW DO YOU START A BUSINESS IN SRI LANKA?? Well keep reading and soon enough you will know the answer!

Its actually a very very simple process, I think that what confuses people is the lack of information out there online about doing so, and on top of that a large portion of the info is in fact very wrong! I will start by saying this, NO you do not NECESSARILY need a local business partner, and NO you do not need to invest hundreds of thousands of dollars into the country, these are myths that are based on certain situations that might require these things, but in your situation this might not be the case.

Different industries in Sri Lanka have a different set of regulations in regards to what percentage of a company can be owned by a foreigner, some industries do not allow any kind of foreign ownership, some allow a maximum of 40%, and some allow the entire 100% to be owned by a foreigner. Below is a list of industries and what percentage of foreign ownership is allowed.

AREAS TOTALLY RESERVED FOR SRI LANKAN'S
(FOREIGNERS CANNOT ENGAGE IN THESE ACTIVITIES)

• MONEY LENDING OTHER THAN THE BUSINESS OF PROVIDING OF CREDITS TO INVESTORS TO PURCHASE SECURITIES OF A LISTED COMPANY BY A COMPANY REGISTERED AS A MARGIN PROVIDER UNDER THE SEC ACT
  PAWN BROKING
• COASTAL FISHING
• RETAIL TRADE WITH INVESTMENT LESS THAN US$ 1 MILLION
• PROVISION OF SECURITY SERVICES INCLUDING SECURITY MANAGEMENT ASSESSMENT AND CONSULTING TO INDIVIDUALS OR PRIVATE ORGANIZATIONS

AREAS WHERE ONLY 40% FOREIGN OWNERSHIP IS ALLOWED
(IF MORE THAN 40% REQUIRED SPECIAL APPROVAL ON A CASE BY CASE BASIS IS REQUIRED)

• SHIPPING AGENCIES
• TRAVEL AGENCIES
• FREIGHT FORWARDING
• EDUCATION
• MASS COMMUNICATIONS
• FISHING(DEEP SEA FISHING)
• TIMBER BASED INDUSTRIES USING LOCAL TIMBER
• GROWING AND PRIMARY PROCESSING OF TEA RUBBER COCONUT COCOA SPICES RICE AND SUGAR
• MINING AND PRIMARY PROCESSING OF NON RENEWABLE NATURAL RESOURCES
• PRODUCTION OF GOODS WHERE SRI LANKA'S EXPORTS ARE SUBJECT TO INTERNATIONALLY DETERMINED QUOTA RESTRICTIONS.

AREAS WHERE LINE MINISTRY APPROVAL IS REQUIRED FOREIGN OWNERSHIP PERCENTAGE DEPENDS ON LINE MINISTRY

• LARGE SCALE MECHANIZED MINING OF GEMS
• LOTTERIES
• ANY INDUSTRY PRODUCING CURRENCY, COINS OR SECURITY DOCUMENTS
• ANY INDUSTRY MANUFACTURING DANGEROUS DRUGS, POISONS NARCOTICS ALCOHOLS TOXIC HAZARDOUS OR CARCINOGENIC MATERIALS
• ANY INDUSTRY MANUFACTURING ARMS, AMMUNITION, EXPLOSIVES, MILITARY VEHICLES AND
• EQUIPMENT, AIRCRAFT AND OTHER MILITARY HARDWARE.
• AIR TRANSPORTATION
• COASTAL SHIPPING

AREAS WHERE 100% FOREIGN OWNERSHIP IS ALLOWED

• ANY INDUSTRY OTHER THAN THE ABOVE 3 CATEGORIES

As you can see there are certain restrictions in place depending on which industry you are wanting to do business in. If you are wanting to open a small retail business and be the 100% shareholder, restrictions are in place which do not allow this, as small retail businesses are reserved for Sri Lankan citizens. On the other hand if you want to open say...a boxing gym (like yours truly) then this can be done very easily, with little headache, and you can be the sole shareholder.

Another thing to note is that all foreign owned businesses are required to have a local company secretary, which in all honesty I personally believe is a great thing to have, provided of course you can find a reliable and professional secretary to use. Generally the majority of law and accounting firms will also act as a company secretary for you as one of their services. You can find a number of them online however I would definitely recommend who I use for my business which you can find here:

http://acmigroup.lk/acmi-law-associates.php

I would highly recommend getting your business setup by your company secretary as opposed to doing all the steps yourself. There is a number of steps to take, which personally, I believe it is best to have someone who knows what they are doing handle it for you. I have run a number of businesses in Australia and even still it was a great decision to spend that extra bit of money and have the registration process handled for me, rather than taking on the headache myself in a foreign country im still finding my feet in!

Another way to setup a company here is through the BOI (Board Of Investment). My knowledge on this is limited as I did not go down this road, however I will tell you what I did learn and see if it may be a more suitable option for you.

The BOI is designed as a 'Go To' place for foreign investors working on large scale projects in the country. To my understanding, in order to setup a company through the BOI, you must make an investment of a minimum of $250,000 USD into the company. Obviously this is a very large amount of money for a lot of people (myself being one of them) which is why I did not go down this road.

There are a number of favourable benefits to be had by setting up through the BOI, such as tax benefits and access to information for setting up your company that you would otherwise need to be doing a lot of research to find. You will also be automatically issued an investment residence visa, which lasts for 3 years and can be renewed afterwards, which is not the case with taking the other option.

Other than these few things my knowledge is limited on the BOI so it will be best for you to contact them directly if that is the direction you are wanting to take. Their website link is posted below:

http://www.investsrilanka.com/