Rules should know


Laws Governing Foreign Investment 

The principal law applicable to foreign investment is BOI Law No. 4 of 1978 and amendments introduced in 1980, 1983 and 1992 and Regulations made under the Act. The BOI was established in 1978 as the Greater Colombo Economic Commission. In 1992, the Commission was reconstituted as the Board of investment of Sri Lanka.

Depending on the nature of the investment and mode of operation, a number of regulatory and legal requirements may also need to be considered prior to commencement of a business. This could range from considerations such as labour laws and land laws. 

Board of Investment of Sri Lanka is empowered to approve projects under following categories.

Projects approved under Section 16 of BOI Law
Projects are approved under section 16 of BOI Law, where the entry of foreign investment is permitted without any fiscal concession. These projects are governed under Normal laws of the country and are subjected to Inland Revenue Laws, Custom Laws and exchange control regulations. These approvals are granted; 
  • only to facilitate the entry of foreign investment 
  • to setting up of a new company with foreign share holding or 
  • for the purpose of transferring or issuance of new shares in an existing non-BOI company to foreign investors 
At present the minimum investment requirement to qualify for the section 16 projects is US$ 250,000. This can be either 100% foreign investment or a joint venture investment with a local collaboration.

Projects approved under Section 17of BOI Law
Sec.17 of the BOI Law, allows to approve projects and enter into agreements with enterprises and to grant exemptions from laws such as Inland Revenue, Exchange Control and Customs, subject to fulfillment of the investment threshold or any other specified requirement.

Projects approved under Strategic Development Projects Act (SDP)
Tax exemptions are considered under the provisions of Strategic Development Projects Act No 14 of 2008 and its amendments for special projects which are in the national interest, likely to bring economic and social benefits to the country and capable of changing the landscape of the country, primarily through 
  • the strategic importance attached to the proposed provision of goods and services, which will be of benefit to the public ; 
  • the substantial inflow of foreign exchange to the country ; 
  • the substantial employment which will be generated and the enhancement of the income earning opportunities ; and 
  • the envisaged transformation in terms of technology. 

For more information: Invest in Sri Lanka-Legal Aspects published by BOI Sri Lanka

            Guide to Invest in Sri Lanka

Source: Board of Investment of Sri Lanka  

Related laws on investment 

Labour Laws

Labour laws of the country are applicable to all enterprises in the country including BOI/export processing Zones (epZ) enterprises, and the Ministry of Labour and Trade Relations, and Department of Labour are responsible for labour administration functions, including labour law enforcement and industrial relations.43   

Land Laws

Transfer of land (state owned or privately owned) to the following is prohibited;44  
- A foreign national  
- A foreign company  
- A company incorporated in Sri Lanka of which 50 per cent or more of its shareholding is held by a foreign national or a foreign company.  

The prohibition will not apply for the following:  45

- The transfer is to a diplomatic mission or an inter-governmental or international multilateral or bilateral mission recognized in terms of the diplomatic privileges Act No. 9 of 1996  
- The transfer is that of a Condominium parcel situated on the 4th floor (excluding the ground floor) or above of a building coming under the provisions of Apartment ownership Law No. 11 of 1973  
- A company incorporated in Sri Lanka of which 50% or more of its shareholding is held by a foreigner or a foreign company, which is operation for at least a consecutive period of 10 years at the time of land is registered; and  
- The Cabinet of Ministers, by order published in the Government gazette, can exempt a foreign national or a foreign company from the application of this prohibition, provided there is a substantial foreign remittance for the purpose of the purchase of the land for which the investment is being allowed, and benefit the national economy.  

Lease of Land state owned or Private owned land46  

• A foreigner/ foreign company can lease a land subject to a maximum period of 99 years. The rate of such land lease tax would be 15% of the total rental of the entire duration of the lease.

• If the land is situated within the BOI zone, industrial zone or tourism zone concessionary rate of land tax shall be paid at 7.5% of the total value of the lease. Outside the zones, land tax 15% of the total lease value shall be paid in addition to the stamp duty.

• If the company has been in operation continuously in Sri Lanka for more than 10 years, it will not be liable to pay the above land tax.


Copy right and Patent Laws

The laws relating to the intellectual property is covered by the Code of Intellectual Property Act No. 36 of 2003 and this embodies the laws related to industrial designs, patents, trademarks and trade names as well as unfair competition. Sri Lanka’s Intellectual Property Law, which is based on the WIPO model law for developing countries, has incorporated internationally accepted principles and concepts of intellectual property. Foreign investors can apply for intellectual property rights through the National Intellectual Property Office of Sri Lanka.

Environment related Laws

Environment related acts are covered under the National Environmental Act No. 47 of 1980. The act permits environmental inspection, issuing of license as well as conducting Environment Impact Assessment (EIA). 

 For more information: Business Laws and Regulations in Sri Lanka

Source: National Intellectual Property Office of Sri Lanka and the Board of Investment of Sri Lanka