Stability and return on investment (ROI) are two key factors that any investor looks to when assessing the potential of foreign investment engines. As the gateway to Asia, Sri Lanka boasts an open economy, attractive tax rates, an excellent location and solid infrastructure, thus making it an incredibly favourable destination for foreign investment. The safety of foreign investment is guaranteed by the constitution. It has bilateral investment protection agreements with 27 countries and double taxation avoidance agreements with 38 countries.
Sri Lanka is a founder member of the Multilateral Investment Guarantee Agency (MIGA), an agency of the World Bank. This provides a safeguard against expropriation and non-commercial risks.
As the Island nation grows socially, economically and financially, the government’s strategy has already started gearing itself to take Sri Lanka and Sri Lankan tourism to new heights (2.5 million visitors in 2016).
The Board of Investment of Sri Lanka (BOI) is the central facilitation point for investors. They provide assistance and advice throughout the investment process.
The BOI currently facilitates investors on a sector-focused approach. These sectors (together with special units to handle high profile projects and regional initiatives) cover all vital areas of the economy.
- Tourism & Leisure
- Knowledge Services
- Other Manufacturing
- Regional Programmes (300 Factories Programme)
Where to Set up
As an investor, you may select the following options to locate your project within Sri Lanka:
1. Locate your project within a BOI administered Export Processing Zone or Industrial Park (with required infrastructure facilities) on long-term lease basis. These zones/parks are more suitable for industrial manufacturing and processing businesses.
2. Locate your project outside zones.
- By obtaining a privately owned land on outright purchase or lease basis, or
- By obtaining a government owned land available for long term lease under different government agencies. Acquisition of government lands involve a comparatively longer process and valuation is based on current market price.
How to Set Up
There are three ways to set up your project under BOI in Sri Lanka:
(1) Section 16 : Minimum Investment US$ 250,000.
Approval under Section 16 of the BOI Act permits foreign investments entry to operate only under the 'Normal Laws' of the country, that is, for such enterprises, provisions of the Inland Revenue, Customs and Exchange Control Laws shall apply.
(2) Section 17 : Minimum Investment app. US$ 500,000.
Under Sec.17 projects are approved with fiscal concessions such as Exchange Control and Custom duty exemption. Further, considering the minimum requirement of investment, the BOI will recommend a corporate tax exemption period through Inland Revenue Department.
(3) Strategic Development : In terms of the Strategic Development Projects Act No 14 of 2008 (as amended), exemptions not exceeding twenty five years may be granted for a Strategic Development Project either in full or part from one or more of the enactments such as The Inland Revenue Act No.10 of 2006,The Value Added Tax Act No. 14 of 2002,The Finance Act No. 11 of 2002,The Excise (Special Provision) Act No.13 of 1989,The Economic Service Charge Act No. 13 of 2006,Customs Ordinance (Chapter 235),The Nation Building Tax Act, No 9 of 2009 and The Port and Airport Development Levy Act, No.18 of 2011.
The approval process for a SDP entails publication of a gazette notice on identifying the project; obtaining cabinet approval for same, publication of an Order in the gazette specifying the exemptions granted and then placing it before parliament for approval by Resolution of parliament.
Strategic Development Project (SDP) means a project which is in the national interest and which is likely to bring economic and social benefit to the country and which is also likely to change 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; substantial inflow of foreign exchange; substantial employment generation; envisaged transformation in terms of technology.
(1) Investment Under 'Normal Laws' - (Section 16)
Approval under Section 16 of the BOI Act permits foreign investment entry to operate only under the ‘Normal Laws’ of the country; that is, for such enterprises, the provisions of the Inland Revenue, Control Laws shall apply. <Read More>
(2) Investment with Tax Incentives (Section 17) - As per Budget 2012
A new tax incentive regime has been introduced with the budget 2012 to promote private investments, both domestic and foreign. These new incentives are applicable to following categories of investments:
- Small Enterprises
- Medium Enterprises
- Large Enterprises
- Project Expansions
- Strategic Import Replacement Enterprises
The details of the qualifying investment and the incentives granted for the enterprises under each category are highlighted below. <Read More>
(3) Investment Incentives under Strategic Development projects Act no 14 of 2008
Duty Free Facilitation
Companies signing an agreement with the Board of Investment of Sri Lanka are entitled to duty free facilities under Sec. 17 of BOI Law No. 4 of 1978. Companies that export more than 90% of goods or services produce are entitled to be free of Customs Duty on capital goods and raw materials. Other companies are entitled to capital goods (also construction materials where applicable) free of Customs Duty during the project implementation period.
Prior to signing an agreement, the company should forward the list of items that it requires to set up and operate the project. These lists will be evaluated and approved by the Sector groups.
Exemption from Exchange Control Regulations
Exchange Control exemption is granted only for Export-oriented projects under Sec. 17 of BOI Law and Strategic Development Projects. At present, a project is considered as an export oriented project only if it exports 90% of its production. Parts I, IA, II, III, IV V & VI of the Exchange Control Act are exempted for these companies and they could operate FCBU (Foreign Currency Banking Unit) accounts.
For More Info: "Invest in Sri Lanka - Everything You Need to Know" : The Board of Investment of Sri Lanka (BOI)
How We Can Help You
InvestSriLanka represents a firm of professionals that shares a common goal of taking Sri Lanka forward by bringing in quality investments in Leisure, Finance, Construction, Agriculture, Alternative Energy and Education.
We welcome your proposals. Alternatively, we are happy to provide you a host of information on current projects and proposals in several spheres of investment. We should be happy to work with you from the concept to construction to commissioning of your special project. Our multi-disciplinary firm of professionals is prepared to offer its services at whatever level of expertise called for. In fact, we would be proud to.
Let us start our exchange of ideas now.