Setting Up a Company in Sri Lanka
Sri Lanka is rebuilding foreign investment flows post-2022 economic crisis with competitive BOI incentives, a strategic Indian Ocean location, and 100% foreign ownership in most sectors.
Sri Lanka's strategic location at the centre of Indian Ocean shipping routes, combined with BOI incentives for export-oriented investment, makes it an increasingly relevant entry point for manufacturers and logistics operators serving the South Asia and global markets. The Companies Act No. 7 of 2007 governs corporate registration; the BOI of Sri Lanka provides one-stop facilitation for qualifying foreign investments.
Key facts for 2026
| Parameter | Detail |
|---|---|
| Corporate income tax | 30% (standard); 14% for qualifying exports |
| VAT | 18% (standard rate from 2023) |
| Foreign ownership | 100% in most sectors via BOI |
| BOI tax holiday | Up to 12 years for qualifying export-oriented investment |
| Port City (Colombo) | Separate SEZ with 0% corporate tax for 40 years |
Board of Investment (BOI)
BOI-registered companies in the garment, IT, manufacturing, tourism and infrastructure sectors can access tax holidays of 6–12 years, duty-free machinery imports, and 100% foreign ownership. BOI registration requires a minimum investment threshold (typically USD 250,000 for most industrial sectors) and commitment to employment targets. BOI entities are registered under a BOI Agreement in addition to the standard Companies Act registration.
Colombo Port City — SEZ
The Colombo Port City, developed on reclaimed land adjacent to the CBD, is Sri Lanka's flagship SEZ with a 40-year corporate income tax exemption for qualifying businesses, a separate regulatory authority (CPCA), and English common-law governance. Targeted sectors include financial services, IT, hospitality and international trade. The Port City is designed to compete with Singapore and Dubai for regional hub functions.
The incorporation process
- Register a Private Limited Company with the ROC — online through the e-ROC system; 1–3 business days for approval.
- For BOI benefits: submit an investment proposal to the BOI; negotiate and sign a BOI Agreement.
- Register with the Department of Inland Revenue for income tax.
- Register for VAT with the Department of Inland Revenue if turnover exceeds LKR 60 million per year.
- Open a corporate bank account; register with the Central Bank for inward foreign investment.
Frequently asked questions
Can a foreigner own 100% of a Sri Lanka company?
Yes, for most activities through BOI registration. A negative list restricts foreign ownership in money lending, retail trade below USD 5 million investment, and certain other sectors.
What is the corporate tax rate in Sri Lanka?
30% standard rate. Qualifying export-oriented activities pay 14%. BOI-registered entities can receive tax holidays of 6–12 years. Colombo Port City entities pay 0% for 40 years.
What is the VAT rate in Sri Lanka?
18% standard rate (increased from 15% in 2023 as part of IMF programme). Exports are zero-rated.
Official sources
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal advice. Confirm with BOI or an advisor before incorporating.