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Doing business in Sri Lanka

A Q&A guide to doing business in Sri Lanka.
This Q&A gives an overview of key recent developments affecting doing business in Sri Lanka as well as an introduction to the legal system; foreign investment, including restrictions, currency regulations and incentives; and business vehicles and their relevant restrictions and liabilities. The article also summarises the laws regulating employment relationships, including redundancies and mass layoffs, and provides short overviews on competition law; data protection; and product liability and safety. In addition, there are comprehensive summaries on taxation and tax residency; and intellectual property rights over patents, trade marks, registered and unregistered designs.

Overview

1. What are the key recent developments affecting doing business in your jurisdiction?

The government intends to create a positive investment climate and bring Sri Lanka into the top 70 nations of the doing business index by 2020 through its budget proposals for 2017. These include, among other things, proposals to:

  • Replace the current the Exchange Control Act with an Investment Inflow Management Act. A draft bill of the proposed legislation is currently unavailable.
  • Establish an Agency for Development to facilitate foreign investment.
  • Enable the Ministry of Development Strategies and International Trade to recommend to the General Treasury any incentives that should be provided to any landmark investments into the country.
  • Provide investment incentives for projects increasing employment through enhanced capital allowances, tax credits and rebates.
  • Provide special concessions for large investments, with minimum employment criteria.

Legal system

2. What is the legal system based on (for example, civil law, common law or a mixture of both)?
Sri Lanka has a mixed legal system, with both civil law and common law aspects.
The legislative system is quasi-unitary with some legislative powers of the parliament delegated to nine provincial councils.

Foreign investment

3. Are there any restrictions on foreign investment (including authorisations required by central or local government)?

Foreign direct investment (FDI) by non-residents is restricted under the exchange control regime administered by the Exchange Control Department (ECD).
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