Foreigners permitted to undertake investments in Sri Lanka under the new exchange control regulations

Broadly, foreigners are permitted to engage in the following capital transactions (Prescribed Investments) in Sri Lanka without having to obtain approval under exchange control laws:

  1. Invest, acquire or hold all classes of shares or an entitlement to shares in any Sri Lankan company incorporated in Sri Lanka and in any company not incorporated in Sri Lanka and listed on the Colombo Stock Exchange

  2. Invest in debt securities of Sri Lankan companies

  3. Granting loans with a tenure of not less than 3 years to Sri Lankan companies.

  4. Invest in debt securities of licensed commercial banks, licensed specialized banks, licensed finance companies, specialized leasing companies subject to the approval of the relevant regulatory authorities

  5. Invest in Unit Trusts or Mutual Funds, Government Securities, securities issued by the Central Bank of Sri Lanka and Sri Lanka Development Bonds

  6. Deposit funds with licensed commercial banks

  7. Acquire immovable property

Investment in shares of companies incorporated in shares will be subject to prevailing ownership restrictions (including foreign ownership restrictions) applicable to certain sectors/industries – e.g. foreign ownership in companies engaged in mass communication is restricted to 40%.

Investment in immovable property is restricted to apartments (presently apartments above the 4th floor) as foreign ownership of other immovable property is not permitted.

Funds required for the Prescribed Investments must be remitted through Inward Investment Accounts (IIA) (previously called Securities Investment Accounts (SIA)) established by the investors with licensed commercial banks. The process of establishing IAAs is reasonably straightforward subject to the usual KYC and customer due diligence undertaken by licensed commercial banks.

All income and proceeds on disposal, liquidation and maturity of investments (capital and profits) can be repatriated through the investor’s IIA without restriction or regulatory approvals.

This is only an overview of the applicable law, and should not be relied upon as legal advice or recommendation by D. L. & F. De Saram, a leading law firm in Sri Lanka. If you require our advice, please be good enough to contact us on [email protected]