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Investment Policy

Sri Lanka’s Investment policy is geared towards the realization of national sustainable development goals and grounded in country’s overall development strategy. Investment policy priorities are based on a thorough analysis of the country’s comparative advantages and development challenges and opportunities.

Its strategic priorities, include:

Investment in specific economic activities, e.g. as an integral part of an industrial development strategy. Areas for mutual reinforcement of public and private investment (including a framework for public-private partnerships). Investment that makes a significant development contribution by creating decent work opportunities, enhancing sustainability, and/or by expanding and qualitatively improving productive capacity and international competitiveness.

 

In this context, the key legislations facilitating investments in Sri Lanka are;

1.Board of Investment Law No. 4 of 1978

The Board of Investment Law No. 4 of 1978 and its amendments is the principal law applicable to investments in Sri Lanka. This Law established the national investment promotion agency, the Board of Investment of Sri Lanka, which is structured to function as the ‘Central Facilitation point’ for investors and is empowered to enter into agreements with investors, providing incentives to attract investments.

2.Finance Act No. 12 of 2012 (Hub Operations)

This legislation was introduced to promote Sri Lanka as an emerging trading hub and facilitates related specific trading and services activities. Free Ports and Bonded Areas have been set up to create trade related infrastructure to facilitate Sri Lanka’s import and export of goods and services with freedom to carry out transactions in a convertible foreign currency.

3.Inland Revenue Act No. 24 of 2017

This legislation simplified the taxation law in Sri Lanka while introducing a new incentive regime for investors. While maintaining the standard corporate income tax rate at 28%, this Act provides for a reduced rate of 14% for specific sectors such as SMEs, Exports of Goods and Services, IT, Education, Tourism and Agriculture. Further, Enhanced investment allowance is offered to investors for their fixed capital investment over and above the normal depreciation.

4.Foreign Exchange Act No. 12 of 2017

The Foreign Exchange Act repealed the Exchange Control Act (Chapter 423) and introduced a liberal exchange regime for Sri Lanka. Foreign exchange controls have been greatly liberalized and investors are allowed to directly deal with the banks for their transactions unless Central Bank approval is specifically needed. Free flow of transfers are allowed through Inward Investment Accounts and Outward Investment Accounts.

Exchange Control Laws Applicable for foreign Investments

5.Land Policy

Foreign investors are permitted to acquire land on lease-hold basis, subject to a maximum tenure of 99 years, with no lease taxes charged. Outright transfer of ownership is permitted when the foreign shareholding of a company is less than 50%. Condominium properties however may be purchased outright with no restrictions on nationality.

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