Dreaming to expand your business to Sri Lanka? A Simple Guide for Foreigners!

By 2023 in Sri Lanka, this pearl of the Indian ocean, has a fast-expanding economy. Contributing to this quick phased growing community is the tourism industry, inviting as many tourists to the country. Similarly, the real estate industry has graduated towards the interest of overseas investors and expats. If you are a foreign investor looking to invest in Sri Lanka, here is a quick guideline that can come handy!

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1.????Do your own Market Research!

Sri Lanka might be an island 150 time smaller in size than USA, but its population is a rounding number to 21.89 million people! Carrying a potential working crowd of diverse industries, we suggest that you do your research to understand which trade you plan to enter. Here are a few influencing factors we recommend that you pay attention to:

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·??????Cultural differences

·??????Existing competition

·??????Pricing strategies

·??????Market trends

·??????Investment opportunities and novel sectors

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We also recommend a risk assessment to understand political stability, regulatory environment and other factors that may impact investments. Furthermore, develop or restructure a market strategy tailored to the Sri Lankan business world. Tackle the opportunity you seek!

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2.????Secure the RIGHT business structure!

Pin down the most convenient and suitable business structure that aligns with your goals. In Sri Lanka, the most commonly spotted business structures are sole proprietorship, partnership, and limited liability company. Once you have decided on your business structure, you company can be registered under the Companies Act No. 07 of 2007.

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Another component you would need to be mindful of is the type of ownership and the percentage of ownership that is applicable to foreign entrepreneurs. For example, certain industries restrict foreign ownership completely and some are open to just 40% of foreign ownership, while other industries provide full ownership. Consulting a local business set-up company for further knowledge would be much advisable!

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3.????Gain LEGAL stability

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Businesses in certain industries need to obtain government approvals before they can legally operate. These approvals are typically in the form of licenses and permits, and the specific requirements vary depending on the industry. It is important for business owners to research the specific requirements for their industry and seek professional assistance if needed to ensure full compliance with regulations. Failure to obtain the necessary approvals can result in penalties and legal complications that could negatively impact the success of the business.

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4.????Professional guidance

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In Sri Lanka, companies under a foreign governance should mandatorily find a local company secretary to provide necessary guidance and assistance. Liaising with a law company can help you sort this quicker and easier!

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5.????Choosing the right location

Sri Lanka might be smaller in size compared to most commercially developing countries, however business locations cannot be compromised! Colombo is enriched with luxurious infrastructure that has elevated the essence of A grade companies. Some such common spaces have been The World Trade Centre, The One Galle Face Complex, The Hatch Building and so on. Similarly, for companies looking at subtle office spaces, Colombo offers a range of other options, matching demands!

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Therefore, delving deeper into the matter, foreign entrepreneurs can look at consider understanding their market or industry and the sort of location they require; a literary business to be located in a calmer neighborhood or an IT business in a fast-phased city! Furthermore, governmental laws, access to workforce, business safety and security and even access to support services can be an added value to the new company!

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6.????Local culture is everything!

Attention to the local culture should be given massive importance! Sri Lanka carries a heavy culture of many centuries. This culture is combined with their religions, relationships, languages, history and a lot more. For example, Buddhism is commonly practiced within in Sri Lanka so according to its religious attributes, dressing modestly and maintaining a generous level of respect to the religious norms is vital.

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Similarly, Sinhalese is the mostly spoken language in the country. Therefore, associating with vendors, suppliers and business partners might require you to know the language. Furthermore, keeping in touch with the governmental laws and regulation can be critical to novel businesses, especially ones with a foreign touch.

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Understanding the local culture provides you a clearer vision on the interests and the demands of the local consumers, helping you tailor items and services according to it. ?

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7.????Hiring employees to grow!

Being a foreign employer hoping to hunt for employers in Sri Lanka, you would have to be vigilant of certain criteria to work error free.

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-???????The legal considerations: Look out for the criterion attached to recruiting local employees. Two such entities that maintains a close connection with employment in Sri Lanka are “The Employment Ordinance” and “The Industrial Disputes Act Control Labor Legislation” in Sri Lanka. Approaching these entities can help you reach steps like getting a Business Registration Number, creating a job description, building compensation schemes, pensions, ETFs, EPFs, etc.

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-???????Understanding social and cultural context: Languages, cultural classifications, gender roles, societal norms, locations and geographical values contribute towards hiring your employees. To better explain this phenomenon, if a certain position which primarily is suitable for both males and females is filled or aimed to be filled by 1 specific gender, it would be considered to be gender discrimination. Likewise, the hiring company might face the conflict of understanding whether to hire basic talent in the close proximity to the business or highly talented individuals located in a different state, away from the company.?

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-???????Recruit Right, Recruit Wise!: Tracking down the perfect candidate is critical for your company’s success. As a foreigner hoping to build or expand their business in Sri Lanka, it would be wiser for you to approach Online Job Platforms or through local recruitment companies. Regardless of the avenue, your recruits must be best fit in their qualifications, experience and cultural fits. Furthermore, identifying educated, skilled and experiences workforce can be a vital step to take!

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8.????Investing in Lankan Island!

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Before investing on capital in Sri Lanka, here are a few facts for you to consider carefully on Sri Lanka’s markets and industries.

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-???????The Sri Lankan real estate market is becoming an attractive investment destination for foreign investors and expats due to its rapidly growing population and thriving tourism economy.

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-???????The strategic location of Sri Lanka, which serves as a gateway to the Indian subcontinent and Southeast Asia, is one of the most significant benefits of investing there.

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-???????The Sri Lankan economy has had a growth rate above 3% in most years in the last decade, and the government has taken a number of steps to strengthen the country's infrastructure and ease of doing business.

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-???????The Sri Lankan real estate market is especially attractive because it is more affordable than other countries in the region.

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-???????Foreigners and expatriates can invest in Sri Lankan real estate through a variety of avenues, including buying property directly, investing in property stocks, or investing in real estate investment trusts (REITs).

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-???????It is important to conduct thorough research and obtain legal and financial guidance before investing in Sri Lankan real estate.

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-???????The Sri Lankan real estate market is still relatively young and underdeveloped, which presents opportunities for foreign investors to get involved in early-stage projects.

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9.????Approvals from the authorities!

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As a foreigner hoping to initiate a business in Sri Lanka, you would primarily need 2 main key components to go through this process; a visa and a work permit.

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This might seem frightening, but with the right guidance, it can be straightforward and easy. It is crucial to realize that depending on your country of origin and the nature of your business, the rules and procedures may change. To ensure that all pertinent requirements are completed, it is strongly encouraged to get professional advice from a local immigration lawyer or consultant.

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10.?Company Registration process

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Registering your company is another step before applying for your work permit in Sri Lanka. In Sri Lanka, company registration is handled by the Registrar of Companies. As an initial step, check to see if your company’s name is previously taken up by any other business. To do so, look for the company name you’ve chosen on the Department of Registrar of Companies website!?

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The next step is to establish your business' exclusivity in the neighborhood by issuing a public notice in at least three neighborhood periodicals. Keep in mind to clearly display the name, type, address, and registration number of your company on your notification!

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11.?Opening an IIA bank account?

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An IIA (Investment Inflow Account) bank account must be opened in order to invest in Sri Lanka for foreign businesspeople. An IIA (Investment Inflow Account) bank account is a type of bank account that is specifically designed for foreign investors who want to invest in Sri Lanka. IIA accounts offer a number of benefits to investors, including:

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·???????????The ability to make and receive foreign currency payments

·???????????The ability to invest in Sri Lankan assets

·???????????The ability to take advantage of tax breaks and other incentives offered by the Sri Lankan government

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To open an IIA bank account, you will need to:

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·?????????Obtain the appropriate authorization from the Board of Investment (BOI) or the relevant regulatory agency.

·?????????Choose a reputable bank with a significant presence in Sri Lanka.

·?????????Provide all required documentation, such as your passport, visa, business registration, and proof of address.

·?????????Make a minimum deposit, which varies depending on the bank.

·?????????Once you have opened your IIA bank account, you will be able to use it to make and receive foreign currency payments, invest in Sri Lankan assets, and take advantage of tax breaks and other incentives offered by the Sri Lankan government.

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Here are some additional tips for opening an IIA bank account in Sri Lanka:

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·??????Start the process early. It can take several weeks to obtain the necessary authorization and documentation.

·??????Choose a bank that has experience working with foreign investors.

·??????Make sure you understand the fees and charges associated with IIA accounts.

·??????Ask about the bank's customer service and support for foreign investors.

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Envoy Ortus SL, a corporate solution provider, have firmly accumulated years of understanding and knowledge in this growing field of business setup! As a growing entity in this lucrative market, our team would be more than supportive to assist you in each and every step towards achieving your business dreams. Call us today for an immediate consultation on +94 77 0473 064 or write to us on [email protected]!