Info Centre
Info centre is the only web centre in Sri Lanka providing free information to any person who wishes to engage in Business or, any employee, Students who need to upgrade their knowledge in doing business in Sri Lanka.
The objective of the Info Centre is to provide knowledge only and not to make any decisions. We strongly advise to seek professional opinion before making any decision on any information contained in Info Centre.
Meaning of a Company
Company means a company incorporated under the Companies Act No. 07 of 2007 or an existing company.
Company Director
Director includes -
(a) a person occupying the position of director of the company, by whatever name called;
| (i) | a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; |
| (ii) | a person in accordance with whose directions or instructions the board of the company may be required to or is accustomed to act; and |
| (iii) | a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the articles of the company, would be required to be exercised by the board ; and |
“Board” and “Board of Directors”
Board and Board of Directors in relation to a company, means -
| (a) | directors of the company who number not less than the required quorum acting together as a board of directors; or |
| (b) | if the company has only one director, that director; |
Rights & Duties Company Directors
Liabilities of Company Directors
| (01) | Carrying on any business or activity that is not within the objects set out in the Article of Association |
| (02) | Alteration made in the articles of a company to which a licence has been granted, without the prior written approval of the Registrar |
| (03) | Making untrue statement in Prospectus |
| (04) | Distribution of Dividend without following procedures set out in the Act |
| (05) | Non-issuing of Share Certificates to Shareholders |
| (06) | Non- convening of an extraordinary general meeting of the Company |
| (07) | Non Compliance with Companies Act and Articles of Association |
| (08) | Payment of non-authorized remuneration or other benefits to company directors |
| (09) | Granting of loans to directors in contravention of company Act |
| (10) | Non-compliance with indemnity and insurance of a Director |
| (11) | Failure of performing duties on insolvency of a company |
Who is a Shareholder
“Shareholder” means -
| (a) | a person whose name is entered in the share register as the holder for the time being of one or more shares in the company; |
| (b) | until a person’s name is entered in the share register, a person named as a shareholder in an application for incorporation of a company at the time of registration of the company; |
| (c) | until a person’s name is entered in the share register, a person who is entitled to have that person’s name entered in the share register under a registered amalgamation proposal as a shareholder in an amalgamated company; |
| (d) | until a person’s name is entered in the share register, a person to whom a share has been transferred and whose name ought to be but has not been entered in the register. |
Powers of a Shareholder
Shareholders powers may be exercised only at a meeting of shareholders or by a resolution in lieu of a meeting. Powers reserved to shareholders may be exercised by an ordinary resolution or Special Resolution.
Liabilities of Shareholders
| (a) | A shareholder shall not be liable for any act, default or an obligation of the company, by reason only of being a shareholder |
| (b) | Shareholders must agree to increase in liability |
| (c) | The liability of a shareholder to the company is limited to any liability expressly provided for in the articles of the company or under the Companies Act |
| (d) | Nothing shall effect the liability of a shareholder to a company under a contract including a contract for the issue of shares, or for any tort or breach of a fiduciary duty or other actionable wrong committed by the shareholder |
| (e) | Shareholders are Liable for unpaid share capital |
| (f) | Shareholder of the company at the time of the winding-up or during the preceding year shall be jointly and severally liable to pay the unpaid tax to the extent of a distribution of cash or property from the company received as a shareholder within one year prior to its winding up |
Annual General Meeting (AGM) of Shareholders
The Board of a company shall call an Annual General Meeting of shareholders to be held once in each calendar year -
| (a) | not later than six months after the balance sheet date of the company; and |
| (b) | not later than fifteen months after the previous annual general meeting |
However, a company is not required to hold its first annual general meeting in the calendar year of its incorporation, but shall hold that meeting within eighteen months of its incorporation.
Ordinary Resolution
“Ordinary resolution” means, a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.
Special Resolution
A resolution shall be a special resolution when it has been passed -
| (a) | by a majority of seventy-five per centum of those shareholders entitled to vote and voting on the question; |
| (b) | at a general meeting of which not less than fifteen working days’ notice, specifying the intention to propose the resolution as a special resolution has been duly given; |
However, where it is so agreed by the shareholders having the right to attend and vote at any such meeting, being shareholders together representing not less than eighty five per centum of the total voting rights at that meeting, a resolution may be proposed and passed as a special resolution at a meeting of which less than fifteen working days’ notice has been given.
Resolution in lieu of meeting (Circular Resolution)
Subject to the provisions contained in the company’s articles, a resolution in writing signed by not less than eighty-five per centum of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders, who together hold not less than eighty-five per centum of the votes entitled to be cast on that resolution, shall be as valid as if it had been passed at a meeting of those shareholders.
Dividend
A dividend is a distribution out of profits of the company, other than an acquisition by the company of its own shares or redemption of shares by the company.
Annual Return
Every private company shall send to the Registrar with its annual return -
| (a) | a declaration signed by the directors of the company to the effect that to the best of their knowledge and belief, they have done all things required to be done by them by or under this Act; |
| (b) |
a certificate signed by a director and by the secretary of the company -
|
Annual Company Registration Levy
There shall be charged and levied for the year commencing on January 1, 2016, and ending on December 31, 2016 from every company incorporated or registered under the Companies Act, No. 7 of 2007 as follows.
| Private Company | 30,000/- |
| Listed Public Company | 1,500,000/- |
| Any other Company | 250,000/- |
However, the levy shall not apply to-
(a) an off-shore company; and
(b) a company limited by guarantee.
The levy shall be collected by the Registrar of Companies from every relevant company on or before December 31, 2019 and be remitted to the Consolidated Fund.
Use of Company Name and Company Number
| (1) |
A company shall ensure that its name and its company number are clearly stated in—
|
| (2) | Every company shall ensure that its name and its company number are clearly displayed at its registered office. |
Foreign Exchange Act
Foreign Exchange Act, No. 12 of 2017 is the Law in Sri Lanka to provide for the promotion and regulation of Foreign Exchange in Sri Lanka and such Regulations are made under the Foreign Exchange Act by the Minister of National Policies and Economic Affairs on 17th November 2017. However, the Act and Regulations may be amended time to time and professional advice must be sought before investment is made in Sri Lanka.
Inward Investment Account (IIA)
Any person resident outside Sri Lanka engages in capital transactions in Sri Lanka which requires remittance of foreign exchange into Sri Lanka to invest, acquire or hold all classes of shares or an entitlement to shares (including any subsequent shares devolving on such investor by virtue of a corporate action by the issuer, exercise of a right, entitlement or conversion) issued by Companies incorporated in Sri Lanka under the Companies Act, No. 7 of 2007 shall be made through an Inward Investment Account opened and maintained in any foreign currency designated by the Central Bank of Sri Lanka or Sri Lanka Rupees with a licensed commercial bank as an authorized dealer.
Excluded Business by Person outside Sri Lanka
Any person resident outside Sri Lanka shall not be allowed to invest or acquire Shares issued by Companies incorporated in Sri Lanka under the Companies Act, No. 7 of 2007 to carry on or carrying on any of the following businesses,
| (a) | Pawn broking; |
| (b) | Coastal Fishing; |
| (c) | Retail trade where a capital contributed by person resident outside Sri Lanka will be less than USD 5 Million. |
Limitation of Shareholding by Person outside Sri Lanka
Shareholding of following Businesses limited only up to 40 per cent of the stated capital of such company or if a special approval has been granted by the Board of Investment of Sri Lanka for a higher percentage of foreign investment in any company, only up to such higher percentage,
| (a) | Production of goods where Sri-Lanka’s exports subject to internationally determined quota restrictions. |
| (b) | Growing and primary processing of tea, rubber, coconut, cocoa, rice, sugar and spices. |
| (c) | Mining and primary processing of non-renewable national resources. |
| (d) | Timber based industries using local timber. |
| (e) | Deep sea fishing (as defined by the Ministry assigned the subject of Fisheries). |
| (f) | Mass communication. |
| (g) | Education. |
| (h) | Freight forwarding. |
| (i) | Travel agencies. |
| (j) | Shipping Agencies. |
Sri Lanka Government Special Approval for Shareholding
The permission shall apply in respect of shares in a company carrying on or proposing to carry on any of the businesses specified below only up to the percentage of the stated capital of the company, for which percentage either general or special approval has been granted by the Government of Sri Lanka or Board of Investment (BOI) in Sri Lanka.
| (a) | Air transportation; |
| (b) | Coastal shipping (as defined by the Ministry assigned the subject of Shipping); |
| (c) |
Industrial undertaking in the Second Schedule of the Industrial Promotion Act, No.46 of 1990, namely-
|
| (d) | Large scale mechanized mining of gems. |
| (e) | Lotteries. |
Overseas Company / Foreign Branch Office
An overseas company registered under the Companies Act, No. 7 of 2007, may carry on in Sri Lanka any Commercial, Trading, or Industrial activity. However, certain commercial, trading and industrial activities are not permitted to be carried out by an overseas company and prior permission has been obtained from the Government of Sri Lanka or any legal or administrative authority established to grant approval for foreign investments on business activities as sated below. Minimum investment amount is US$ 200,000 or equivalent amount in other designated foreign currencies.
Business activities not permitted to be carried out by an overseas company in Sri Lanka
| (a) | Money lending (other than the branches of foreign banks registered in Sri Lanka under the Banking Act, No. 30 of 1988); |
| (b) | Pawn broking; |
| (c) | Retail trade where the capital contributed by persons resident outside Sri Lanka is and less than USD 5 million after such investment; |
| (d) | Coastal fishing; |
| (e) | Growing and primary processing of tea, rubber, coconut and rice; |
| (f) | Mining and primary processing of non-renewable national resources |
| (g) | Freight forwarding; |
| (h) | Shipping agency business; |
| (i) | Mechanized mining of gems; and |
| (j) | Lotteries. |
Business activities with Prior Approval Required by Overseas Company in Sri Lanka
| (a) | Production of goods where Sri Lanka’s exports subject to internationally determined quota restrictions; |
| (b) | Growing and primary processing of sugar, cocoa and spices; |
| (c) | Timber based industries using local timber; |
| (d) | Deep sea fishing; |
| (e) | Mass communication; |
| (f) | Education; |
| (g) | Outbound travel agency business; |
| (h) | Local air transportation; |
| (i) |
MAny industry manufacturing or producing-
|
Liaison Office
An overseas company registered under the Companies Act, No. 7 of 2007, may carry on in Sri Lanka any Non-Commercial, Non-Trading or Non-Industrial activity such as the activities undertaken or carried out by a liaison office, representative office, regional office or other similar office, provided that such activities do not provide any income directly or indirectly to the company.
Land (Restrictions on Alienation) Act
Land (Restrictions on Alienation) Act, No. 38 of 2014 and subsequent amendments to the Act make provisions to stipulate restrictions on the transfer, lease or mortgage of lands situated within Sri Lanka to Foreigners, Foreign Companies and Companies incorporated under Companies Act No. of 07 of 2007 with foreign shareholding and specify circumstances where the exemptions are granted.
Restriction on Transfer of Land
Transfer of title of any land situated in Sri Lanka, shall be prohibited subject to exceptions if such transfer is to a —
| (a) | Foreigner; or |
| (b) | Company incorporated in Sri Lanka under the Companies Act where any foreign shareholding in such company, either direct or indirect, is fifty per cent or above; or |
| (c) | Foreign Company (Company incorporated outside Sri Lanka) |
The legal validity of a transfer of land to a company incorporated in Sri Lanka under the Companies Act, with less than fifty per cent of foreign shareholding, the foreign shareholding of such company shall remain less than fifty per cent, for a minimum period of consecutive twenty (20) years from the date of such transfer.
Exemptions under Land (Restrictions on Alienation) Act
| 1 | A Condominium parcel specified under the Apartment Ownership Law in Sri Lanka, |
| 2 | Any land the title of which is transferred to a dual citizen of Sri Lanka within the meaning of the Citizenship Act in Sri Lanka, |
| 3 | Any Foreign entity engaged in the Banking, Financial, Insurance, Maritime, Aviation, Advanced Technology or Infrastructure Development Project identified as a Strategic Development Project, in terms of the provisions of the Strategic Development Projects Act, No. 14 of 2008, |
| 4 | Any Foreign Company engaged in International Commercial Operations, where the land is purchased to locate or relocate its global or regional operations or to set up a branch office in Sri Lanka, |
| 5 | Any land the title of which is transferred to a Company listed in Colombo Stock Exchange. |
Lease Land in Sri Lanka
Any Foreigner, a Company incorporated in Sri Lanka under the Companies Act, where any foreign shareholding in such company, either direct or indirect, is fifty per cent or above or any Foreign Company may lease any land in Sri Lanka for a maximum period not exceeding ninety nine (99) years without payment of Lease Land Tax. Land Lease Tax abolished in Sri Lanka with effect from 8th January, 2017.
Introduction
Intellectual Property Act, No. 36 of 2003 and amendments thereto provide for the law relating to Intellectual Property and for an efficient procedure for the registration of intellectual properties in Sri Lanka. The National Intellectual Property office of Sri Lanka established to administer the Intellectual Property Act.
Act provides for protection of right of Patent, Copy Rights, Related Rights, Industrial Design, Marks and Trade Marks, Trade Names, Layout Designs of integrated Circuits, Unfair Competition and Undisclosed Information and Geographical Indications.
Protection of right of Patent
An invention is patentable if it is new, involves an inventive step and is industrially applicable.
Novelty
An invention is new if it is not anticipated by prior art.
Prior art shall consist of -
(a) everything disclosed to the public, anywhere in the world, by written publication, oral disclosure, use or in any other way, prior to the filing or, where appropriate, priority date of the patent application claiming the invention ;
(b) the contents of patent application made in Sri Lanka having an earlier filing or, where appropriate, priority date than the patent application referred to in paragraph (a), to extent that such contents are included in the patent granted on the basis of the said patent application made in Sri Lanka.
Inventive step
An invention shall be considered as involving an inventive step if, having regard to the prior art relevant to the patent application claiming the invention, such inventive step would not have been obvious to a person having ordinary skill in the art.
Industrial Design
Any composition of lines or colours or any three dimensional form, whether or not associated with lines or colours, that gives a special appearance to a product of industry or handicraft and is capable of serving as a pattern for a product of industry or handicraft shall be deemed to be an industrial design Provided that anything in an industrial design which serves solely to obtain a technical result shall not be protected as industrial design.
Trade Marks
“Trade mark” means any visible sign serving to distinguish the goods of one enterprise from those of another enterprise.
Service Marks
“Service Mark” means any visible sign serving to distinguish the services of one enterprise from those of another enterprise.
Trade Names
“Trade Name” means the name or designation identifying the enterprise of a natural or legal person
Geographical Indications
“Geographical Indication” means an indication which identifies any goods as originating in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.
Introduction
The Board of Investment (BOI) has its origins in the Greater Colombo Economic Commission which was established in 1978. Fourteen years later, in 1992, the Commission was reconstituted as the Board of Investment of Sri Lanka (BOI). The BOI is structured to function as a central facilitation point for investors in Sri Lanka.
Board of Investment is authorized to enter in to agreements with any Enterprise under the Section 16 and Section 17 of the B.O.I. Law. B.O.I. shall have power under section 17 of the Law to provide tax benefits to the Investors under following Acts.
However, Income Tax Exemptions will be granted in accordance with Inland Revenue Act No. 24 of 2017.
B.O.I. facilitates Visa for foreign Investors / Shareholders, Directors and Employees under the category of Entry Visa, Residence Visa, Multiple Entry Business Visa and Special Residence Visa.
Investment Incentives proposed in 2019 Budget
High value Investment Incentives - Proposed Incentives to Accelerate High Value Domestic and Foreign Direct Investments
Large Scale Projects (Investment above $100 Million)
The incentive regime for large scale projects is as follows;
Income tax computation for Investments over $100 mn:
A person that invests a total sum of US$ 100 mn or more in depreciable assets, excluding intangible assets, in a project approved by the Board of Investment of Sri Lanka established under Board of Investment Law No. 4 of 1978 shall be eligible for a deduction of 150% of such actual expenditure incurred in each of such years on such assets for a period of 10 years from commercial operations;
Applicable up-front taxes:
Only during project implementation or construction period until commencement of commercial operations, the following exemptions from up-front taxes are proposed for investment projects above $100mn.
NBT: Exempt
PAL: Exempt
Cess: Cess will be exempt on all project related items
Duty and other taxes on negative list items: The negative list shall not apply and $100 mn projects may import project related items or purchase locally at their discretion.
Note: The necessary guidelines for claiming exemptions will be published. Since it is difficult to separate project related items that are intended for use in residential components, in investments made in mixed development projects as long as the investment (depreciable assets excluding intangible assets, land, and residential units for sale) criteria is met, up-front tax exemptions will be applicable for the residential component as well.
Investments over US$ 1 billion
For investments over US$ 1 billion, in addition to the benefits outlined above, the period for deduction of unrelieved losses shall be 25 years.
The rate of dividend tax paid by the company to a non-resident shall be zero during the period that such dividends are paid out of profits sheltered by enhanced capital allowances.
Expatriate employees in a company investing more than US$ 1 billion shall be exempt from withholding tax on employment income during the period that profits are sheltered by enhanced capital allowances.
Mid-size Investments over US$ 50 million
For investments over US$ 50 million but less than US$ 100 million, the additional deduction would be 100% on actual expenditure under the same conditions, whereby upfront taxes will be exempt for such investments during the period of construction, prior to commencement of commercial operations.
Strategic Development Projects Act, No. 14 of 2008
Strategic Development Projects Act, No. 14 of 2008 Certified on 29th February, 2008 is to promote strategic development projects in Sri Lanka and provide tax benefits on such projects. The Board of Investment of Sri Lanka shall identify in consultation with the relevant line Ministries, any proposed project as a Strategic Development Project.
Approval of the projects shall be granted by the Cabinet Ministers and Parliament of Sri Lanka. Following Taxes or Levies exempted under Strategic Projects Act,
Main Tax Laws
Main Tax Laws applicable to commence and operate as a business in Sri Lanka are as follows,
| Income Tax | Inland Revenue Act No. 24 of 2017 |
| Value Added Tax | Value Added Tax Act, No. 14 of 2002 and amendments thereto |
| Nation Building Tax | Nation Building Tax Act, No. 09 of 2009 and amendments thereto |
| Economic Service Charge | Economic Service Charge Act, No.13 of 2006 and amendments thereto |
Income Tax
Inland Revenue Act, No 24 of 2017 is effective in Sri Lanka form 1st April 2018. Income tax shall be payable for each year of assessment by –
| (a) | a person who has taxable income for that year; or |
| (b) | a person who receives a final withholding payment during that year. |
Income of a Person has been categorized as Income from Employment, Business, Investment and Other Sources. Therefore, Income Tax shall be collected by the Department of Inland Revenue by way of
| 1 | Withholding Tax from Employment, Investment and Service fee income of Resident Individual, |
| 2 | Self-Assessment Tax from person engage in Business in each quarter and |
| 3 | Capital Gain Tax on realization of an asset or liability. |
Investment Incentives under Inland Revenue Act of Sri Lanka
Enhanced Capital Allowances
| (1) | A Capital Allowance of 100% of the expenses incurred by a person on depreciable assets, other than intangible assets during a year of assessment shall be granted to that person for that year if the total expenses incurred by that person during that year on depreciable assets (other than intangible assets) that are used in a part of Sri Lanka other than the Northern Province exceeds USD 3 million but does not exceed USD 100 million. |
| (2) | A Capital Allowance of 150% of the expenses incurred by a person on depreciable assets other than intangible assets during a year of assessment shall be granted to that person for that year if the total expenses incurred by that person during that year on depreciable assets (other than intangible assets) that are used in a part of Sri Lanka other than the Northern Province exceeds USD 100 million. |
| (3) | A Capital Allowance of 200% of the expenses incurred by a person on depreciable assets other than intangible assets during a year of assessment shall be granted to that person for that year where the total expenses incurred by that person during that year on depreciable assets (other than intangible assets) that are used in the Northern Province exceeds USD 3 million. |
| (4) | A Capital Allowance of 150% of the expenses incurred by a person on assets or shares of a state owned company during a year of assessment shall be granted to that state owned company for that year if the total expenses incurred by that person during that year on assets of a state owned company that are used in a part of Sri Lanka exceeds USD 250 million. |
Exemption of Certain Dividends from Withholding Tax
The Rate of tax to be withheld from a dividend paid by a Company to a non-resident member shall be zero, if the company paying the dividend has incurred more than USD 1,000 million on depreciable assets (other than intangible assets) in Sri Lanka or entitled to an enhanced capital allowance under above (4), and that dividend is paid out of profits sheltered by enhanced Capital allowances.
Exemption of Employment Income from Withholding Tax
The Rate of tax to be withheld from a payment made by an employer to an expatriate employee shall be zero, if the company paying the dividend has incurred more than USD 1,000 million on depreciable assets (other than intangible assets in Sri Lanka or entitled to an enhanced capital allowance under above (4), where the number of expatriate employees is not exceeding twenty.
Income Tax Exemption and Concessions on certain Sectors
Information Technology
A company is entitled to an additional deduction when calculating the company’s income from business for a year of assessment equal to 35% of the total amount deducted for the year under Act that represents payments made by the company which are to be included in calculating the taxable income of its employees (other than as a company director), where that company —
| (a) | Conducts a business which predominately consists of providing information technology services; |
| (b) | has at least 50 employees during the whole of the year; and |
| (c) | report those employees in the statement that the company, as a withholding agent, is required to file under the Act. |
Headquarters Relocation
Any institution established on or after October 1, 2017 by relocating in Sri Lanka the headquarters or regional head offices of institutions in the international network, as specified by the Commissioner-General by Notice published in the Gazette shall be taxed at the rate of Zero percent for three years of assessment after 1st April 2018.
Renewable Energy
Any person, who has entered into a Standardized Power Purchase Agreement on or before November 10, 2016 with the Ceylon Electricity Board to provide electricity generated using renewable resources shall be taxed at the rate of fourteen percent for the three years of assessment after the commencement of this Act.
Research and Development
A person is entitled to an additional deduction when calculating the person’s income from business for a year of assessment equal to 100% of the total amount of research and development expenses deducted for the year under the Act, for three years of assessment commencing from 1st April, 2018.
Income Tax Rates
The taxable income of a company for a year of assessment shall be taxed at the following rates:—
| (a) | Small and Medium Enterprises | 14% |
| (b) | Predominantly conducting a business of exporting goods and services | 14% |
| (c) | Predominantly conducting an agricultural business | 14% |
| (d) | Predominantly providing educational services | 14% |
| (e) | Predominantly engaged in an undertaking for the promotion of tourism | 14% |
| (f) | Predominantly providing information technology services | 14% |
| (g) | Betting and gaming, liquor and tobacco | 40% |
| (h) | Others | 28% |
Value Added Tax
Value Added Tax (VAT) was imposed in Sri Lanka with effect from 1st August 2002 under the Value Added Tax Act, No 14 of 2002 and the Act has been amended in each year except in year 2010.
Registration Threshold for VAT
(1) Business other than Whole Sale and Retail
Every person who carries on a taxable activity If his taxable supply of goods or services or supply of goods and services,
has exceeded Rs.3,000,000 per quarter, or has exceeded Rs.12,000,000 per annum, or
likely to exceed Rs.3,000,000 in the succeeding quarter or Rs 12 Million in the succeeding twelve months period
(2) Business of Whole and Retail
A person or partnership engaged in the business of wholesale or retail trade, whose quarterly turnover/supplies exceeds Rs. 12.5 Million (including exempt or excluded supplies)
Shall be registered for Value Added Tax as a Permanent VAT Registered. However, temporary VAT registration could be obtained for import or export purpose if above threshold does not meet.
VAT Registration for Special Projects
Registration could be obtained during project implementation period of project commence in Sri Lanka with the consent of Commissioner General of Inland Revenue to avoid any amount of VAT payable by any Investor.
VAT Rates
Rates of Value Added Tax applicable are 15% and 0%. “Zero” rate is applicable for persons engage in export of goods and services (Direct), Indirect exporters and to registered person during project implementation period.
Nation Building Tax (NBT)
Nation Building Tax (NBT) is imposed with effect from 1.2.2009 by the Nation Building Tax Act No. 9 of 2009 and Act has been amended subsequently.
NBT is payable by Importers, Manufactures, Service Providers and Whole Sale & Retails Business subject to exclusions. Applicable rate of NBT is 2%. 50% of turnover of Whole Sale & Retail business and 75% of turnover of Distributors are not considered for calculation of NBT.
Liable Limit (Per Quarter)
Nation Building Tax shall be in paid if such turnover exceeds following thresholds per quarter,
| Rs. 25,000,000 | For processing of any locally procured agricultural produce in the preparation for sale |
| Rs. 3,000,000 | Other than above |
Economic Service Charges (ESC)
Economic Service Charge (ESC) imposed in Sri Lanka with effect from 1st of April 2006 under the Economic Service Charge Act No. 13 of 2006.
Tax Base & Threshold
Every person should register for ESC if the liable turnover of a quarter is Rs. 12.5 million or more for any quarter commencing on or after 01.04.2017 and applicable rate of ESC is 0.5%.
Shop and Office Employees Act No. 19 of 1954
The purpose of this Act is to regulate the employment, regulate hours of work and to regulate remuneration of persons in Shops and Offices and other matters incidentally thereto. These Acts combines with four different important areas of (1) Regulations of hours of employment of Shops and Offices (2) Maternity Benefits (3) Payment of remuneration and (4) Regulation of remunerations by Tribunals.
Employees’ Provident Fund Act No. 15 of 1958
The Employees’ Provident Fund Act No. 15 of 1958 came into operation from 1st of June 1958. Act is to establish a Provident Fund for the benefit of certain classes of employees and to provide matters connected therewith. in other words, this ensure a retiring benefit to employed persons by means of contributory Provident Fund and on that principle that superannuation benefit of employees is joint of the employer and employee.
Every employee must pay a minimum 8% and the employer a minimum of 12% of the employees’ total earnings for each month to the EPF Fund or to any approved Provident Fund.
Employees’ Trust Fund Act No. 46 of 1980
The objectives of the Employees Trust Fund Act No. 46 of 1980
| (a) | to promote employees ownership, employee welfare, economic democracy through participation in financing and investment |
| (b) | to provide for non-contributory benefit to employees on retirement |
| (c) | to promote employee participation in Management through the acquisition of equity interest in enterprises and |
| (d) | to do all such other acts or things as may be necessary for or conducive to, the attainment of the objects specified in (a) and (b). |
The employer of every employee is required to contribute to the ETF in every month at a percentage of 3% from its total earnings. Contributions in respect of ETF shall be forwarded on or before the last date of the succeeding month.
Payment of Gratuity Act No. 12 of 1983
This Act came into operation on 31st march 1983 and all employees in private sector establishments and Corporations which employed 15 or more workman are covered by the Act. Further Act deals with recovery of Gratuity and powers of the Commissioner.
Calculation of payment of gratuity for employees as follows,
| (1) | If you are a monthly paid employee, half the month’s last drawn salary for each completed years of service. |
| (2) | If you are paid daily, 14 days of the salary for each completed years of service. |
Labour Laws applicable to Women
In Sri Lanka, there are special protective measures to safeguard the employment of female employees. These regulations are in conformity with the International Standards to protect the rights of a female employee and such legislations are followings,
| (i) | Employment of Women, Young Persons and Children’s Act. No. 47 of 1956. |
| (ii) | Shop and Office Employees’ Act No.19 of 1954. |
| (iii) | Factories Ordinance No.45 of 1942. |
| (iv) | Maternity Benefits Ordinance No.32 of 1939. |
| (v) | Mines (Female Labour Underground Ordinance) Ordinance 1937. |
Securities and Exchange Commission Act
The Securities and Exchange Commission of Sri Lanka (SEC) was established in pursuance of the Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987 as amended by Act No. 26 of 1991, Act No. 18 of 2003 and Act no. 47 of 2009 with the objectives of
| (a) | creation and maintenance of a market in which securities can be issued and traded in an orderly and fair manner |
| (b) | the protection of the interest of investors |
| (c) | the operation of a Compensation Fund to protect investors from financial loss arising as a result of any licensed stock broker or licensed stock dealer being found incapable of meeting his contractual obligations and |
| (d) | the regulation of the securities market and to ensure that professional standards are maintained in such market. |
Eligibility to be listed on the Main Board (Listing Requirements)
| (a) | Stated Capital of not less than Rupees Five Hundred Million (Rs.500, 000,000/-) at the time of listing, |
| (b) | Net profit after tax for three (3) consecutive years immediately preceding the date of application, |
| (c) | Positive Net Assets as per the consolidated audited financial statements for the last two (2) financial years immediately preceding the date of application, and, |
| (d) | On the date of listing, the applicant Entity shall meet the Minimum Public Holding Requirement. |
Eligibility to be listed on the Diri Savi Board (Listing Requirements)
| (a) | Stated Capital of not less than Rupees Hundred Million (Rs.100, 000,000/-) at the time of listing, |
| (b) | Positive Net Assets as per the consolidated audited financial statements for the financial year immediately preceding the date of application, |
| (c) | On the date of listing, the applicant Entity shall meet the Minimum Public Holding Requirement. |
