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Starting a new business in Sri Lanka
Starting a new business in Sri Lanka
Sri Lanka (do-don’t starting a new business in Sri Lanka), a once civil war torn country has now seen a boom in its commerce and economy with promising new startups starting their operations in this country of 20.97 million people. With a GDP of $237.791 billion Sri Lanka is slowly but surely growing closer to become a country with lots of opportunities.
So you have seen how much Sri Lanka has grown over the years and you have set your eyes on the country to set up a business of your own. You cannot just rent a small shop and set up there and think you are on your way to success. Of course not, there are legal obligations one has to deal with first before they set up their dream business and work there. There are certain steps that much be followed before starting a new business in Sri Lanka:
1. Register a company name that is unique:
Before starting a new business in Sri Lanka or anywhere you have to first have a company name that is unique to solely you. Otherwise how will you create your own brand image for the consumers? What a company is to a consumer is solely tied to the brand name or company name, a trustworthy brand name gives the people a sense of reliability and confidence. So the first basic step is one must register a brand name and slowly work to build that brand. The cost associated with registering a name is LKR 1000.
2. The company secretary and director signs consent
Before the new company is formed a company secretary must be designated and consent must be signed between the director and company secretary. In accordance to Article 221(1) of Companies Act No. 7 of 2007 each and every company new or old must have a director and secretary.
As for the fee, there is no specific fee, it varies from the type of company one wished to form. The range is between $100-150 for private companies. An amount of LKR 10000-15000 is usually paid per month for company secretary.
3. Register the newly formed company at the Department of the Registrar of Companies
After the processes mentioned the company is required the documents as follows to the Department of Registrar of companies:
From 1: Registration of Company
Form 18: Consent and certificate of director
Form 19: Consent and certificate of secretary
Two copies of Article of Association.
Registrar of companies charges LKR 15000 for Form 1 and LKR 1000 for Form 1, 2 and Article of Association and the time required for the completion of procedure are approx. 2 days
4. Give a public notice of incorporation
After the incorporation of the company public notice must be given by the company within 60 days of incorporation of the company. The notice must state the following things:
- Name of the company
- Registration number
- Date of incorporation
- Address to the registered office
This law is according to section 9 of Sri Lanka’s Companies Act No. 1566/32, dated: 12/09/2008
The information should be published in Government Gazette and in any daily newspaper in three languages; English, Sinhala and Tamil. The time required for the completion of procedure is approx. 3 days with a charge on LKR 7000
5. Register with the tax authorities and obtain a Tax Identification Number (TIN) from Taxpayer Services Unit of Inland Revenue Department
The company must then register itself with the tax authorities and complete the form accompanied with the necessary documents including Form 1 and acquire a Tax Identification Number (TIN). The applicant or an authorized representative of the applicant is needed to be physically present at the premises of the registration.
6. Register for VAT with the Inland Revenue Department VAT Registration Branch
In order to get permanent VAT registration the newly formed company must show documents that proves a sales figure of LKR 3,750,000 per quarter or LKR 15,000,000 per year.
*On January 1st 2015 the rate of Vat was reduced from a previous 12% to 11%
7. Register with the Department of Labor and obtain the EPF number
All new companies must register with the department of labor and obtain the Employee Provident Fund (EPF) which is government owned and maintained by the central bank. For Employee Trust Fund (ETF) there will no registration necessary as the same EPF number is used for their monthly contributions.
Companies with employees who have been working for more than 5 years, have to pay gratitude to the employees. However this is revoked for companies that have less than 15 employees working for them. No pension is obligatory for private sector businesses and for business that operates in dangerous sectors; they are required to obtain special Factory Ordinance Checkups.
Conclusion: You may contact us before starting a new business in Sri Lanka as foreigner. You do cooperate foreign investors to registering new business by our expert.