SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
sion of land where such disputes are likely to result in a breach of the peace.
not yet been brought into force. The BOI accordingly continues to operate as a central facilitation point for foreign and domestic investors under transitional arrangements, with existing BOI approvals remaining valid. Approval from the BOI is typically sought where: • the investment qualifies under a BOI-approved sector or scheme; • fiscal incentives such as duty exemptions are being claimed; • strategic development status is being pursued under the Strategic Development Projects Act; or • a foreign investor seeks to increase their share - holding percentage or obtain approval for 100% foreign ownership in sectors where ownership is otherwise limited or restricted. BOI approval is not mandatory for all foreign invest - ments, particularly for minority equity participation in non-restricted sectors. In addition, investments approved by the BOI are entitled to operational con - veniences such as streamlined import/export proce - dures, land allocation in industrial zones, and assis - tance with obtaining work visas for expatriate staff. Colombo Port City Economic Commission Foreign investments made within the Colombo Port City Special Economic Zone are governed by a dis - tinct regulatory framework under the Colombo Port City Economic Commission Act, No 11 of 2021. The Colombo Port City Economic Commission serves as the single-window regulator for all business and investment activity within the zone. Any person wishing to undertake a business, commer - cial or financial activity in Port City must first obtain a business registration and relevant authorisations or licences from the Commission. Unlike the general regime administered by the BOI, Port City offers a highly liberalised environment with no foreign owner - ship restrictions, guaranteed capital and profit repa - triation, tax incentives, and exemptions from certain domestic laws, subject to the specific guidelines and rules issued by the Commission. All remittances into and out of Port City must be rout - ed through Port City Investment Accounts (PCIAs), and compliance with the Commission’s directives is
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments General Requirements Foreign investment in Sri Lanka is primarily governed by the Foreign Exchange Act, No 12 of 2017, and is subject to certain sector-specific restrictions, approv - als and compliance requirements. Foreign investors seeking to invest in Sri Lanka must comply with the Foreign Exchange (Classes of Capital Transactions Undertaken in Sri Lanka by a Person Resident Outside Sri Lanka) Regulations No 2 of 2021 and other direc - tives issued under the Foreign Exchange Act. While Sri Lanka generally adopts a liberal policy toward foreign direct investment (FDI), full foreign ownership is not permitted in certain sectors, and investment in others may require special approval, or minimum capi - tal thresholds. Prohibited or restricted areas for for - eign investment typically include retail trade with less than USD5 million investment, coastal fishing, pawn- broking and certain regulated professions (eg, legal practice). These restrictions are periodically revised by the government, and reference must be made to the most recent regulations to determine the permissibility of investment in a given sector. All inward remittances for investment purposes must be routed through Inward Investment Accounts (IIAs) opened with licensed commercial banks in Sri Lanka and must be properly documented. Failure to comply with these procedures may restrict the repatriation of The Board of Investment of Sri Lanka (BOI) is the country’s principal investment promotion agency, his - torically established under the Board of Investment of Sri Lanka Law, No 4 of 1978. While that Law has been repealed by the Economic Transformation Act, No 45 of 2024, which provides for the BOI’s functions to be reconstituted under new bodies including the Economic Commission of Sri Lanka and Investment Zones Sri Lanka, the provisions affecting the BOI have returns or capital at a later stage. Board of Investment of Sri Lanka
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