Are you planning to start a partnership business in Sri Lanka? Whether you’re teaming up with a friend or a fellow entrepreneur, setting up a partnership can be a smart way to grow your business — but only if you register it properly and understand your tax responsibilities.
In this guide, we’ll walk you through:
- ✅ What a partnership is
- 📝 How to register a partnership business in Sri Lanka
- 🧾 How taxes work for partnerships
- ⚖️ Key legal tips and compliance advice
📌 1. What Is a Partnership Business?
A partnership is a legal relationship where two or more people agree to carry on a business in common with a view to profit. It’s governed by Roman-Dutch Law in Sri Lanka and is recognized as a contractual business entity.
Key Features:
- Shared ownership
- Joint decision-making
- Profit and loss sharing
- No separate legal identity (unlike a company)
📝 2. How to Register a Partnership Business in Sri Lanka
You must register your business with the appropriate local authority — usually a Divisional Secretariat, Municipal Council, or Provincial Council, depending on where your business is located.
✳️ Step-by-Step Registration Process:
Step 1: Choose a Business Name
Make sure it’s:
- Unique
- Not misleading
- Not infringing trademarks
- Not offensive or restricted (e.g., “bank”, “national”, “presidential”)
Step 2: Prepare Required Documents
| Document | Description |
|---|---|
| 🧾 Completed application form | Issued by the local authority |
| 📑 Partnership Agreement | Not mandatory but strongly recommended |
| 🆔 NICs of all partners | Identity documents |
| 🏢 Proof of business address | Utility bill or lease agreement |
| 📝 Owner’s consent (if rented) | From the landlord |
| 🖼️ Photos of partners (if required) | Passport-sized |
Step 3: Submit Application
Submit the completed documents to the relevant local authority:
- Urban/Municipal Council – if in a city or town
- Divisional Secretariat – if in a rural or suburban area
- Provincial Council (Western Province) – if registering in Colombo, Gampaha, Kalutara, etc.
🪙 Registration Fees: Typically Rs. 500 – Rs. 2,000 depending on the authority.
Step 4: Receive Business Registration Certificate (BRC)
The Business Registration Certificate is usually issued within 3–7 working days. It confirms your partnership is officially recognized.
🧾 You’ll need the BRC to:
- Register for taxes
- Open a bank account
- Bid for tenders or contracts
💰 3. How Taxes Work for Partnerships in Sri Lanka
🆔 Step 1: Get a TIN (Taxpayer Identification Number)
After BRC is issued, register with the Inland Revenue Department (IRD) to get a TIN for the partnership.
📍 Visit: Your nearest IRD branch
🌐 Or use: https://www.ird.gov.lk
Also, each partner must have a personal TIN, even if the partnership has its own.
📄 Step 2: File Partnership Tax Returns
Under the Inland Revenue Act No. 24 of 2017, partnerships must file an annual tax return, disclosing:
- Total business income
- Deductions and expenses
- Profit allocation to each partner
🔁 Due Date: Generally 30th November for the previous year.
💼 Step 3: Tax Treatment of Partnerships
Unlike companies, partnerships themselves are not taxed directly. Instead:
- Profits are distributed among partners
- Each partner pays income tax on their share of profits, at personal income tax rates
📌 Example:
- Partnership earns Rs. 3,000,000
- 3 equal partners: each receives Rs. 1,000,000
- Each partner declares this in their personal income tax return
🧾 VAT & Other Taxes (If Applicable)
If your turnover exceeds the VAT threshold (currently Rs. 80 million per annum), the partnership must also register for VAT and charge it on taxable supplies.
Other applicable taxes:
- EPF/ETF if you have employees
- ESC or NBT (if reintroduced by future legislation)
⚖️ 4. Legal & Compliance Tips
✅ Always draft a Partnership Agreement – It avoids future disputes
✅ Renew BRC annually – Most local authorities require yearly renewal
✅ Maintain proper books – Especially if your revenue is growing
✅ File returns on time – Avoid IRD penalties and interest
✅ Open a business bank account – Helps keep personal and business expenses separate
🔚 Conclusion
Starting a partnership business in Sri Lanka is simple and affordable — but you must ensure proper registration and tax compliance.
By following the steps above, you can:
- Operate legally
- Build trust with clients and suppliers
- Avoid future penalties and legal issues
