Starting a business in Sri Lanka begins with registering your company — but what if you don’t begin operations right away?
Whether it’s due to funding issues, market delays, or a change in strategy, many entrepreneurs register their company name and stop there. But here’s the catch: once registered, your company still has legal and tax responsibilities — even if no business activity takes place.
In this post, we’ll explain what you must do with the Inland Revenue Department (IRD) and how to stay compliant to avoid penalties.
⚠️ Why You Can’t Ignore the IRD After Company Registration
Once your business is registered with the Registrar of Companies (ROC), you’re automatically expected to:
- Register with the Inland Revenue Department (IRD) for tax purposes
- File tax returns, even if the business is inactive
- Pay penalties if you fail to file
The IRD assumes your company is operational unless you inform them otherwise — and they expect compliance.
✅ Step-by-Step: What to Do if Your Company Is Inactive
1. Register for a Taxpayer Identification Number (TIN)
Even if you’re not running the business, you’re still required to get a TIN from the IRD. This is used for all future tax filings.
Apply via:
👉 www.ird.gov.lk
2. File a Nil Tax Return
If you’re not earning any income or doing any transactions, you still must file a tax return indicating zero activity (called a “nil return”).
Types of Returns You May Need to File:
| Tax Type | Action |
|---|---|
| Income Tax | File a nil return annually |
| VAT (if registered) | File monthly NIL VAT returns |
| PAYE (if registered) | File NIL if no employees |
| ESC (Economic Service Charge) | May apply depending on turnover |
3. Notify the IRD of Dormant Status
You can formally notify the IRD in writing that your company is not yet operational.
Include:
- Company Name & TIN
- Date of Registration
- Declaration of Dormancy
- Signed by a Director or Secretary
The IRD may update your profile to “dormant” and reduce filing burdens temporarily, but this is at their discretion.
4. Avoid Penalties for Non-Filing
Even with zero activity, non-filing is treated as non-compliance and attracts automatic penalties such as:
- Rs. 50,000 and upwards for income tax non-filing
- Monthly penalties for non-filing of VAT returns
- Late payment interest (even if no payment is due)
So always file — even if your company did nothing.
🔁 Option: Temporarily Close or Strike Off the Company
If you don’t plan to operate the business in the near future, consider these legal options:
🔹 A. Declare Dormancy
- File a board resolution declaring the company inactive
- Inform ROC and IRD
- Keep filing nil returns
🔹 B. Strike Off the Company
- Apply to the Registrar of Companies to deregister (strike off) your business
- Requires:
- No liabilities
- No pending tax matters
- Written request with board resolution
This fully closes the business, so you can restart later with a new registration if needed.
📑 Pro Tips
- Keep all bank statements empty or inactive to prove dormancy
- Always retain ROC and IRD correspondence for records
- If you’re unsure, hire a registered tax consultant to file returns correctly
✅ Summary: What To Do If Your Company Is Not Yet Operating
| Task | Why It’s Important |
|---|---|
| Get TIN | Mandatory after registration |
| File Nil Returns | Avoid penalties |
| Inform IRD | Reduce compliance burden |
| Keep Records | For future audits |
| Close Company (if needed) | To legally end obligations |
💬 Final Thoughts
Registering a company is a big step — but even if you don’t start right away, tax compliance doesn’t wait. Avoiding IRD responsibilities can cost you hefty fines and legal trouble later on.
Stay ahead by filing on time, communicating with the IRD, and keeping your records clean. If you decide to launch the business later, you’ll be glad you did things the right way from day one.
