Starting an IT company in Sri Lanka involves several critical legal and compliance steps to ensure smooth business operations. From initial registration to tax compliance and employee-related obligations, startups must follow a structured approach to establish and grow their venture successfully.

1. Registering the Business as a Company

The first step for an IT startup is to legally register the business as a Private Limited Company (Pvt Ltd) with the Department of the Registrar of Companies (ROC). This ensures the company’s legal existence and provides credibility when dealing with clients, vendors, and financial institutions.

Key Steps for Registration:

Reserve a unique business name via the 360 Accountnats online portal www.360accountants.lk/register/company

Submit required forms including Form 1, Form 18, Form 19, and Articles of Association.

Obtain the Business Registration Certificate.

Receive the Company Registration Number.

Once registered, the company is officially recognized as a legal entity, allowing it to operate within Sri Lanka’s business ecosystem.

2. Opening a Tax File & Company Bank Account

After registration, the next step is to ensure compliance with tax regulations and facilitate financial transactions.

Obtaining a Taxpayer Identification Number (TIN):

Register with the Inland Revenue Department (IRD) at www.ird.gov.lk.

Submit the Business Registration Certificate and other required documents.

Receive the TIN number, which is necessary for tax compliance and filing returns.

Opening a Business Bank Account:

Provide the Business Registration Certificate, TIN, and company details.

This step enables the company to conduct financial transactions, receive payments, and manage expenses efficiently.

3. Employee Registration: EPF, ETF & Payroll Taxes

Once the company hires staff, it must register for Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) to comply with labor laws.

Registration Process:

Register with the Labour Department for EPF and ETF contributions.

Deduct the required 8% from employees’ salaries and contribute an additional 12% as the employer.

File monthly payroll tax returns and ensure compliance with employee benefit contributions.

This step is crucial for businesses to legally employ staff and manage salaries in a structured manner.

4. Annual Company License Renewal & Tax Filings

To maintain legal compliance, startups must renew their business license and file annual tax returns.

Annual License Renewal

Renew the Company Registration with the ROC annually.

Ensure that all business-related permits and licenses are up to date.

Filing Annual Tax Returns:

Submit Corporate Income Tax (CIT) returns to the IRD.

Maintain accurate financial records for auditing and compliance.

Conclusion

For an IT startup in Sri Lanka, following these structured steps ensures smooth operations, legal compliance, and credibility in the business environment. Registering the company, setting up tax files, onboarding employees, and ensuring annual tax and license renewals form the backbone of a well-regulated and successful startup.

By adhering to these compliance requirements, IT businesses can focus on innovation, growth, and achieving long-term success in the digital industry. Need help with company registration or tax compliance? Contact us for expert assistance!