Why Indian Entrepreneurs Should Consider Starting a Business in Sri Lanka

(And What You Need to Know About Ownership Rules)

If you’re an Indian entrepreneur looking to expand your business beyond India, Sri Lanka offers an attractive and strategic opportunity. Whether you’re in IT, hospitality, retail, or food & beverage, the island nation is increasingly becoming startup-friendly—with simplified regulations and close geographical and cultural ties to India.

But before jumping in, it’s important to understand one key aspect: foreign ownership restrictions.

🔑 Foreign Ownership Rule: What Indians Need to Know

As a general rule, foreigners (including Indians) can own only up to 40% of a company in Sri Lanka in certain restricted sectors—unless special approval is obtained from the Board of Investment (BOI).

This means, if you’re planning to register a business in these restricted sectors (such as trading, import/export, small-scale services, or retail), you must partner with a Sri Lankan citizen who will hold at least 60% of the shares.

✅ Local partnerships are not only mandatory in many sectors but also beneficial—your Sri Lankan partner can help you navigate the local business environment, language, and regulatory framework.

💡 But Here’s the Good News…

Not all industries have this 40% cap.

👉 In the IT and Software sector, 100% foreign ownership is allowed.

👉 In the restaurant, cafe, and food service businesses, you can also fully own the company as a foreigner.

This opens the door wide for Indian tech entrepreneurs, app developers, SaaS startups, and restaurant owners who want to expand into a new but familiar market without needing a local partner (unless you choose to have one strategically).

🔍 Why Sri Lanka?

Here are just a few reasons why more Indian founders are setting up in Sri Lanka:

✅ Geographic Proximity

• Quick flights from South India
• Lower logistics cost

✅ Cultural Compatibility

• Shared language roots (Tamil spoken widely in the North)
• Familiar food, customs, and work culture

✅ Lower Operating Costs

• Affordable real estate, staffing, and utilities
• Lower overall cost of doing business compared to metro cities in India

✅ Tax Incentives & BOI Approvals

• You can apply for BOI approval for full ownership in restricted sectors
• Tax holidays and investment reliefs available for eligible projects

🧾 How to Register a Company in Sri Lanka (as an Indian)

1. Choose Business Structure: Most Indian founders go with a Private Limited Company
2. Reserve a Company Name: Via Sri Lanka’s Department of Registrar of Companies (ROC)
3. Prepare Incorporation Documents:
   • Articles of Association
   • Consent forms
   • Details of directors/shareholders
4. Local Address Required: You’ll need a registered business address in Sri Lanka
5. Open a Bank Account
6. Register for Taxes: Obtain TIN (Taxpayer Identification Number), VAT if applicable

🛑 Note: If you’re in a restricted sector, your Sri Lankan partner must hold the majority shares (60%).

📊 Popular Business Ideas for Indians in Sri Lanka

🤝 Partnering with Locals – A Strategic Move

Even if not legally required, having a trustworthy local partner can be a huge advantage. They can assist with:

• Licensing
• Recruitment
• Supply chain
• Dealing with local authorities
• Managing in Sinhala/Tamil if needed

🚀 Ready to Expand?

If you’re an Indian business owner looking for a gateway to South Asia, Sri Lanka offers the perfect mix of opportunity, accessibility, and affordability.

Whether you want to open a tech firm in Colombo, a restaurant in Jaffna, or launch a freelance agency, you can do it—just be aware of the ownership rules and structure your company smartly.

👉 Need help setting up your company in Sri Lanka?
We can guide you through:

• Company registration
• Partner search
• Tax compliance
• BOI approvals

📩 Contact us today and take your first step toward expanding into Sri Lanka!