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Sri Lanka, previously Ceylon and officially the Democratic Socialist Republic of Sri Lanka, is a South Asian island republic. It is located in the Indian Ocean, southwest of the Bay of Bengal and southeast of the Arabian Sea; the Gulf of Mannar and the Palk Strait separate it from the Indian subcontinent. Sri Lanka borders India and the Maldives on the sea. Its legislative capital is Sri Jayawardenepura Kotte, while its major city and financial center is Colombo.
The known history of Sri Lanka extends back 3,000 years, with evidence of ancient human habitation dating back at least 125,000 years. It has an extensive cultural legacy. The oldest known Buddhist literature from Sri Lanka, known as the Pli canon, are from the fourth Buddhist council around 29 BCE. From the early days of the old Silk Road trade route to today's so-called maritime Silk Road, Sri Lanka's geographic position and deep harbors have made it of enormous strategic significance. Because of its strategic position, it was known to both Far Easterners and Europeans as early as the Anuradhapura era. The country's commerce in luxury products and spices drew merchants from all over the world, contributing to Sri Lanka's diversified population. The Portuguese came to Sri Lanka (mostly by mistake) at a moment of considerable political upheaval in the Sinhalese kingdom of Kotte, and thereafter tried to control the island's marine areas and profitable foreign commerce. Part of Sri Lanka was taken over by the Portuguese. Following the Sinhala-Portuguese conflict, the lands were taken over by the Dutch and the Kingdom of Kandy. The British took seized the Dutch territories and then expanded their rule over the whole island, colonizing it from 1815 until 1948. In the early twentieth century, a national movement for political independence evolved, and Ceylon became a dominion in 1948. In 1972, the dominion was superseded by the Republic of Sri Lanka. Sri Lanka's recent history has been marked by a 26-year civil war that started in 1983 and was successfully concluded in 2009 when the Sri Lanka Armed Forces defeated the Liberation Tigers of Tamil Eelam.
Today, Sri Lanka is a multicultural country with many different cultures, languages, and races. The Sinhalese constitute the bulk of the country's population. The Tamils, a sizable minority community, have also played an important part in the history of the island. The Moors, Burghers, Malays, Chinese, and indigenous Vedda are other long-established communities.
The island has a long history of participation in contemporary international organizations, including membership in the United Nations, the Commonwealth of Nations, the G77, and the Non-Aligned Movement. Sri Lanka is the highest-ranked South Asian country on the Human Development Index, with the second-highest per capita income; nevertheless, the current economic crisis has resulted in currency collapse, growing inflation, and a humanitarian catastrophe due to a severe scarcity of basics. It has also sparked public rallies, with protesters demanding that the President and the administration resign.
Employees receive 14 days of paid vacation per year after one year of work, in addition to public holidays. Employees with less than a year of service are entitled to four to ten days of vacation, as follows:
If your job starts on or after April 1st but before July 1st, you'll have 10 days off.
If your job starts on or after July 1st but before October 1st, you'll have seven days off.
If you start work on or after October 1st but before December 31st, you will get four days off.
Employees must use a minimum of seven days of annual leave in a row within a 12-month period of accumulation. The dates on which leave may be taken are negotiated between the company and the employee.
Sri Lanka recognizes 27 public holidays.
Employees are entitled to up to seven days of sick leave each year. Sick leave is earned at a rate of one day every two months during the first year of work.
Employees who are female are entitled to 12 weeks of paid maternity leave. The first two weeks can be taken up to two weeks before the projected due date, and the remaining ten weeks can be taken after the baby is born. If the pregnancy does not result in a live birth, the employee is entitled to six weeks of paid leave, two weeks before and four weeks after the projected due date.
The employer shall provide maternity benefits for the period leading up to and including the day of confinement within 48 hours of the employee showing proof of pregnancy. Payment is made in two payments during the second and fourth weeks of leave for the period after the delivery.
There is no statutory paternity leave.
Other than the already mentioned terms regarding maternity and paternity leave, there are no other provisions in the law of Sri Lanka regarding parental leave.
Employment contracts may be cancelled by either the employer or the employee at the conclusion of the contract term (if the contract is for a specified term).
Employers have the authority to terminate an employee for misconduct or disciplinary reasons related to poor performance. Employers must tell employees of the reason for termination in writing within two days of the termination. Justifications for terminating an employee include extreme negligence, abusive or insubordinate behavior, fraud, theft or dishonesty, intoxication or other impairment, abandonment or chronic absenteeism.
Termination of an employee for any cause other than discipline, including redundancy, normally requires approval by the Labor Commissioner or the employee's consent. Written approval and consent are required.
Employees are entitled to redundancy pay if their employment is terminated due to the business's closure.
Notice periods for dismissal, or payments in lieu of notice, are typically stipulated in the employment contract. However, if the employer invokes the notice period or payment in lieu of notice provisions during an unjust dismissal, the employee may challenge the termination on the grounds of unjust dismissal. When an employee is dismissed on disciplinary grounds, the employer is required to inform the employee, in writing, of the reasons for the dismissal before the end of the second working day following the dismissal.
There is no clear provision in labor laws on the duration of probation period in Sri Lanka. Generally, the probation period is six months' long.
The amount of compensation that may be awarded is determined by the length of service of the employee. For each year of service completed, employees with one to five years of service are entitled to 2.5 months' salary as compensation. Employees with between six and fourteen years of service are entitled to receive two months' salary as compensation for each year of service. Employees with 15 to 19 years of service are entitled to 1.5 months' pay as compensation for each completed year of service. Employees with between 20 and 24 years of service are entitled to receive one month's salary as compensation for each year of service. Employees with between 25 and 34 years of service are entitled to receive 0.5 months' salary as compensation for each completed year of service. Under the above formula, the maximum severance payment that can be made is 1.25 million Sri Lankan Rupees.
The standard work week is 45 hours long, with eight hours per day from Monday to Friday.
Male employees between the ages of 14 and 18 are generally prohibited from working at night, defined as between 6 p.m. and 6 a.m. Male employees between the ages of 16 and 18 are, however, permitted to work between the hours of 6 a.m. and 10 p.m. if employed in a hotel, restaurant, or place of entertainment.
Female employees, with a few exceptions, are also prohibited from working at night. Female employees who are at least 18 years old may work overnight in a residential hotel, between the hours of 6 p.m. and 10 p.m. if employed in a hotel or restaurant, or between the hours of 6 p.m. and 8 p.m. if employed in an office.
Overtime is limited to 12 hours per week and is compensated at 150% of the basic rate.
The minimum wage is 10,000 Sri Lankan rupees per month.
Sri Lanka offers a free universal public healthcare system that is delivered via a network of healthcare facilities and hospitals. Citizens and workers are both covered by the universal healthcare system. Some private companies provide supplementary health insurance policies, although they are regarded perks rather than entitlements.
A probationary term, pay on yearly vacations, public holidays, sick leaves, maternity leave, paternity leave, and overtime pay are all mandated by law. Social security payments are sometimes included in statutory benefits.
Corporate income tax is levied on the global taxable revenue of resident businesses and public entities. A business may also be a friendly society, a building society, a pension fund, a provident fund, a retirement fund, a superannuation fund, or a similar fund or society. A business is sometimes defined as a partnership with at least 20 members who have limited responsibility for the firm's obligations. Similarly, a unit trust or mutual fund that does not perform an acceptable investment activity is regarded as a corporation, and corporate tax applies in all of these instances. Non-resident businesses must pay CIT on any revenue generated from a company, investment, or other source that originates or is derived in Sri Lanka.
Generally, most businesses are imposed a corporate income tax rate of 14 percent. Businesses consisting of betting and gaming, liquor, and tobacco, however, are subject to a much higher rate of 40 percent. Entities in Trading, banking, finance, and insurance are also subject to a higher rate of 24 percent. Manufacturing entities are imposed an 18 percent rate and gains from the realization of investment assets are subject to a reduced rate of 10 percent.
Individuals who are residents are liable to income tax on their global earnings. Non-residents are solely taxed on income earned in Sri Lanka.
For a taxable income of up to LKR 3,000,000, the tax rate is set at 6 percent.
For a taxable income between LKR 3,000,000 and LKR 6,000,000, the tax rate is set at 12 percent.
For a taxable income over LKR 6,000,000, the tax rate is set at 18 percent.
In Sri Lanka, VAT is levied on imported products as well as the supply of goods, including wholesale and retail commerce, and services. On the basis of defined criteria, provisions are provided for submitting returns monthly or quarterly. Even when reports may be submitted quarterly, VAT-registered individuals are obliged to make monthly tax payments. Certain defined imports, as well as products and/or services provided locally, are exempt.
VAT is levied at a regular rate of 8% on the specified values of imports and domestic goods (prior to 1 December 2019, the rate was 15 percent ). Exports and some foreign services are exempt from taxation. Aside from the aforementioned zero-rated supplies, the provision of services by a hotel guest house, restaurant, or other similar company offering comparable services registered with the Sri Lanka tourism board authority with 60 percent local inputs is designated as a zero-rated supply.
With effect from 1 January 2020, registration for VAT is required only if the quarterly value of taxable supplies exceeds LKR 75 million or the annual value of taxable supplies exceeds LKR 300 million. However, a voluntary registration option is accessible to businesses with a quarterly turnover value of less than LKR 75 million.
The input tax paid on imports and supplies of goods (including capital goods) and services in a month that are used in the business of making taxable supplies in that month can be deducted from the tax payable (output tax) on such supplies, subject to a limit of the lesser of 100% of output tax or the actual input tax paid.
Excess VAT paid may be refunded to zero-rated suppliers and new companies registered under Section 22 (7) of the VAT Act. A streamlined VAT system is in place to relieve zero-rated suppliers and other qualifying suppliers of the burden of paying input VAT, avoiding the requirement for refunds.
To work in Sri Lanka, an employee must apply for and be granted either a visiting or a residency visa.
A Visitor Visa/Business Purpose Visa is a 30-day visa that permits you to travel for short business visits. This may be extended for a period of up to 90 days.
A Residence Visa/Employment Visa is a one-year visa that allows you to work or study in the country. This may be renewed annually for as long as the employee requires.
Business Visas must be secured prior to entering Sri Lanka, since changing visa classes after arrival is not permitted.
In Sri Lanka, employment contracts might be written, oral, or inferred. Both the employer and the employee sign written employment contracts in a language that the employee understands. Employees at an office or store must be given the following information in writing:
The employee's name and job title
The date of the appointment
Payment terms, additional salaries, and bonuses
Working hours and vacation
Terms of termination
In Sri Lanka, employment contracts may be for a set or indeterminate period of time. There is no necessity for background checks or screening of workers or prospects during employment or before hiring.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Sri Lanka Rupee
The procedure of establishing a Sri Lanka subsidiary varies depending on the firm, since both geography and entity play a role. For example, someone establishing in one location of the nation may not be subject to the same Sri Lanka subsidiary regulations as someone forming in another region or city. If you're unsure where to incorporate, we suggest consulting with an expert who can guide you to a region with favorable regulations for foreigners.
The kind of firm also has an influence on the procedure of establishing a subsidiary in Sri Lanka. You may incorporate as one of many distinct companies depending on your intended degree of participation in the nation. Foreigners may set up a limited liability company (LLC), a public limited company, a branch office, or a representative office in Sri Lanka. The company you pick should be determined by the kind of commercial transactions you want to do in the nation.
Because LLCs provide the greatest independence and flexibility in the nation, many businesses prefer to organize as an LLC. The following are the processes to establishing your Sri Lanka subsidiary as an LLC:
1. Online business name reservation with the Registrar of Companies
2. Obtaining the director's and company secretary's signatures on a permission form
3. Filing the necessary documentation with the Registrar, including your Articles of Association
4. Obtaining a Tax ID Number from the Taxpayer Services Unit
5. Making the company's existence known to the public via daily publications and the Government Publications Bureau.
6. Creating bank accounts in-country
7. Obtaining an Employee Provident Fund identification number from the Department of Labor
If you want to incorporate as an LLC, you must observe the Sri Lanka subsidiary laws that apply to such company. For example, at least one director and two stockholders of any nationality are required. There is no minimum share capital requirement, however you will need a company secretary who is generally based in Sri Lanka.
A public limited company is the second most frequent kind of business. PLCs, like LLCs, have no minimum share capital requirement, but they must have two shareholders and two directors who are Sri Lankan natives. Every year, directors are responsible for completing yearly tax returns as well as presenting audited accounts and financial statements.