Sri Lanka has a skilled, English-speaking workforce in technology, finance and shared services, and many foreign companies start there with a small team. Setting up a company means registering with the Registrar of Companies, the Inland Revenue Department, and the EPF and ETF before the first hire, and some activities need further approvals. This guide sets out the choices and the steps in order, and what to do if you need to hire before your company is ready.
Choose the structure
The right structure depends on what the business will do in Sri Lanka, who will own it and whether it will earn income locally. Check early whether the activity is restricted or needs approval for foreign investors.
| Structure | What it is | Typical use |
|---|---|---|
| Private limited company | A Sri Lankan company registered under the Companies Act No. 7 of 2007, which can be wholly foreign-owned in most activities | Operating businesses that sell, invoice or employ in Sri Lanka |
| Branch of a foreign company | The foreign company registers its place of business in Sri Lanka without forming a new entity | Groups that want the parent to carry on the activity directly |
| Liaison or representative office | An office that promotes or coordinates for the parent and does not earn income in Sri Lanka | Market research and liaison |
Some sectors have foreign-ownership limits or conditions, and investments that want incentives go through the investment approval process. Take Sri Lankan legal and tax advice on the structure before you file.
Set up the company: the steps in order
- Check the activity and the name. Confirm any limits on foreign ownership for the activity and reserve the company name through the Registrar of Companies’ online system (eROC).
- Register the company. File the incorporation forms, the articles of association and the directors’ and secretary’s consents through eROC. A company needs a registered office in Sri Lanka and a company secretary.
- Report the beneficial owners. Record and file the people who own or control the company, as the Registrar requires.
- Register for tax. Obtain a taxpayer identification number (TIN) from the Inland Revenue Department, and register for VAT and other taxes if the business will be liable.
- Open a bank account. Banks verify the company, its directors and its owners. Foreign investment usually comes in through a designated investment account, which makes it easier to repatriate capital and profits later.
- Register as an employer. Register with the Employees’ Provident Fund within 14 days of employing the first person, and with the Employees’ Trust Fund.
- Set up payroll and filings. Pay salaries at least monthly, withhold APIT, pay EPF and ETF by the last working day of the following month, and keep up with the annual returns to the Registrar and the Inland Revenue Department.
How long this takes depends on the activity, the documents and the bank. Plan the steps above before you commit to a start date for your first employee.
Tax and employment basics
| Item | Rate or rule |
|---|---|
| Minimum wage | LKR 30,000 a month or LKR 1,200 a day from 1 January 2026; Wages Boards can set higher rates |
| EPF | Employer 12%, employee 8% of monthly earnings |
| ETF | Employer 3% |
| APIT on salaries | No tax on the first LKR 1,800,000 a year, then 6% to 36%, withheld by the employer |
| Gratuity | Half a month’s salary per completed year after five years, for employers with 15 or more workmen |
Corporate income tax and VAT depend on the activity and turnover; check the current rates with the Inland Revenue Department or your tax adviser before you plan prices. Estimate the cost of a salary in our Sri Lanka salary and employer cost calculator, and read our Sri Lanka employment law guide for the employment rules.
Hiring before your company is ready
Registration, the bank account and the employer registrations take time, and some companies want to start with one or two people while they test the market. Payroll outsourcing does not solve this on its own: a payroll provider runs payroll for an employer that already exists. If you want to hire before your company is ready, an employer of record can employ the person in Sri Lanka for you; when your company is set up, the employment can move to it with the employee’s agreement. See Employer of Record in Sri Lanka. For a foreign national, see Expat Employment in Sri Lanka.
Once you have a company
- Keep the registered office, the company secretary and the annual return up to date
- Run payroll, APIT, EPF and ETF every month, or use Sri Lanka payroll to do it for you
- Give every employee written terms of employment and keep leave and gratuity records
- Review the minimum wage and the APIT tables when they change
How NNRoad can help
NNRoad helps overseas companies hire in Sri Lanka, before and after they set up a company. We can employ your first people through our employer of record service and run payroll for your Sri Lankan company once it exists. Contact us about your plans. We will respond within 24 hours.
Reviewed November 2026. General information, not legal or tax advice.