Company compliance Sri Lanka does not end when you receive your Certificate of Incorporation. In fact, registration is just the beginning. From the moment your company is incorporated, a set of legal obligations kicks in — and missing any one of them can result in serious penalties.
This guide covers every compliance obligation your Pvt Ltd company has in Sri Lanka. It covers Annual Returns, tax filing, VAT, employment obligations, and statutory records. Furthermore, it gives you a clear compliance calendar so you always know what is due and when.
Company Compliance Sri Lanka: What Changes After Registration?
The moment your company registers, three things happen automatically. First, the Department of the Registrar of Companies opens a company file on the eROC portal. Second, a Taxpayer Identification Number (TIN) is automatically assigned by the Inland Revenue Department. Third, your compliance clock starts ticking.
From this point forward, your company must meet a set of legal obligations every year. Furthermore, directors carry personal liability for any compliance failures. As a result, staying on top of company compliance Sri Lanka is not optional — it is a legal duty.
Annual Return: Your Most Important Compliance Obligation
The Annual Return — officially called Form 15 — is the single most important filing for every Pvt Ltd company in Sri Lanka. You must submit it to the Registrar of Companies through the eROC portal every year.
When to file. File your first Annual Return within 18 months of your company’s date of incorporation. After that, file it every year within the same timeframe. Furthermore, your company must hold an Annual General Meeting (AGM) before filing. Alternatively, directors can pass a resolution to waive the AGM — ASAC prepares this resolution for our clients.
What it contains. Form 15 includes details of your directors, shareholders, share capital, registered address, and confirmation that the company is still active and compliant.
Penalties for late filing. Failing to file your Annual Return on time carries serious consequences. The company faces fines of up to LKR 100,000. Furthermore, each officer in default faces personal fines of up to LKR 50,000. Moreover, persistent non-compliance can lead to the company being struck off the register entirely.
ASAC prepares and files Form 15 for all client companies as part of our ongoing company secretarial services. As a result, our clients never miss a deadline.
Tax Obligations for Every Company in Sri Lanka
Every registered company in Sri Lanka must meet tax obligations with the Inland Revenue Department. Here is what you need to know.
Corporate Income Tax
All Pvt Ltd companies pay Corporate Income Tax (CIT) on their taxable profits. The standard CIT rate in Sri Lanka is 30%. However, certain sectors — including small and medium enterprises and qualifying exporters — may benefit from concessionary rates. Furthermore, BOI-registered companies may access tax holidays depending on their investment and sector.
When to file. Companies must file their income tax return within 8 months of the end of their financial year. For companies with a financial year ending on 31 March, the filing deadline is 30 November. E-filing is mandatory for all companies. File through the IRD e-services portal.
Advance Income Tax Payments. Companies must also make quarterly advance income tax payments throughout the year. These are based on estimated annual profit. Failure to make advance payments on time attracts interest charges.
Withholding Tax
Companies must withhold tax on certain payments — including dividends, interest, rent, and payments to contractors. Furthermore, the withheld amounts must be remitted to the IRD by the 15th of the month following the payment. As a result, proper accounting systems are essential from the start.
Company Compliance Sri Lanka: VAT Registration and Filing
When VAT applies. Your company must register for Value Added Tax (VAT) if its turnover exceeds LKR 3 million per quarter or LKR 12 million per year. Once registered, you must charge VAT on eligible goods and services at the standard rate of 18%.
How to register. Register for VAT through the IRD e-services portal. Furthermore, registration must happen before the threshold is crossed — not after.
VAT filing. VAT returns must be filed monthly or quarterly depending on your registration category. Moreover, VAT payments are due by the end of the month following the tax period. Late filing and late payment both attract penalties and interest.
VAT on imports. Companies that import goods into Sri Lanka must pay VAT at the point of importation. Furthermore, VAT paid on business inputs can be claimed as an input tax credit against your VAT liability.
EPF and ETF: Employment Compliance Obligations
If your company employs staff, two additional compliance obligations apply immediately.
Employees’ Provident Fund (EPF). Every employer must contribute 12% of each employee’s gross salary to the EPF. Furthermore, employees contribute 8% of their own salary. Both contributions go to the Central Bank of Sri Lanka. Monthly EPF payments are due by the last day of the month following the relevant pay period.
Employees’ Trust Fund (ETF). Every employer must contribute 3% of each employee’s gross salary to the ETF. Furthermore, this is an employer-only contribution — employees do not contribute. ETF payments are due by the 15th of the month following the relevant pay period.
Failing to make EPF and ETF payments on time carries penalties and legal liability for directors. As a result, set up payroll systems correctly from the moment you hire your first employee.
Maintaining Statutory Records
Every Pvt Ltd company must maintain accurate statutory records at all times. This is a requirement under Section 148 and related sections of the Companies Act No. 07 of 2007. Your statutory records include:
- Register of Directors — names, addresses, appointment dates, and resignation dates
- Register of Shareholders — names, addresses, share holdings, and transfer history
- Register of Charges — details of any mortgages or charges over company assets
- Minutes of Board Meetings — records of all decisions made by directors
- Minutes of General Meetings — records of all shareholder meetings and resolutions
- Share Certificates — issued to all shareholders upon allotment
ASAC maintains all statutory records for our client companies. Furthermore, all ASAC clients get access to The Boardroom — our 24/7 company records platform on mobile and desktop. Your statutory records, board resolutions, Annual Returns, and company documents are always accessible from anywhere in the world.
Notifying the Registrar of Changes
Every change to your company’s key details must be formally notified to the Registrar of Companies through the eROC portal. These changes include:
- Director appointments and resignations — notify within the required timeframe
- Shareholder changes and share transfers — update the register and notify eROC
- Registered office address changes — update immediately upon moving
- Company name changes — require a special resolution and Registrar approval
- Changes to Articles of Association — require a special resolution and Registrar filing
Failing to notify the Registrar of changes is itself a compliance breach. Furthermore, operating with outdated information on the eROC system can cause problems with banks, tax authorities, and contract counterparties. ASAC manages all Registrar notifications for our client companies as part of our ongoing retainer service.
Company Compliance Sri Lanka: What Happens If You Fall Behind?
Falling behind on company compliance Sri Lanka carries serious consequences. Here is what happens at each stage.
Late Annual Return. The company faces fines of up to LKR 100,000. Directors face personal fines of up to LKR 50,000 each. Furthermore, the Registrar may issue a default notice.
Late tax filing. The IRD charges penalties and interest on late tax returns and late payments. Moreover, persistent non-compliance can trigger a tax audit.
Late VAT filing. Penalties and interest apply immediately. Furthermore, the IRD can deregister your company from VAT if non-compliance continues.
Late EPF and ETF payments. Penalties and surcharges apply. Additionally, the EPF and ETF boards can take legal action against defaulting employers.
Struck off the register. Companies that persistently fail to file Annual Returns face strike-off from the Companies Register. As a result, the company loses its legal status and cannot operate, enter contracts, or hold assets. Restoring a struck-off company is a complex and expensive process.
The good news is that all of this is entirely avoidable. ASAC manages every compliance obligation for our client companies year-round. As a result, none of our clients have ever been struck off or faced compliance-related legal action.
Annual Compliance Calendar for Sri Lankan Companies
Use this calendar to track your key compliance deadlines every year.
| Obligation | Deadline |
|---|---|
| Annual Return (Form 15) | Within 18 months of incorporation, then annually |
| Income Tax Return | Within 8 months of financial year end |
| Advance Income Tax — Q1 | 15th of the 4th month of financial year |
| Advance Income Tax — Q2 | 15th of the 6th month of financial year |
| Advance Income Tax — Q3 | 15th of the 9th month of financial year |
| Advance Income Tax — Q4 | 15th of the 12th month of financial year |
| VAT Return and Payment | End of month following tax period |
| EPF Contributions | Last day of following month |
| ETF Contributions | 15th of following month |
| Withholding Tax Remittance | 15th of following month |
Frequently Asked Questions
What is the most important company compliance obligation in Sri Lanka? Filing your Annual Return (Form 15) on time is the most critical obligation. It confirms your company’s active status with the Registrar of Companies. Furthermore, missing it leads to fines for both the company and its directors.
When does my company need to register for VAT in Sri Lanka? Your company must register for VAT once turnover exceeds LKR 3 million per quarter or LKR 12 million per year. Register through the IRD e-services portal before the threshold is crossed.
Do I need to file tax returns if my company made no profit? Yes. Every registered company must file an income tax return regardless of whether it made a profit. Furthermore, you must still file even if the company had no activity during the year.
What happens if I miss my Annual Return deadline? The company faces fines of up to LKR 100,000 and directors face personal fines of up to LKR 50,000. Moreover, persistent non-filing can result in the company being struck off the register.
Does company compliance Sri Lanka apply to dormant companies? Yes. Even dormant companies must file Annual Returns and meet minimum compliance obligations. However, dormant companies may be eligible for simplified filing in some circumstances. Contact ASAC to discuss your options.
Can ASAC handle all my company compliance obligations? Yes. ASAC manages Annual Returns, board resolutions, statutory records, director and shareholder notifications, and Registrar correspondence for all client companies. Furthermore, we provide guidance on tax and employment obligations in coordination with our accounting team.
How ASAC Can Help
Company compliance Sri Lanka can feel overwhelming — especially if you are running your business while trying to keep up with filing deadlines, tax payments, and statutory records. At Ananda Sirisena & Company (ASAC), we take all of this off your plate.
We manage your Annual Return, prepare board resolutions, maintain your statutory registers, handle all Registrar notifications, and coordinate with your accountants on tax filing. Furthermore, all ASAC clients get access to The Boardroom — our 24/7 company records platform on mobile and desktop. Your statutory documents are always accessible, wherever you are.
As a result, you can focus entirely on building your business — knowing that your company compliance Sri Lanka obligations are fully taken care of.
Book a free 15-minute call with our team below to discuss your compliance requirements.
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![Sole proprietorship vs Pvt Ltd Sri Lanka — this is one of the most common questions first-time entrepreneurs ask. Both structures let you run a legal business. However, they are very different in terms of liability, credibility, tax, and growth potential. This guide compares both business structures clearly and simply. By the end, you will know exactly which one suits your situation — and what steps to take next. Sole Proprietorship vs Pvt Ltd Sri Lanka: What Is the Difference? The biggest difference is legal identity. A sole proprietorship is not a separate legal entity from its owner. You and your business are the same person in the eyes of the law. As a result, you carry full personal liability for every debt and obligation your business creates. A Private Limited Company (Pvt Ltd), on the other hand, is a separate legal entity. It exists independently from its owners. Furthermore, shareholders are only liable up to the value of their shares. As a result, your personal assets stay protected if the business runs into trouble. This one difference — personal liability vs limited liability — drives almost every other comparison between sole proprietorship vs Pvt Ltd Sri Lanka. What Is a Sole Proprietorship in Sri Lanka? A sole proprietorship is the simplest business structure available in Sri Lanka. One person owns and runs the business. Furthermore, that person takes full responsibility for everything the business does. How to register. Sole proprietorships register at the local Divisional Secretariat — not through the eROC portal. Registration fees are very low. However, the process requires an in-person visit to the Divisional Secretariat. You cannot register online. Who can register. Only Sri Lankan citizens and permanent residents can register a sole proprietorship. Foreign nationals cannot. Instead, they must register a Private Limited Company through the Department of the Registrar of Companies. Liability. The owner carries unlimited personal liability. If the business cannot pay its debts, creditors can go after your personal savings, property, and other assets. Tax. Sole proprietors pay personal income tax on all business profits. There is no separation between business and personal income for tax purposes. Bank accounts. Most banks in Sri Lanka do not offer full business banking facilities to sole proprietorships. As a result, accessing loans, trade finance, or business credit cards is much harder. Compliance. Ongoing compliance requirements are minimal. There is no Annual Return to file, no board resolutions required, and no Company Secretary needed. What Is a Private Limited Company (Pvt Ltd) in Sri Lanka? A Private Limited Company is a separate legal entity registered under the Companies Act No. 07 of 2007. It is the most popular business structure in Sri Lanka for startups, SMEs, and foreign investors. How to register. Pvt Ltd companies register through the eROC portal operated by the Department of the Registrar of Companies. The entire process is online. Furthermore, ASAC can complete the registration on your behalf remotely. Read our full company registration guide here. Who can register. Both Sri Lankan nationals and foreign investors can register a Pvt Ltd company. Moreover, 100% foreign ownership is permitted in most sectors. Liability. Shareholders carry limited liability only. Your personal assets are protected from business debts. As a result, the company's financial risk stays separate from your personal finances. Tax. Pvt Ltd companies pay Corporate Income Tax on profits. Furthermore, companies have access to certain tax incentives and deductions not available to sole proprietors. Bank accounts. Banks treat Pvt Ltd companies as proper business entities. As a result, they offer full corporate banking facilities — including business loans, trade finance, overdrafts, and corporate credit cards. Compliance. Pvt Ltd companies must meet ongoing compliance requirements. These include filing an Annual Return (Form 15) every year, maintaining statutory registers, holding AGMs, and appointing a licensed Company Secretary. However, ASAC manages all of this for our clients year-round. Sole Proprietorship vs Pvt Ltd Sri Lanka: Key Differences Compared Here is a clear side-by-side comparison of sole proprietorship vs Pvt Ltd Sri Lanka. FeatureSole ProprietorshipPrivate Limited CompanyLegal identityNo — owner and business are the sameYes — separate legal entityPersonal liabilityUnlimitedLimited to share valueWho can registerSri Lankan citizens and PRs onlyAnyone — including foreignersRegistration authorityDivisional SecretariatDepartment of Registrar of Companies via eROCOnline registrationNoYes — fully onlineMinimum directorsN/A1Company Secretary requiredNoYes — legally mandatoryCorporate bank accountLimited accessFull accessForeign ownershipNot permittedPermitted in most sectorsAnnual Return requiredNoYes — within 18 months, then annuallyCredibility with clientsLowerHigherAccess to investmentVery limitedGood — can take on shareholdersCost to registerVery lowModerateOngoing compliance costVery lowModerate Which Is Right for Your Business? The answer depends on your situation. Furthermore, it depends on where you want your business to go in the next few years. Choose a sole proprietorship if: You are testing a business idea with very low risk You operate a small, local, cash-based business You are a Sri Lankan national or permanent resident You want the absolute minimum in compliance and cost You do not plan to take on investors or partners Choose a Pvt Ltd company if: You want to protect your personal assets from business risk You plan to grow, scale, or take on investment You want to open a proper corporate bank account You are a foreign national investing in Sri Lanka You want to build credibility with clients, banks, and partners You plan to apply for government contracts or tenders You intend to hire employees and manage payroll properly For most serious entrepreneurs — local or foreign — a Private Limited Company is the right choice. The cost of registration is modest. Moreover, the protection, credibility, and growth potential it provides far outweigh the additional compliance obligations. How to Register Each Business Type Registering a sole proprietorship: Visit your local Divisional Secretariat in person Submit your application form and supporting documents Pay the registration fee — typically a few hundred rupees Receive your Certificate of Registration of Business Name Display the certificate at your business premises Registering a Pvt Ltd company: Check name availability on the eROC portal Reserve your preferred company name Prepare Form 1, Form 18, Form 19, and Articles of Association Upload all documents through eROC in PDF format Pay government registration fees online Await Registrar approval — typically 5 to 7 business days Download your Certificate of Incorporation ASAC manages every step of Pvt Ltd registration for you. Furthermore, we act as your Company Secretary from day one. Contact us to start your registration here. Sole Proprietorship vs Pvt Ltd Sri Lanka: Cost Comparison Sole proprietorship costs: Registration fee: A few hundred rupees at the Divisional Secretariat Ongoing compliance: Minimal — no Annual Return, no Company Secretary required Total annual cost: Very low Pvt Ltd company costs: Government registration fees: Published on the Department of Registrar of Companies website Professional service fees: Depend on your specific situation — ASAC provides a clear quote after a short consultation Annual company secretarial retainer: Covers Annual Return filing, board resolutions, and ongoing compliance Total annual cost: Higher than a sole proprietorship but manageable — and worth every rupee for the protection and credibility it provides The real cost of a sole proprietorship is not what you pay to register. It is what you risk by having no limited liability protection. Furthermore, it is the business opportunities you miss because you lack corporate credibility. Can You Convert a Sole Proprietorship to a Pvt Ltd Company? Yes. Many business owners start as sole proprietors and convert to a Pvt Ltd company as they grow. However, conversion is not automatic. You need to register a new Private Limited Company through eROC. Furthermore, you must transfer your business activities, contracts, and assets to the new company. The good news is that your existing business name may be available for registration as a company name — provided no other company has already registered it. Check availability on the eROC name search before you start. ASAC manages the conversion process for clients who want to upgrade from sole proprietorship to Pvt Ltd. Book a call with our team below to discuss your options. Common Mistakes When Choosing a Business Structure Choosing a sole proprietorship because it is cheaper. The registration cost is lower. However, the risk is far higher. One lawsuit or unpaid debt can wipe out your personal savings. Furthermore, you will struggle to open a proper corporate bank account or win contracts from larger clients. Registering a Pvt Ltd company without understanding the ongoing obligations. A Pvt Ltd company comes with real compliance requirements. Annual Returns, board resolutions, statutory registers, and tax filing are all mandatory. As a result, many business owners get caught out by late filing penalties. ASAC manages all of this for our clients so they can focus on their business. Waiting too long to upgrade from sole proprietorship to Pvt Ltd. Many entrepreneurs plan to upgrade "later." However, later often means after a problem has already happened. Registering a Pvt Ltd company early protects you from day one. Foreign nationals trying to register a sole proprietorship. Foreign nationals cannot register a sole proprietorship in Sri Lanka. Only Sri Lankan citizens and permanent residents qualify. Furthermore, even permanent residents should consider a Pvt Ltd company for the additional protection and credibility it offers. Frequently Asked Questions What is the main difference between sole proprietorship vs Pvt Ltd Sri Lanka? The main difference is legal identity and liability. A sole proprietorship has no separate legal identity from its owner — you carry unlimited personal liability. A Pvt Ltd company is a separate legal entity — your personal liability is limited to the value of your shares. Can a foreigner register a sole proprietorship in Sri Lanka? No. Sole proprietorships in Sri Lanka are only available to Sri Lankan citizens and permanent residents. Foreign nationals must register a Private Limited Company through the Department of the Registrar of Companies. Is a Pvt Ltd company better than a sole proprietorship in Sri Lanka? For most serious business owners — yes. A Pvt Ltd company offers limited liability, higher credibility, full corporate banking access, and the ability to take on investors. Furthermore, it allows foreign ownership and opens more opportunities than a sole proprietorship. How much does it cost to convert a sole proprietorship to a Pvt Ltd company in Sri Lanka? There is no formal conversion process — you register a new Pvt Ltd company and transfer your business to it. The cost depends on your specific situation. Book a call with ASAC and we will give you a clear breakdown. Do I need a Company Secretary for a sole proprietorship in Sri Lanka? No. A Company Secretary is only mandatory for Private Limited Companies and other incorporated entities under the Companies Act. Sole proprietorships have no such requirement. Can I have employees as a sole proprietor in Sri Lanka? Yes. Sole proprietors can hire employees. However, you must comply with all labour laws, EPF and ETF obligations, and employment contracts regardless of your business structure. Learn more at the Department of Labour Sri Lanka. How ASAC Can Help Ananda Sirisena & Company (ASAC) helps entrepreneurs choose the right business structure from the start. We have over 30 years of experience in company registration Sri Lanka and corporate governance. As a result, we know exactly which structure works best for different situations — and how to set it up correctly from day one. If you decide a Private Limited Company is right for you, ASAC manages the entire registration process. We prepare all documents, act as your Company Secretary, and handle all ongoing compliance obligations. Furthermore, all ASAC clients get access to The Boardroom — our 24/7 company records platform on mobile and desktop. If you want to protect your business, build credibility, and set yourself up for growth — a Pvt Ltd company is the right move. Book a free 15-minute call with our team below. We will assess your situation and give you a clear recommendation. [INSERT HUBSPOT CALENDAR HERE] Related guides: How to Register a Pvt Ltd Company in Sri Lanka Cost of Company Registration Sri Lanka Documents for Company Registration Sri Lanka Company Secretary Sri Lanka: Do You Really Need One?](https://anandasirisena.lk/wp-content/uploads/Sole-Proprietorship-vs-Pvt-Ltd-sri-lanka-700x350.jpg "Sole Proprietorship vs Pvt Ltd sri lanka")
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