Section 16 or Section 17, minimum investments, fees, today's incentives and the reforms under way — what foreign investors need to know before applying to the Board of Investment.
Sri Lanka welcomes foreign investment in most sectors, and for more than four decades the Board of Investment of Sri Lanka (BOI) has been the main door investors walk through. This guide explains how BOI approval works today, the difference between the two approval routes, what it costs, and what has changed recently — so you can plan your entry with realistic expectations.
What the BOI does
The BOI is the government agency that registers and supports foreign-invested enterprises. A BOI-registered company signs an agreement with the BOI that sets out what it will do and the facilities it is entitled to. Beyond approvals, the BOI acts as a point of contact with other agencies — customs, immigration and utilities — which is often where much of the practical value lies.
Section 16 or Section 17: choosing your route
There are two ways to register with the BOI, named after the sections of the BOI Law that create them.
Section 16 — the "normal laws" route
A Section 16 approval allows a foreign investor to operate under the normal laws of Sri Lanka, without special fiscal concessions. It is typically used for businesses in areas where foreign ownership would otherwise be restricted, such as certain trading and service activities. The BOI publishes a minimum investment of US$250,000 for this route.
Section 17 — the "incentives" route
A Section 17 approval is for projects that qualify for concessions. The minimum investment depends on the sector. The BOI's published guidance gives examples such as around US$150,000 for IT and business-process services, from US$500,000 to US$5 million for manufacturing, and from US$3 million to US$12.5 million for infrastructure projects. A Section 17 company signs a formal agreement with the BOI, and its Articles of Association must be cleared by the BOI's legal department before the company is incorporated.
In short: if you need incentives, you are looking at Section 17 and must meet your sector's threshold. If you mainly need permission to operate and hold the business in foreign hands, Section 16 is usually simpler.
The approval process, step by step
The BOI outlines the following sequence for new investors:
- Check your company name with the Registrar of Companies.
- Submit the investment application to the BOI with your project details and financing plan.
- Obtain site approval, where your project needs land, a factory or a zone location.
- Incorporate the company. For Section 17 projects, the draft Articles of Association are cleared by the BOI first.
- Sign the BOI agreement.
- Implement the project — construction, equipment, recruitment — and begin commercial operations.
Timelines vary widely with the sector, the size of the project and the other authorities involved, such as environmental, coastal, municipal and sector regulators. A well-prepared application with complete documents is the single biggest factor you control.
What it costs
The BOI's published schedule includes an application processing fee of US$400, an agreement processing fee of roughly US$2,500 to US$4,500 for Section 17 projects, and annual fees that depend on the sector. VAT applies to these fees. Fees are revised from time to time, so confirm the current schedule before you budget.
Incentives: what has changed
Many older guides still promise long tax holidays for BOI projects. That picture is out of date.
- Since the Inland Revenue Act of 2017, incentives for most new investments have moved away from open-ended tax holidays towards enhanced capital allowances — deductions linked to the amount invested in qualifying assets.
- Very large projects can still receive exemptions under the Strategic Development Projects Act. In November 2025 the government proposed amending that Act to cap tax holidays at 10 years, down from up to 25, with no extensions, and to add a Ministry of Finance cost–benefit review and ongoing BOI monitoring of each project.
- Customs duty and expatriate staff concessions may still be available for qualifying Section 17 projects, depending on the agreement.
The practical lesson is to build your financial model on the incentives you will actually receive under current law, not on figures from a brochure written years ago.
Moving your money in and out
Foreign investors normally bring capital into Sri Lanka through an Inward Investment Account (IIA), under the Foreign Exchange Act No. 12 of 2017. Channelling funds through an IIA creates the record that allows you to repatriate profits, dividends and sale proceeds later. Setting this up correctly at the start saves significant trouble at exit.
A reform to watch: the Economic Transformation Act
In 2024 Parliament passed the Economic Transformation Act, No. 45 of 2024. It provides for new institutions — including an Economic Commission and a zones authority — that are intended to take over the BOI's investment-promotion and zone functions over time. The Act states that approvals, agreements and incentives already granted by the BOI remain valid.
For an investor today, this means two things. Your BOI approval will carry forward, and you should check the current position of these reforms when you apply, as the handover is being phased in.
Five mistakes we see most often
- Relying on outdated incentive information. Tax rules have changed materially since 2017.
- Choosing the wrong route. Applying under Section 17 without meeting the threshold, or missing out on concessions a project qualifies for.
- Bringing money in the wrong way. Funds that do not come through an Inward Investment Account can be difficult to take back out.
- Underestimating other approvals. Land, environmental, coastal and sector licences often take longer than the BOI step itself.
- Weak local partner due diligence. Where a joint venture is involved, governance and exit terms need to be agreed before money moves.
How Arwa Lanka helps
We guide foreign investors through the whole journey: choosing the right route, preparing the BOI application, coordinating site and sector approvals, setting up the Inward Investment Account, and staying with you through implementation. If you are considering an investment in Sri Lanka, book a confidential consultation with a partner.
This article is general information and not legal, tax or investment advice. Rules, thresholds and fees change; always confirm the current position with the BOI and your professional advisers before making a decision. Information current as of September 2026.
Sources: Board of Investment of Sri Lanka — New Investor guide · KPMG Sri Lanka — Bill to amend the Strategic Development Projects Act (November 2025) · Daily FT — Economic Transformation Act and the BOI Law · The Economic Transformation Act, No. 45 of 2024