The Inward Investment Account is the key to repatriating dividends and sale proceeds from Sri Lanka. How it works under the Foreign Exchange Act, and the mistakes that trap investors' money.
Every foreign investor eventually asks the same question: when this investment makes money, or when I sell it, can I get my money out? In Sri Lanka the answer is yes — provided the money came in the right way. That "right way" is almost always an Inward Investment Account (IIA).
The legal framework
Foreign exchange in Sri Lanka is governed by the Foreign Exchange Act, No. 12 of 2017, together with regulations and directions issued by the Central Bank of Sri Lanka. The Act liberalised many current-account transactions but kept a framework for capital flows. The IIA is the channel through which foreign investors bring in capital so that it can be tracked — and freely taken out again.
What an Inward Investment Account is
An IIA is a special account opened with a licensed commercial bank in Sri Lanka, in the name of a non-resident investor. Foreign funds are credited to it from abroad and then used to make permitted investments, such as:
- shares in Sri Lankan companies, whether listed or unlisted
- government securities and certain debt instruments
- other investments allowed under the regulations
Because the money's entry is recorded, the dividends, interest and sale proceeds from those investments can be credited back to the IIA and remitted abroad in line with the regulations.
Why it matters
Money that does not come in through the proper channel is much harder to take out. Common problems we see:
- Paying share capital from a personal account or through informal channels, leaving no IIA record of the investment.
- Mixing personal and investment funds, so the investment trail becomes unclear.
- Lending money to a company informally instead of using the account types set out for foreign borrowing.
Each of these can delay or block repatriation years later — often at the worst possible moment, such as when you are trying to sell.
Loans are different
If you are funding a Sri Lankan company with debt rather than equity, different account types apply. Long-term foreign loans — generally those of three years or more — are channelled through designated external commercial borrowing accounts, and short-term working-capital loans through other account types. Structure the loan correctly at the outset so that the interest and principal can be repaid abroad.
A practical checklist
- Open the IIA before transferring any investment funds.
- Send funds directly from your overseas bank account to the IIA.
- Keep the documents — bank advices, share allotment records and board resolutions — that tie each transfer to the investment.
- Make sure the company issues shares promptly against the funds received.
- For loans, use the correct borrowing account and document the loan terms properly.
- When you receive dividends or sell, route the proceeds back through the IIA.
How Arwa Lanka helps
We coordinate with your bank and your company secretary so that capital, shares and records line up from day one, which keeps your exit clean. If you are about to invest, or you are unsure whether an existing investment was set up correctly, talk to us.
This article is general information and not legal, tax or financial advice. Foreign exchange rules are updated by the Central Bank from time to time; confirm the current requirements with your bank.
Sources: Lex Mundi — Foreign investment restrictions guide: Sri Lanka · Central Bank of Sri Lanka — Revised regulations under the Foreign Exchange Act No. 12 of 2017 · Commercial Bank — Inward Investment Accounts