(Last updated: 30 Mar 2011)

Business etiquette

Business tips

Business cards are exchanged at both business meetings and social occasions.

Sri Lankans are courteous and hospitable and guests are frequently invited to the homes of business acquaintances – even after the first meeting. Though appointments and meetings may have been confirmed in advance, punctuality is not strictly observed.

Although office attire is formal in Sri Lanka, jackets may not be required for business meetings unless the meeting is with a government minister or the chairman of a state institution or private sector company. Dress for most social occasions is casual unless formal attire has been specified.

Please note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff

Tariff based on the Harmonised System (HS). Most duties are ad valorem, assessed on the CIF value (Incoterms 1990). Sri Lanka has a three-band import tariff schedule based on the harmonised system of classification. The three bands are 5 per cent, 10 per cent and 25 per cent. In addition a surcharge of 20 per cent on import duty is also payable.

Passenger motor vehicles, alcoholic beverages, tobacco, carpets, perfume and other luxury items are subject to rates as high as 200 per cent.

Import tariffs are waived for export-oriented companies, IT related projects and special infrastructure projects approved by the Board of Investment. The following imports also exempt from duty are:

• textiles, yarn and other intermediate goods for the garment export industry
• gold
• gems
• computers and software
• telecommunications equipment
• sports equipment
• medical and dental equipment
• agricultural seeds
• machinery for use in the agricultural and fisheries industries

India and Sri Lanka signed a tariff agreement recently under which Sri Lanka will have duty free access to 1000 items within three years and India will be able to export 800 items to Sri Lanka within eight years.

Customs authority contact details:

Director General of Customs
Times Building
Colombo 1
Sri Lanka
Tel: +94 1 347 881
Fax: +94 1 446 364

Non-tariff barriers

The Sri Lanka Government has liberalised import and export procedures. Import licenses are required for only a few specified items due to health and security reasons. These products include:

• firearms and ammunition
• drugs and pharmaceutical products
• precious metals
• alcohol
• toxic and hazardous chemicals
• pesticides
• meats
• fresh produce

The import of illegal drugs is strictly prohibited. There are no export controls on most items other than coral and shells, wood and wood-based articles, ivory and antiques, which have been imposed due to environmental protection and the preservation of antiques.

The Sri Lanka Health Ministry will impose a ban on genetically modified (GM) foods including products using GM ingredients. Licences will be required for import items such as:

• soya-based products
• maize/corn
• tomato and tomato-based products
• potato and potato products
• bakers’ and brewers’ yeast
• cheese and micro-biological starter cultures

Valid certification from the exporting country’s health authorities clearing the product of any GM ingredients will be required.

There are more than 1200 standards governing manufactured products, agricultural commodities, industrial raw materials and production processes set and enforced by the Sri Lankan Standards Institute. Sri Lanka has also adopted International Standards Organisation ISO 9000 standards for quality management and assurance, ISO 10011 standards for management audits and ISO 14000 series for environment procedures.

Product certification, labelling and packaging

Labelling and marking

Packing should be strong and should guard against extreme heat in summer, humidity in winter and possible storage in the open. Steel strapping is recommended.

Outer containers should bear consignee's mark and port mark and also should be numbered (to accord with packing list) unless their contents can be otherwise readily identified.

An indelible marking of origin (eg. Made in Australia) must appear on all goods and their immediate containers.

Edible fats, oils, milk and other dairy products are subject to special marking regulations.

Infant milk foods must state in Sinhala, Tamil and English: 'Breast milk substitute' and 'Doctors recommend that breast feeding is better'.

Containers of liquids must be marked in the metric equivalent of imperial gallons.

Dimensions of piece goods must be conspicuously stamped/marked in the metric equivalent of standard yards and fractions of yards.

English language is accepted for labelling of consumer goods but local languages are essential on any products aimed at the mass market.

Special certificates

Livestock require certificates of health issued by the approved authority in the country of origin. In Australia this is usually the Australian Quarantine and Inspection Service, Commonwealth Department of Agriculture, Fisheries and Forestry-Australia.

Meat and meat products require sanitary certificates issued by the approved authority in the country of origin.

Plants require phytosanitary certificates.

Used clothing, raw cotton and cottonseed must have certificates of fumigation.

Second-hand equipment must be accompanied by a certificate of valuation.

Methods of quoting and payment

Quotations preferably in US dollars.

Documentary requirements

Fax signatures are not permitted.

Commercial invoice

No prescribed form and two copies is required. The invoice must indicate:

• country of origin
• brand marks, eg. make, model
• positive reference by order number or correspondence with supplier
• whether the price is CIF or FOB (Incoterms 1990)
• freight and insurance values
• type and amount of discount given
• packaging details indicating dimensions and weights, unless provided for inseparate packing list
• full description of goods, including the HS number

Specific details are required for certain goods, including:

• fabrics - fibre composition and proportion by weight, construction (whether woven or knitted), finishes given (whether plain, coated, dyed or printed), the unit of quantity and the width of the piece
• synthetic fibres - whether continuous or discontinuous
• motor vehicles - whether they are new, used or reconditioned
• chemicals - name, element and grade

Bill of lading/airway bill

To Order bills acceptable. Clean bill of lading showing gross weight of each package.

Packing list

Two copies, if requested.

Public health requirements

Livestock require special import permits issued by the Chief Government Veterinary Surgeon of Sri Lanka. (see also 'Special certificates'). Special import permits must be obtained from the Director of Agriculture.

Edible fats, oils, milk and dairy products and the use of preservatives, colours and artificial sweeteners in foodstuffs are subject to specific regulations.

Drugs and pharmaceutical's are subject to strict controls.

Insurance

Normal commercial practice. In addition, exporters should ensure that if they retain an interest in the goods until they reach the customer's warehouse the goods are adequately covered for loss or damage after landing.

Weights and measures

The metric system.

Taxation

The government has introduced a two-band value added tax on all products and services. The retail trade sector will be brought under the VAT system in 2003.

A lower rate of 10 per cent will be applicable on all essential goods and services such as:

• power
• petroleum
• foodstuffs
• pharmaceuticals
• medical, agriculture and fisheries equipment

A standard rate of 20 per cent applies for all other products.

Sri Lanka and Australia signed a double taxation agreement in 1991 whereby Australian companies operating in Sri Lanka receive a concessionary or zero tax breaks in Australia if they have paid taxes in Sri Lanka. In addition, reduced rates are levied on dividends (15 per cent), interest and royalty payments (10 per cent).

All Sri Lankan businesses are subject to taxation unless they have been exempted under special provisions for a specific period, eg. if they are companies approved by the Board of Investment. Both resident and non-resident companies are liable for a corporate income tax of 35 per cent with an additional surcharge of 20 per cent. Non-resident companies are also subject to an additional tax of 33.33 per cent on remittances of profits – limited to 11.11 per cent of taxable income.

Dividends declared from tax exempt profits are tax-free in the hands of the shareholder during the tax holiday period and one year thereafter. A withholding tax of 15 per cent is generally payable on all dividend income other than quoted public companies, though non-resident shareholders of public quoted companies would be subject to this tax.

Residents are taxed on a sliding scale from 10 per cent up to a maximum of 35 per cent while expatriate employees are taxed at a concessionary rate of 15 per cent for the first five years and thereafter are subject to the same rates as residents. Expatriates employed in flagship companies with investments of US$50 million or more would not be subject to any personal income taxes for five years.

Non-nationals aren’t subject to transfer tax on shares purchased on the stock market. The removal of stamp duty on all share market transactions, the abolition of capital gains tax, and exemption from income tax/capital gains on sale of debt and listed securities are some of the measures established to stimulate the stock market.

Other general information:

• An Export Development Board charge of 10 per cent is levied on imports subject to duties of 50 per cent or more.
• A levy of one per cent will be charged on the declared CIF value of all cargo imported to Sri Lanka Export industry inputs are exempted.
• Excise duties are levied on cigarettes and liquor products.