On 18 June 2025, the Minister of Finance, Planning and Economic Development issued an Order under Section 22 of the Foreign Exchange Act, No. 12 of 2017 (“Foreign Exchange Act”), published in Gazette Extraordinary No. 2441/14 (“New Order”), repealing the previous Order published in Gazette Extraordinary No. 2415/56 of 19 December 2024 (“Repealed Order”).
The New Order continues to impose restrictions and limitations on outward remittances and overseas investments by persons resident in Sri Lanka, including corporate investors, emigrants, and licensed commercial banks. While the core framework remains, the New Order introduces notable changes aimed at refining the regulatory approach. These measures will be in effect for a period of six months from 20 June 2025, reflecting the Government’s ongoing efforts to manage foreign currency reserves in response to evolving economic conditions.
Initial Migration Allowance for Emigrants:
Outward remittances made by an emigrant under the initial migration allowance continue to be restricted to USD100,000 or its equivalent in any other designated foreign currency, as was the case under the Repealed Order. This amends the initial migration allowance of USD200,000 earlier permitted under the Foreign Exchange (Remittance of Funds by Emigrants) Regulations No. 3 of 2021 issued under the Foreign Exchange Act.
Suspension of Payments through Outward Investment Accounts (“OIA”)
Pursuant to the Foreign Exchange (Classes of Capital Transactions Undertaken Outside Sri Lanka by a Person Resident in Sri Lanka) Regulations No. 1 of 2021 (“Regulations No. 1 of 2021”), issued under the Foreign Exchange Act, persons resident in Sri Lanka are permitted to undertake the capital transactions specified therein, subject to prescribed limitations on outward remittances. These limitations are determined by the nature of the investment and the category of the investor, as set out in the Regulations. All outward remittances in connection with such capital transactions must be routed through an OIA maintained by the resident investor with a licensed commercial bank in Sri Lanka.
Under the Repealed Order, the permission to remit funds via an OIA for such transactions was suspended, subject to specified exceptions. This suspension remains in effect under the New Order, subject to the exceptions set out below, which differ from those under the Repealed Order.
1. Investments in ordinary shares of companies incorporated outside Sri Lanka.
A company incorporated in Sri Lanka (investor) is permitted to invest in ordinary shares in a company incorporated outside Sri Lanka subject to one of the following conditions:
(a) Outward remittances in connection with such investment is subject to the following thresholds, which reflect increased limits compared to those prescribed under the Repealed Order:
| Eligible Investor | Applicable Limitation |
|---|---|
| A company incorporated in Sri Lanka and listed in the Colombo Stock Exchange | Up to USD750,000 or equivalent in any other designated foreign currency or amount less than or equivalent to 20% of the net assets of the investor as per the audited financial statements of the latest financial year, whichever is lower. |
| A company incorporated in Sri Lanka and not listed in the Colombo Stock Exchange | Up to USD 200,000 or an amount less than or equivalent to 20% of their net assets (whichever is lower). |
(b) The investment is entirely financed through a permitted foreign currency loan obtained by the investor from a person resident outside Sri Lanka (subject to the monetary threshold set out in Regulations No.1 of 2021); or
(c) The investment is financed through proceeds of investments made by persons resident outside Sri Lanka in debt securities with a minimum tenure of seven years and shares issued by the investor (subject to the monetary threshold set out in Regulations No.1 of 2021).
Aggregated investments in ordinary shares of a company incorporated outside Sri Lanka incorporated outside Sri Lanka under items (a), (b) and (c) above cannot exceed the monetary thresholds set out in Regulations No. 1 of 2021.
Additional conditions applicable to all aforementioned exceptions (“Additional Conditions”):
(a) The purpose must be ‘expansion of business’ overseas
Expanding activities directly related to existing product lines or service offerings (e.g., increasing capacity, expanding product/service range) and/or vertical integration through the supply chain (e.g., backward integration for raw materials, forward integration for distribution, marketing, retailing of existing products/services)
(b) The investments shall not comprise ‘portfolio investments’
(c) Investments made by eligible resident investors that grant less than 10% of the voting power of a company incorporated outside Sri Lanka.
(d) The investee company shall not engage in investments as its principal business activity.
The investor’s Board of Directors must confirm compliance with these conditions via a resolution to relevant licensed commercial bank that hosts the OIA.
In addition, the following investments are permitted under the New Order:
2. Regulatory compliance
Subsequent investments by an eligible resident investor to fulfill regulatory requirements in the investee’s country for existing investments in a subsidiary or overseas office.
3. Setting up new overseas offices
Investments made by a company incorporated in Sri Lanka to set up new overseas offices, up to USD 100,000 or equivalent.
4. Funding pre-existing overseas offices
Investments made by a company incorporated in Sri Lanka in overseas offices established prior to the effective date of the New Order, up to USD 30,000 or equivalent in any other designated currency.
5. Investments by licensed banks
Investments made by licensed banks in the shares of overseas subsidiaries and/or overseas offices for the purpose of carrying out banking operations.
6. Employee share ownership plans and share option schemes
Investments in Employee Share Ownership Plans or Employee Share Option Schemes by eligible resident individuals.
Other Outward Remittance Limits
Through Business Foreign Currency Accounts held by Sri Lankan residents for ‘expansion of business overseas’, remittances are limited to USD 200,000 or equivalent.
Through Personal Foreign Currency Accounts held by Sri Lankan residents, remittances are limited to USD 20,000 or equivalent.
Case-by-Case Consideration by the Central Bank of Sri Lanka (“CBSL”):
Investments that exceed the prescribed limits on outward remittances may be considered on a case-by-case basis by CBSL, subject to the following criteria:
(a) Investments by companies incorporated in Sri Lanka in ordinary shares of a company incorporated outside of Sri Lanka provided that:
- the Additional Conditions set out above are fulfilled; and
- the investment is entirely financed through a permitted foreign currency loan obtained by the investor from a non-resident; or
- the investment is entirely financed through proceeds of investments made by persons resident outside Sri Lanka in debt securities (with a minimum tenure of seven years) and shares issued by the investor.
(b) The investment is proposed to be made by an eligible resident investor (as specified in Regulations No.1 of 2021) to fulfil regulatory requirements imposed in the investee’s jurisdiction in relation to existing investments in subsidiaries or overseas offices
(c) The investment is proposed to be made by a licensed bank in overseas subsidiaries or overseas offices for the purposes of conducting banking operations.
Who qualifies as an eligible resident investor?
‘Eligible resident investors’ has the same meaning as defined in Regulations No. 1 of 2021. This includes, inter alia:
- Companies incorporated in Sri Lanka (whether listed or unlisted on the Colombo Stock Exchange);
- Regulated or licensed entities under the Central Bank of Sri Lanka; or Securities and Exchange Commission of Sri Lanka; or Insurance Regulatory Commission of Sri Lanka;
- Individuals or sole proprietorships;
- Partnerships;
- Licensed commercial banks or specialized banks.
The types of investments that each eligible resident investor is permitted to undertake are specified in Regulations No. 1 of 2021. All such investments are subject to the limitations and restrictions set out in the New Order.
What are notable changes under the New Order?
The permitted thresholds for Sri Lankan-incorporated companies to invest in ordinary shares of foreign companies have been increased.
Can individuals invest in companies incorporated outside Sri Lanka under the New Order?
Permission granted for overseas investments by individuals is limited to investments in Employee Share Ownership Plans or Employee Share Option Schemes up to the amounts in the relevant prospectus.
