Doing Business 2019 Sri Lanka Economy Profile Sri Lanka Page 1 Doing Business 2019 Sri Lanka Economy Profile of Sri Lanka Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 Sri Lanka About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Sri Lanka Ease of Doing Business in DB 2019 Rank Region South Asia 190 1 Sri Lanka Income Category Lower middle income 100 DB 2019 Ease of doing business score Population 21,444,000 0 100 City Covered Colombo 61.22 DB 2019 Ease of Doing Business Score 0 100 67.23: India (Rank: 77) 61.22: Sri Lanka (Rank: 100) 56.71: Regional Average (South Asia) 55.31: Pakistan (Rank: 136) 54.43: Maldives (Rank: 139) 41.97: Bangladesh (Rank: 176) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Sri Lanka 1 28 38 55 65 83 84 82 93 92 Rank 109 124 136 140 141 164 163 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - Sri Lanka 100 87.87 80 74.37 72.18 73.29 66.67 59.79 Score 60 51.87 45.05 40.00 41.16 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 Sri Lanka Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Sri Lanka Starting a Business - Sri Lanka Standardized Company Legal form Private Limited Liability Company Paid-in minimum capital requirement LKR 0 City Covered Colombo Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Procedure – Men (number) 7 7.6 4.9 1 (New Zealand) Time – Men (days) 9 13.7 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 9.4 11.0 3.1 0.0 (Slovenia) Procedure – Women (number) 7 7.8 4.9 1 (New Zealand) Time – Women (days) 9 13.9 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 9.4 11.0 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 0.0 0.2 8.6 0.0 (117 Economies) Figure – Starting a Business in Sri Lanka and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 89.17: Maldives (Rank: 71) 87.87: Sri Lanka (Rank: 83) 85.44: Regional Average (South Asia) 81.89: Pakistan (Rank: 130) 80.96: India (Rank: 137) 80.82: Bangladesh (Rank: 138) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 Sri Lanka Figure – Starting a Business in Sri Lanka – Procedure, Time and Cost Time (days) Cost (% of income per capita) 9 7 8 6 Cost (% of income per capita) 7 5 6 Time (days) 5 4 4 3 3 2 2 1 1 0 0 1 2 3 4 *5 *6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 Sri Lanka Details – Starting a Business in Sri Lanka – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Reserve a unique company name 2 days LKR 2,000 + 15% Agency : Registrar of Companies VAT Searching for a unique company name is done online via the website of the Department of the Registrar of Companies (www.drc.gov.lk). The website also accepts reservation fee payments. The fee for name approval and reservation is LKR 2,000 + 15% VAT. Once the payment is done, the name confirmation is provided by email and SMS. The company name reservation is valid for 3 months. 2 The company secretary and director sign a consent 1 day see procedure details Agency : Company Secretary According to Article 221(1) of the Companies Act No. 7 of 2007, every company shall have a director and a secretary. The Company Secretary must be hired before incorporation because one of the requirements to incorporate is a consent form that the Company Secretary must sign saying he/she will be the secretary for the newly formed company -- Form 19: Company Secretary Details. The company director must sign Form 18: Company Director Details. Forms can be obtained online at www.drc.gov.lk. There is no specific fee schedule. The fees vary from firm to firm, and are generally based on a quarterly retainer. The quarterly charges in the region vary between of USD$ 100 - 150 for private companies but some firms may charge up to USD 1000 annual fee for acting as a Company Secretary. LKR 10,000-15,000 is usually paid per month, so per quarter the amount ranges between LKR 30,000 - 45,000. 3 Register at the Department of the Registrar of Companies 2 days LKR 4,000+15%VAT Agency : Registrar of Companies (registration fee for The application for company incorporation is submitted online since April 2018. Form 1) plus LKR The company must submit the following documents to the Department of the 2,000+15%VAT Registrar of Companies: (registration fee for • Form 1 – Registration of a company each: Form 18, 19 • Form 18 – Consent and certificate of director and the Articles of • Form 19 – Consent and certificate of secretary • One copy of Articles of Association Association) A company may either adopt the standard set of Articles of Association in Table A of the Companies Act of Sri Lanka or draft its own Articles of Association. Professional charges are higher for drafting new Articles of Association than for adopting the standard text. The Registrar of Companies charges the following registration fees: - LKR 4,000 for Form 1; - LKR 2,000 for Form 18; - LRK 2,000 for Form 19; and - LRK 2,000 for the Articles of Association. All fees are subject to 15% VAT. The Certificate of Incorporation can typically be obtained in around 2 days and the registration number is provided by email and SMS. 4 Publish a notice of incorporation 3 days LKR 7,000 Agency : Daily Newspapers and Government Publication Bureau According to Section 9 of Sri Lanka’s Companies Act No. 7 of 2007 and section 3(a) of the Gazette Notice No. 1566/32 dated 12/09.2008 public notice must be given within 60 days of the incorporation of a company. The notice of incorporation specifying the name of the company, registration number, date of incorporation, and address of the registered office should be published in the Government Gazette and in any daily newspaper in three languages: English, Sinhala and Tamil. The proof of publication should then be filed with the Registrar of Companies. The newspaper publications once handed over with the payment which depends on the size of the Notice, will appear within 3-4 days. The publication in the Gazette will appear within 2 weeks of submitting the request with the payment. The Registrar of Companies accepts a copy of the receipt issued by the Government Printer as proof of publication. Page 8 Doing Business 2019 Sri Lanka 5 Register with the tax authorities and obtain a Tax Identification Number 1 day (simultaneous no charge (TIN) from Taxpayer Services Unit of Inland Revenue Department with previous Agency : Department of Inland Revenue procedure) The applicant or an authorized representative of the applicant must be physically present at the Taxpayer Services Unit of Inland Revenue Department to pick up and complete the application for a Taxpayer Identification Number (TIN) number with supporting documents including a copy of Form 1, Certificate of Incorporation and Articles of Association. TIN registration application can be submitted online through the RAMIS system. However, this method was only recently introduced and is not yet widely used. 6 Register for VAT with the Inland Revenue Department's VAT Registration 1 day (simultaneous no charge Branch with previous Agency : Department of Inland Revenue procedure) To obtain permanent VAT registration, the applicant must submit documents proving turnover of LKR 3,000,000 per quarter or LKR 12,000,000 per year according to the Value Added Tax Act No. 14 of 2002. VAT registration application can be submitted online through the RAMIS system. However, this method was only recently introduced and is not yet widely used. 7 Register with the Department of Labor and obtain the Employee Provident 1 day (simultaneous no charge Fund (EPF) number with previous Agency : Department of Labour and the Central Bank of Sri Lanka procedure) Companies must register with the Department of Labor to obtain the Employees Provident Fund (EPF) registration number. The fund is a government-owned and maintained by the Central Bank. No separate registration is required to register with the Employees Trust Fund (ETF). ETF uses the same EPF number for their monthly contributions. Companies must also pay gratuities to employees that have been employed for more than 5 years. The gratuity provisions do not apply to companies that have fewer than 15 employees. There is no pension scheme for private sector employees. Businesses that engage in activities of a dangerous nature should obtain special Factories Ordinance checkups. Takes place simultaneously with previous procedure. Page 9 Doing Business 2019 Sri Lanka Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2019 Sri Lanka Dealing with Construction Permits - Sri Lanka Standardized Warehouse Estimated value of warehouse LKR 30,126,432 City Covered Colombo Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Procedures (number) 13 15.2 12.7 None in 2017/18 Time (days) 87 165.5 153.1 None in 2017/18 Cost (% of warehouse value) 0.3 13.2 1.5 None in 2017/18 Building quality control index (0-15) 6.0 9.2 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Sri Lanka and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 73.81: India (Rank: 52) 73.00: Maldives (Rank: 62) 72.18: Sri Lanka (Rank: 65) 61.85: Regional Average (South Asia) 60.82: Bangladesh (Rank: 138) 53.59: Pakistan (Rank: 166) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in Sri Lanka – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 0.14 80 0.12 Cost (% of warehouse value) 70 0.1 60 Time (days) 50 0.08 40 0.06 30 0.04 20 0.02 10 0 0 1 *2 *3 4 5 6 7 *8 9 10 11 12 13 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2019 Sri Lanka Figure – Dealing with Construction Permits in Sri Lanka and comparator economies – Measure of Quality 15 14.0 12.3 Index score 10.0 10 9.2 7.0 6.0 5 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Details – Dealing with Construction Permits in Sri Lanka – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain the non-vesting certificate, the certificate of ownership and the 3 days LKR 12,000 building and street line certificate Agency : Single Window Counter of the Colombo Municipal Council It is mandatory to obtain and submit a non vesting certificate, a certificate of ownership and a building and street line certificate. All three certificates can be obtained at the same timethrough the Single Window Counter (SWC) of the Colombo Municipal Council (CMC). 2 Receive on-site inspection from Fire Service Department and obtain fire 14 days no charge safety clearance for proposed building Agency : Fire Service Department of the CMC The Fire Service Department will carry out the inspection when the relevant department of the Urban Development Authority (UDA) sends the plan. The Fire Officers of the Fire Service Department will carry out a study of the plan and then may conduct a fire inspection and issue fire safety clearance. It takes 10 working days to obtain a fire inspection. 3 Request and receive water sanction inspection and sewage inspection 1 day LKR 204 Agency : National Water Supply & Drainage Board The following documents must be submitted to obtain a drainage certificate: • The prescribed application form, signed in duplicate • Six copies of the approved building plan • The water and drainage plans • Two copies of the building permit • A copy of the water sanction All applications for drainage certificates must be submitted by a contractor registered with the local authority, and the drainage connection should be carried out by such contractor. 4 Obtain the water sanction and the drainage certificate from the National 7 days LKR 21,420 Water Supply & Drainage Board Agency : National Water Supply & Drainage Board 5 Submit building permit application to Urban Development Authority (UDA) 1 day no charge Agency : Urban Development Authority (UDA) Once the proof of ownership has been obtained, BuildCo, can submit the application to obtain a building permit along with all the building plans and other documents. The Urban Development Authority will proceed with a site inspection to verify the location. The UDA now also accepts online applications. 6 Receive on-site inspection from the Urban Development Authority (UDA) 1 day no charge Agency : Urban Development Authority (UDA) The applicant normally provides transportation or is responsible for the cost of a taxi or a trishaw. The cost depends on the location, but does not normally exceed USD 10.00. Page 12 Doing Business 2019 Sri Lanka 7 Obtain building permit from the Urban Development Authority (UDA) 14 days LKR 38,150 Agency : Urban Development Authority (UDA) An application for a building permit must be submitted along with five copies of the building plan. The following documents must be submitted • The water clearance from National Water Supply & Drainage Board • The Drainage Clearance from Water Supply & Drainage Division of relevant Local Authority • The Fire Service Department of the UDA issues the fire report with or without conditions • The Building Department of the Urban Development Authority (UDA) issues the street line certification. An on-site inspection is conducted by an area inspector of the UDA and a report is prepared based on the investigations. • The Area Inspector’s report is assessed by an Officer in Charge, Planning Officer or Building Engineer, and presented to the Planning Committee with comments and recommendations • The Planning Committee may approve the building plan and grant the development permit with or without conditions • The street/building lines must be demarcated on the ground, before the commencement of construction The building permit application form costs LKR 150.00. If the floor area is more than 3,500 square feet, the application should be certified by an architect and a chartered engineer. The following documents are needed: • A certificate from a qualified civil structural engineer regarding the design, supervision, and structural stability of the proposed development in order to ensure that no damage would be caused to adjoining properties • An insurance policy and a letter of indemnity 8 Request and receive on-site inspection by fire inspector of Fire Service 1 day no charge Department of CMC Agency : Fire Service Department of the CMC 9 Request and receive final inspection by Area Inspector of the Planning 1 day no charge Department of the Urban Development Authority (UDA) Agency : Planning Division of the UDA 10 Obtain certificate of conformity from the Urban Development Authority 14 days LKR 699 (UDA) Agency : Urban Development Authority (UDA) The application to obtain a certificate of conformity must be signed by the owner(s) and a qualified person. The certificate of conformity (COC) is issued only under the names of the owners. To obtain a certificate of conformity, an application must be submitted with the following documents: • Water sanction • Drainage certificate • Approved building plan: the building plan should be strictly in compliance with the Building Regulations of the Urban Development Authority Act • On-site inspection by an Area Inspector of the Planning Department of the CMC to ensure that construction has been completed according to the approved plan • On-site inspection by a fire inspector. The inspector’s report is then assessed by a technical staff assistant and by an Officer in Charge, Planning Officer or Building Engineer, and presented to the Planning Committee • A certificate approving the mechanical ventilation system by private air- conditioning engineers (working for AC suppliers) • Any other certificates mentioned in the building permit It is a mandate to obtain a COC for the constructed building before occupying the new building. The requirements to fulfill in applying for Certificate of Conformity can be found through the on line Application System in the UDA Official web site. 11 Apply for water connection from National Water Supply and Drainage 1 day no charge Board Agency : National Water Supply and Drainage Board To obtain the water connection, BuildCo must submit an application to the National Water Supply and Drainage Board, an assessment notice, the title deed and an ownership certificate. After that, BuildCo receives an on-site inspection, pays the water installation costs, and signs an agreement with the Board. 12 Receive on-site inspection by inspector from National Water Supply and 1 day no charge Drainage Board Agency : National Water Supply and Drainage Board 13 Obtain water connection 32 days LKR 31,000 Agency : National Water Supply and Drainage Board Takes place simultaneously with previous procedure. Page 13 Doing Business 2019 Sri Lanka Details – Dealing with Construction Permits in Sri Lanka – Measure of Quality Answer Score Building quality control index (0-15) 6.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge; In official gazette. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 0.0 Which third-party entities are required by law to verify that the building plans are in By law, there is 0.0 compliance with existing building regulations? (0-1) no need to verify plans compliance; Civil servant reviews plans. Quality control during construction index (0-3) 1.0 What types of inspections (if any) are required by law to be carried out during construction? Inspections by in- 1.0 (0-2) house engineer. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not always done in practice during construction. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance Yes, final 2.0 with the approved plans and regulations? (0-2) inspection is done by government agency. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building No party is held 0.0 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) liable under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 0.0 What are the qualification requirements for the professional responsible for verifying that the Being a 0.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) registered architect or engineer. What are the qualification requirements for the professional who supervises the construction Being a 0.0 on the ground? (0-2) registered architect or engineer. Page 14 Doing Business 2019 Sri Lanka Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and obtaining final supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property income per capita) because the warehouse has access to a road. - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 15 Doing Business 2019 Sri Lanka Getting Electricity - Sri Lanka Standardized Connection Price of electricity (US cents per kWh) 16.9 Name of utility Ceylon Electricity Board City Covered Colombo Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Procedures (number) 5 5.4 4.5 3 (25 Economies) Time (days) 100 98.3 77.2 18 (3 Economies) Cost (% of income per capita) 692.8 1054.7 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 6 2.1 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Sri Lanka and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 89.15: India (Rank: 24) 74.37: Sri Lanka (Rank: 84) 59.36: Regional Average (South Asia) 55.60: Maldives (Rank: 145) 44.75: Pakistan (Rank: 167) 30.81: Bangladesh (Rank: 179) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 16 Doing Business 2019 Sri Lanka Figure – Getting Electricity in Sri Lanka – Procedure, Time and Cost Time (days) Cost (% of income per capita) 100 700 600 Cost (% of income per capita) 80 500 Time (days) 60 400 300 40 200 20 100 0 0 1 2 *3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in Sri Lanka and comparator economies – Measure of Quality 8 7 6.5 6 6 Index score 5 4 3 2.1 2 1 0 0 0 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Page 17 Doing Business 2019 Sri Lanka Details – Getting Electricity in Sri Lanka – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to Ceylon Electricity Board and await external site 4 calendar days LKR 2,000 inspection Agency : Ceylon Electricity Board An application should be submitted to the City Office of Ceylon Electricity Board, together with the following documents. These documents need not be notarized. (i) A copy of the approved Building Plan; (ii) Documentary evidence to establish the street address/assessment number allotted to the property by the Colombo Municipal Council (e.g. - Certificate of ownership, Statutory Notice of Assessment for the current year, Non-vesting certificate or a letter issued by the CMC); and (iii) a copy of the certificate of incorporation to identify the customer. Once the documents are checked and accepted, the applicant is provided with an appointment for the site visit. 2 Receive site inspection and estimate from Ceylon Electricity Board 25 calendar days LKR 0 Agency : Ceylon Electricity Board CEB officials make site visit to ascertain the possible route/s for the connection cable/s, length/s of possible rout/e, point/s of connection to the medium voltage network of Colombo City; as well as to decide upon the network improvements required to make available the power capacity at the proposed point/s of network of network, to finalize the substation kiosk location and to make measurements and any other details for the kiosk. CEB officials then design the proposal for the connection and the detailed design of the substation kiosk. The quotation provided by CEB includes a) all further costs payable to CEB; b) any other requirements to be fulfilled such as Chartered Engineer’s certificate and the specifications and the drawing of the kiosk is sent out to the applicant by post or handed over if he calls over to collect it. 3 Request and receive installation test certificate from chartered electrical 1 calendar day LKR 15,000 engineer Agency : Chartered Electrical Engineer Applicant has to pay for the Charted Electrical Engineers as follows; > 150kVA - LKR 10,000 - 15,000 < 150kVA - LKR 15,000 - 25,000 This inspection is carried out by a Chartered Electrical Engineer, who is registered with the City Office of CEB. Request for the inspection could be made by phone. 4 Obtain excavation permit 8 calendar days LKR 457,025 Agency : Colombo Municipal Council Ceylon Electricity Board gives the customer an excavation sketch which needs to be provided by the customer to Central Road Maintenance Unit (CRMU) of the Colombo Municipal Council. The CRMU will examine the same and if necessary visit the site and provide an estimated reinstatement cost which will be the cost of the excavation permit. The cost of the excavation permit will depend on the type of paving on the road or foot path that has to be excavated to lay the underground cabling and that must be therefore reinstated. 5 Ceylon Electricity Board carries out laying of cables, installation of 63 calendar days LKR 3,700,435.56 switchgears and equipment and commission of electricity Agency : Ceylon Electricity Board Once the estimate is paid, the utility applies for the road excavation permit from the Colombo Municipal Council/Road Development Authority. Labor costs are charged by the RDA/CMC for reinstatement of excavation. Construction cost is essentially for construction of sub-station. This amount has to be submitted to the CEB. Approved building plan from CMC is sufficient from applicant's side. But CEB has to get approval from following institutes (before cable laying);- Presidential Security Division; Traffic Police; Sri Lanka Police; Colombo Municipal Council. All the material needed for the external connection is provided by the CEB. Meter is installed by the Construction Unit of the CEB and at the same time the connection is provided by the Area Unit of the CEB. Prior to the connection, the applicant should enter into an Agreement with the CEB for supply of electricity. Takes place simultaneously with previous procedure. Page 18 Doing Business 2019 Sri Lanka Details – Getting Electricity in Sri Lanka – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 6 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 3.2 System average interruption frequency index (SAIFI) 2.3 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 2.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.ceb.lk/for- your-business/ Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 19 Doing Business 2019 Sri Lanka Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. • Official costs only (such as administrative fees, - Has no trees, natural water sources, natural reserves or historical monuments of duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 20 Doing Business 2019 Sri Lanka Registering Property - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Procedures (number) 8 6.8 4.7 1 (4 Economies) Time (days) 39 114.1 20.1 1 (New Zealand) Cost (% of property value) 5.2 6.9 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 5.5 8.8 23.0 None in 2017/18 Figure – Registering Property in Sri Lanka and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 51.87: Sri Lanka (Rank: 140) 46.91: Regional Average (South Asia) 45.63: Pakistan (Rank: 161) 43.55: India (Rank: 166) 39.97: Maldives (Rank: 175) 28.91: Bangladesh (Rank: 183) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in Sri Lanka – Procedure, Time and Cost Time (days) Cost (% of property value) 4.5 35 4 Cost (% of property value) 30 3.5 3 25 Time (days) 2.5 20 2 15 1.5 10 1 5 0.5 0 0 1 *2 3 4 5 6 7 8 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 21 Doing Business 2019 Sri Lanka Figure – Registering Property in Sri Lanka and comparator economies – Measure of Quality 30 25 Index score 20 15 8.7 8.5 9.5 8.8 10 5.5 6.5 5 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Details – Registering Property in Sri Lanka – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain an updated survey plan of the property 14 days LKR 30,126.43; Agency : Colombo Municipal Council (About 0.1% of Obtaining a new updated plan of the land and the building is advisable to ensure property value) that the boundaries on the ground have not changed or if the survey plan is old. This is also needed to obtain the Building and Street Line Certificate. 2 A title search must be carried out at the relevant Land Registry 4 days LKR 500 Agency : Land Registry On receipt of the last title deed and plan from the seller, a title search must be carried out at the relevant Land Registry. A notary engaged by the purchaser must recommend the title. Good title must be established for the past 35 years. All deeds and plans must be checked. If prior deeds are not available with the seller the notary will have to check duplicates of deeds at the Land Registry. If plans are not available, the relevant surveyors would have to be contacted and obtain duplicates of the plans. Other checks must be carried out as well by the lawyer (notary) at the local authority. As per the section 17(a) of the Notaries Ordinance No 1 of 1907 before any deed or instrument affecting any interest in land or other immovable property is drawn by the Notary, he shall search or cause to be searched the registers in the land registry to ascertain the state of the title regarding such land and whether any prior deed adversely affecting any interest in such land has been registered. On confirmation that the title to the property is clear. If the title is not clear, it is recommended to purchase a title insurance is recommended, and the next step would be to obtain a policy of title Insurance (procedure 1a). If title insurance is recommended in procedure 1 due to a defect in title, then the next step would be to obtain a Buyer's Policy of Title Insurance to cover defects. This step is optional and contingent to the result of step 1. If the policy is needed, the time necessary to obtain this title will depend on the time taken by the title insurance company to evaluate the title, decide to issue or not to issue the title insurance policy and the cost will depend on the premium payable. Usually title insurance is recommended for the following reasons: • Prior deeds and documentation not being available and further if the registers at the land registry cannot be traced for 35 years (if the books are damaged). • If there are any discrepancies in the title deeds and plans. • If the present owner had owned an undivided share of a larger land, and had sub-divided it without the consent of the other parties or without a Deed of Partition or Partition Plan. 3 Obtain the non-vesting certificate, the ownership certificate and the 3 days LKR 12,000; building and street line certificate (Certificate of Agency : Colombo Municipal Council ownership Rs. The seller obtains the following certificates at the Single Window Counter at the 3500.00-Commercial Colombo Municipal Council + Non Vesting 1. The Non-vesting Certificate Certificate: Rs. 2. The Ownership Certificate 3. The Building and Street Line Certificates. The Street Line Certificate confirms 5000.00-Commercial whether the property is affected by a proposed road widening or any other + Building and Street reservation. The local authority issues a photocopy of the survey plan indicating Line Certificate Rs. the approximate position of the street line which is measured from the center of 3500) the Road. Necessary documents to obtain Street Line Certificate 1.Copies of Survey Plan with correct assessment 2.Owner's consent letter 3.Applicant's NIC photocopy 4.If the assessment number given in the survey plan does not tally with the current assessment number municipal assessor's letter clarifying the assessment number. The buyer must also obtain from the seller the Certificate of Conformity already in his possession, which confirms that the building constructed is an approved construction. Page 22 Doing Business 2019 Sri Lanka 4 Transfer deed is signed in favor of the buyer 2 days LKR 301,764.32; (1% Agency : Lawyer/Notary of purchase price The following document with regard to the Selling company must be presented to (Lawyer’s fees) + the buyer’s lawyer/notary for the deed of transfer to be signed in favor of the LKR 500 additional buyer: cost) The documents are as follows: 1. Articles of Association of the company 2. Certificate of incorporation of the seller 3. Resolution authorizing the sale of land. If the purchase-sale is a major transaction as defined by section 185 of Companies Act No. 7 of 2007, such a transaction should require the shareholders sanction as well. The buyer needs to pass a resolution to purchase the property. On receipt of the above documents the deed of transfer in favor of the purchaser can be signed. Lawyer’s fees are paid by the buyer and will depend on the lawyer (usually 1% of purchase price). 5 Obtain the market value from the Provincial Department of Revenue 1 day LKR 250 Agency : Provincial Department of Revenue, Western Province Before or after the payment of stamp duty the instrument of transfer is forwarded to the office of the Provincial Department of Revenue of the Western Province for the purpose of obtaining the market value of the property. This measure was introduced beginning March 1, 2013 with the purpose of ensuring that stamp duties are paid based on the correct market value. The appropriate value will be provided at the discretion of the department's valuer. If the instrument is submitted after the stamp duties have already been paid the and after the examination the department determines that the amount paid is inadequate, then the balance must be settled. The department will provide the certification of "instrument with duly paid stamp duties." By ensuring that the stamp duty was paid based on the value provided by the Provincial Department of Revenue the instrument will not be recalled later on for examination of its value and will not be refused registration. 6 Payment of stamp duty at a nominated bank 1 day LKR 1,204,057.28; Agency : State Bank (Stamp duty payable After execution of the deed of transfer stamp duty will have to be paid within 7 as follows days to a nominated state bank in favor of the Revenue Commissioner of the 3% on the First Rs. relevent Provincial Council in which the land is situated. 100 000 4% on the Balance) 7 Deed is sent for registration to the relevant land registry 15 days LKR 100 Agency : Land Registry After payment of stamp duty, the deed duly attested by the notary, will have to be sent for registration to the relevant Land Registry. The deed is registered and returned to the notary from the Land Registry within 3 days after receiving the Day Book. Notaries are involved with searching, preparing title report and attestation, as well as paying stamp duty. The details of the registered deeds are published in the Land Registry website (www.Rgd.gov.lk) and notice boards are available at the Land Registry office. Computerized system and greater number of staff are ensuring faster registration of deeds. 8 Name of the buyer must be registered at the Municipality and the certificate 3 days LKR 3,500; (for of ownership is obtained commercial Agency : Colombo Municipal Council properties) The name of the new company will have to be registered as the new owner at the Colombo Municipal Council. An abstract of title form should be duly filled by a Notary Public and should be submitted to the relevant Local Authority together with a Pedigree, a certificate, a copy of the rate receipt, a certified copy of the latest plan and deed of transfer and a covering letter prepared by the Notary. Thereafter the name of the new owner will be registered in the Assessment registers and the Certificate of Ownership will be issued giving the present owner's name. Takes place simultaneously with previous procedure. Page 23 Doing Business 2019 Sri Lanka Details – Registering Property in Sri Lanka – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 3.0 What is the institution in charge of immovable property registration? Registrar General Department In what format are the majority of title or deed records kept in the largest business city—in a Paper 0.0 paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions No 0.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Sri Lanka Survey Department (SLSD) In what format are the majority of maps of land plots kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Separate 0.0 or mapping agency kept in a single database, in different but linked databases or in separate databases databases? Do the immovable property registration agency and cadastral or mapping agency use the No 0.0 same identification number for properties? Transparency of information index (0–6) 1.5 Who is able to obtain information on land ownership at the agency in charge of immovable Only 0.0 property registration in the largest business city? intermediaries and interested parties Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: http://www.rgd.go v.lk/web/index.ph p? option=com_cont ent&view=article &id=13&Itemid=1 38&lang=en#regi stration-of- movable-and- immovable- properties Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: http://www.rgd.go v.lk/web/index.ph p? option=com_cont ent&view=article &id=13&Itemid=1 38&lang=en#regi stration-of- movable-and- immovable- properties Does the agency in charge of immovable property registration commit to delivering a legally No 0.0 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Page 24 Doing Business 2019 Sri Lanka Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the No 0.0 immovable property registration agency? Number of property transfers in the largest business city in 2017: Who is able to consult maps of land plots in the largest business city? Anyone who 0.5 pays the official fee Is the applicable fee schedule for accessing maps of land plots made publicly available— No 0.0 and if so, how? Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a No 0.0 specific time frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 1.0 Does the law require that all property sale transactions be registered at the immovable No 0.0 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? No 0.0 Is there a specific compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Notary; Is there a national database to verify the accuracy of identity documents? No 0.0 For a standard land dispute between two local businesses over tenure rights of a property District Court of worth 50 times gross national income (GNI) per capita and located in the largest business Colombo city, what court would be in charge of the case in the first instance? How long does it take on average to obtain a decision from the first-instance court for such a More than 3 0.0 case (without appeal)? years Are there any statistics on the number of land disputes in the first instance? No 0.0 Number of land disputes in the largest business city in 2017: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Page 25 Doing Business 2019 Sri Lanka Do married men and married women have equal ownership rights to property? Yes 0.0 Page 26 Doing Business 2019 Sri Lanka Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 27 Doing Business 2019 Sri Lanka Getting Credit - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Strength of legal rights index (0-12) 2 5.5 6.1 12 (5 Economies) Depth of credit information index (0-8) 6 4.0 6.7 8 (42 Economies) Credit registry coverage (% of adults) 0 4.8 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 46.5 18.5 65.3 100.0 (25 Economies) Figure – Getting Credit in Sri Lanka and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 80.00: India (Rank: 22) 47.50: Regional Average (South Asia) 45.00: Pakistan (Rank: 112) 40.00: Sri Lanka (Rank: 124) 35.00: Maldives (Rank: 134) 25.00: Bangladesh (Rank: 161) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Sri Lanka and comparator economies 9 8 7 6 5.5 Index Score 5 5 4 3 2 2 2 2 1 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Page 28 Doing Business 2019 Sri Lanka Details – Legal Rights in Sri Lanka Strength of legal rights index (0-12) 2 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and No replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be No secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by No asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed No online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency No procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization No procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow Yes the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Sri Lanka and comparator economies 8 7 7 7 6 6 Index Score 5 5 4.0 4 3 2 1 0 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Page 29 Doing Business 2019 Sri Lanka Details – Credit Information in Sri Lanka Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and No No 0 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No No 0 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 6 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 6,356,658 0 Number of firms 212,892 0 Total 6,569,550 0 Percentage of adult population 46.5 0 Page 30 Doing Business 2019 Sri Lanka Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 31 Doing Business 2019 Sri Lanka Protecting Minority Investors - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Extent of disclosure index (0-10) 8.0 5.8 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 5.0 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 7.0 7.4 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 7.0 6.9 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 6.0 5.9 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 7.0 6.1 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Sri Lanka and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 80.00: India (Rank: 7) 71.67: Pakistan (Rank: 26) 66.67: Sri Lanka (Rank: 38) 61.67: Regional Average (South Asia) 55.00: Bangladesh (Rank: 89) 43.33: Maldives (Rank: 132) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Sri Lanka and comparator economies – Measure of Quality Sri Lanka 7 5 8 6 7 7 Bangladesh 5 7 6 3 5 7 India 8 7 8 8 10 7 Maldives 4 8 01 5 8 Pakistan 7 7 6 9 8 6 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 South Asia 6.4 5.9 6.1 6.2 7.2 7.1 0 10 20 30 40 50 60 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 32 Doing Business 2019 Sri Lanka Details – Protecting Minority Investors in Sri Lanka – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 6.7 Extent of disclosure index (0-10) 8.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of 2.0 directors excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a 1.0 conflict without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Liable if negligent 1.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by No 0.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if 1.0 negligently concluded Ease of shareholder suits index (0-10) 7.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the No 0.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying No 0.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 6.7 Extent of shareholder rights index (0-10) 7.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Page 33 Doing Business 2019 Sri Lanka Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new No 0.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require Yes 1.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a No 0.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to No 0.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 6.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of No 0.0 directors? Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board Yes 1.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Yes 1.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum No 0.0 period set by law? Extent of corporate transparency index (0-10) 7.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting No 0.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on the No 0.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be Yes 1.0 audited by an external auditor? Page 34 Doing Business 2019 Sri Lanka Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The Total tax and contribution rate (% of commercial machinery seller is registered for VAT and excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, profits) sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 35 Doing Business 2019 Sri Lanka Paying Taxes - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Payments (number per year) 36 27.6 11.2 3 (Hong Kong SAR, China) Time (hours per year) 129 274.8 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 55.2 43.5 39.8 26.1% (32 Economies) Postfiling index (0-100) 49.31 41.78 84.41 None in 2017/18 Figure – Paying Taxes in Sri Lanka and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 66.42: Maldives (Rank: 117) 65.36: India (Rank: 121) 60.02: Regional Average (South Asia) 59.79: Sri Lanka (Rank: 141) 56.13: Bangladesh (Rank: 151) 47.05: Pakistan (Rank: 173) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Sri Lanka and comparator economies – Measure of Quality 100 80 Index score 60 49.31 49.31 47.48 44.36 41.78 40 20 10.49 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Page 36 Doing Business 2019 Sri Lanka Details – Paying Taxes in Sri Lanka Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Nation 12.0 2% turnover 35.35 Building Tax Employer 1.0 online 11.0 12% gross salaries 13.54 paid - Social security contribution (EPF) Employees 1.0 online 3% gross salaries 3.38 Trust Fund (ETF) Property tax 1.0 35% annual 1.73 property value Corporate 5.0 15.0 12% taxable profit 1.17 income tax Tax on 0.0 withheld 10% interest 0.26 included in interest income other taxes Municipal 1.0 varies from 0.02 business tax LKR 250 to LKR 5,000 Stamp duty 1.0 various rates 0.00 small amount Employee 0.0 online and 8% gross salaries 0.00 withheld paid - Social jointly security contribution (EPF) Fuel tax 1.0 included in 0.00 small amount the price of fuel Value added 12.0 103.0 11% /15% value addition 0.00 not included tax (VAT) Vehicle tax 1.0 LKR 1,000 fixed fee 0.00 depending on vehicle type Totals 36 129 55.2 Page 37 Doing Business 2019 Sri Lanka Details – Paying Taxes in Sri Lanka – Tax by Type Taxes by type Answer Profit tax (% of profit) 1.2 Labor tax and contributions (% of profit) 16.9 Other taxes (% of profit) 37.1 Page 38 Doing Business 2019 Sri Lanka Details – Paying Taxes in Sri Lanka – Measure of Quality Answer Score Postfiling index (0-100) 49.31 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders and others Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund 0 per case study scenario Time to obtain a VAT refund (weeks) No VAT refund 0 per case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 3.0 97.25 Time to complete a corporate income tax correction (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 39 Doing Business 2019 Sri Lanka Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual • Covers all documents required by law and in procedure took 24 hours. practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 40 Doing Business 2019 Sri Lanka Trading across Borders - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Time to export: Border compliance (hours) 43 62.9 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 366 347.2 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 48 74.1 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 58 160.3 35.2 0 (20 Economies) Time to import: Border compliance (hours) 72 95.8 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 300 504.6 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 48 100.8 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 283 276.7 24.9 0 (30 Economies) Figure – Trading across Borders in Sri Lanka and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 77.46: India (Rank: 80) 73.29: Sri Lanka (Rank: 93) 62.57: Regional Average (South Asia) 60.12: Pakistan (Rank: 142) 55.87: Maldives (Rank: 155) 31.76: Bangladesh (Rank: 176) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in Sri Lanka – Time and Cost Time (hours) Cost (USD) 80 366 72 400 70 350 300 60 283 300 Time (hours) Cost (USD) 48 48 50 43 250 40 200 30 150 20 100 58 10 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 41 Doing Business 2019 Sri Lanka Details – Trading across Borders in Sri Lanka Characteristics Export Import Product HS 61 : Articles of apparel and clothing HS 8708: Parts and accessories of motor accessories, knitted or crocheted vehicles Trade partner United States Japan Border Colombo port Colombo port Distance (km) 5 5 Domestic transport time (hours) 6 6 Domestic transport cost (USD) 110 110 Details – Trading across Borders in Sri Lanka – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 24.0 171.7 by customs authorities Export: Clearance and inspections required 0.0 0.0 by agencies other than customs Export: Port or border handling 43.0 194.4 Import: Clearance and inspections required 24.0 72.6 by customs authorities Import: Clearance and inspections required 0.0 0.0 by agencies other than customs Import: Port or border handling 72.0 227.1 Page 42 Doing Business 2019 Sri Lanka Details – Trading across Borders in Sri Lanka – Trade Documents Export Import Commercial invoice Bill of lading Packing list Packing list Certificate of origin Commercial invoice Insurance certificate Certificate of origin Export declaration Customs Import Declaration Bill of lading Delivery order SOLAS certificate E-manifest SOLAS certificate Page 43 Doing Business 2019 Sri Lanka Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 44 Doing Business 2019 Sri Lanka Enforcing Contracts - Sri Lanka Standardized Case Claim value LKR 1,085,845 Court name Colombo District Court City Covered Colombo Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Time (days) 1318 1101.6 582.4 None in 2017/18 Cost (% of claim value) 22.8 29.8 21.2 None in 2017/18 Quality of judicial processes index (0-18) 8.5 7.0 11.5 None in 2017/18 Figure – Enforcing Contracts in Sri Lanka and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 52.47: Maldives (Rank: 125) 43.49: Pakistan (Rank: 156) 43.44: Regional Average (South Asia) 41.19: India (Rank: 163) 41.16: Sri Lanka (Rank: 164) 22.21: Bangladesh (Rank: 189) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in Sri Lanka – Time and Cost Time (days) Cost (% of claim value) 1600 80 1442 1445 Cost (% of claim value) 1400 66.8 1318 70 1200 1071 1101.6 60 Time (days) 1000 50 800 760 40 31.0 582.4 29.8 600 22.8 30 18.5 21.2 20.5 400 20 200 10 0 0 Bangladesh India Maldives OECD Pakistan South Sri high Asia Lanka income Page 45 Doing Business 2019 Sri Lanka Figure – Enforcing Contracts in Sri Lanka and comparator economies – Measure of Quality Sri Lanka 2.5 1 0.5 4.5 Bangladesh 3 1 0.5 3 India 2.5 1.5 2 4.5 Maldives 2 0 1 2.5 Pakistan 2 1.2 0.5 2 OECD high income 2.5 3.1 2.3 3.6 South Asia 2.4 1.1 0.8 3.1 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Sri Lanka Indicator Time (days) 1318 Filing and service 62 Trial and judgment 1000 Enforcement of judgment 256 Cost (% of claim value) 22.8 Attorney fees 20.2 Court fees 1.1 Enforcement fees 1.5 Quality of judicial processes index (0-18) 8.5 Court structure and proceedings (-1-5) 4.5 Case management (0-6) 1.0 Court automation (0-4) 0.5 Alternative dispute resolution (0-3) 2.5 Page 46 Doing Business 2019 Sri Lanka Details – Enforcing Contracts in Sri Lanka – Measure of Quality Answer Score Quality of judicial processes index (0-18) 8.5 Court structure and proceedings (-1-5) 4.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 1.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil No case? 1.b. If yes, are the time standards set for at least three court events? n.a. 1.c. Are these time standards respected in more than 50% of cases? n.a. 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to No 0.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 Page 47 Doing Business 2019 Sri Lanka 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public No order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation No (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 48 Doing Business 2019 Sri Lanka Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 49 Doing Business 2019 Sri Lanka Resolving Insolvency - Sri Lanka Indicator Sri Lanka South Asia OECD high Best Regulatory income Performance Recovery rate (cents on the dollar) 43.1 32.7 70.5 None in 2017/18 Time (years) 1.7 2.6 1.7 0.4 (Ireland) Cost (% of estate) 10.0 9.9 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 7.0 6.6 11.9 None in 2017/18 Figure – Resolving Insolvency in Sri Lanka and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 59.86: Pakistan (Rank: 53) 45.05: Sri Lanka (Rank: 92) 40.84: India (Rank: 108) 38.30: Regional Average (South Asia) 33.48: Maldives (Rank: 139) 28.20: Bangladesh (Rank: 153) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Sri Lanka – Time and Cost Time (years) Cost (% of estate) 4.5 4.3 12 4.0 4 9.9 10.0 9.3 10 Cost (% of estate) 3.5 9.0 8.0 Time (years) 3 2.6 2.6 8 2.5 6 2 1.7 1.7 1.5 4.0 4.0 1.5 4 1 2 0.5 0 0 Bangladesh India Maldives OECD Pakistan South Sri high Asia Lanka income Page 50 Doing Business 2019 Sri Lanka Figure – Resolving Insolvency in Sri Lanka and comparator economies – Measure of Quality Sri Lanka 3 2.5 1 0.5 Bangladesh 2 2 0 India 4.5 2 1 1 Maldives 0 2 0 Pakistan 5.5 2.5 2 1.5 OECD high income 5.3 2.8 2.2 1.9 South Asia 3.6 2.1 0.9 0.9 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Sri Lanka and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 60 50.6 43.1 44.5 40 32.7 29.2 26.5 20 0 Sri Lanka Bangladesh India Maldives Pakistan South Asia Page 51 Doing Business 2019 Sri Lanka Details – Resolving Insolvency in Sri Lanka Indicator Answer Score Proceeding foreclosure As per provisions of the new Companies Act No. 7 of 2007, secured creditors are totally exempted from an automatic stay. Therefore, after Mirage's default on payment, BizBank would initiate foreclosure trying to recoup the investment as soon as possible by filing the petition at the High Court. Outcome piecemeal sale The hotel will stop operating and Mirage assets will be sold piecemeal by the court-appointed auctioneer after the foreclosure proceeding. Time (in years) 1.7 The foreclosure procedure takes approximate 1.7 years until BizBank is repaid some or all of the money owed to it. BizBank would initiate foreclosure after 60 days since Mirage's default on payment. It takes at least half a year for the High Court to make the initial decision on BizBank's petition. Mirage would be given another 60 days to appeal the decision followed by the Court's final decision (another 2 months). The appeal will take several months. The preparation and execution of the auction sale until BizBank receives the sale proceeds usually takes at least 3 months. Cost (% of 10.0 The costs associated with the case would amount to approximately 10% of the value of the estate) debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees (<1%), attorney fees (5%), costs of notification and publication (<1%), ), fees of accountants, assessors, inspectors and other professionals (1%), and fees of auctioneers (5%), additional cost related to the auction (1%). Recovery rate 43.1 (cents on the dollar) Page 52 Doing Business 2019 Sri Lanka Details – Resolving Insolvency in Sri Lanka – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 7.0 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may 1.0 file for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a 0.5 creditor may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 3.0 Does the insolvency framework allow the continuation of contracts supplying essential goods No 0.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.5 Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5 Does the insolvency framework require that dissenting creditors in reorganization receive at No 0.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information No 0.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions No 0.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 53 Doing Business 2019 Sri Lanka Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 54 Doing Business 2019 Sri Lanka Labor Market Regulation - Sri Lanka Details – Labor Market Regulation in Sri Lanka Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 68.7 Ratio of minimum wage to value added per worker 0.1 Maximum length of probationary period (months) n.a. Working hours Standard workday 8.0 Maximum number of working days per week 5.5 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 14.0 Paid annual leave for a worker with 5 years of tenure (working days) 14.0 Paid annual leave for a worker with 10 years of tenure (working days) 14.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 14.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? Yes Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? Yes Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure 10.8 Page 55 Doing Business 2019 Sri Lanka Severance pay for redundancy dismissal for a worker with 5 years of tenure 54.2 Severance pay for redundancy dismissal for a worker with 10 years of tenure 97.5 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 54.2 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? No Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 84.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Page 56 Doing Business 2019 Sri Lanka Business Reforms in Sri Lanka In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Dealing with Construction Permits: Sri Lanka made dealing with construction permits easier by launching a single window, increasing transparency by providing online access to building regulations and reducing the processing times to issue several building certificates. Registering Property: Sri Lanka made property registration easier by implementing a single window to streamline the process of delivering several certificates and increased transparency by providing online access to cadastral information. Paying Taxes: Sri Lanka made paying taxes easier by introducing online systems for filing corporate income tax, value added tax and employee trust fund contributions Enforcing Contracts: Sri Lanka made enforcing contracts easier by introducing a pre-trial conference as part of the case management techniques used in court. DB2018 Trading across Borders: Sri Lanka made exporting and importing easier by developing a customs single window. DB2017 Starting a Business: Sri Lanka made starting a business easier by removing the stamp duty on newly issued shares. Protecting Minority Investors: Sri Lanka strengthened minority investor protections by requiring board and in some cases shareholder approval of related-party transactions and by requiring that such transactions undergo external review. DB2016 Starting a Business: Sri Lanka made starting a business easier by eliminating the requirement to notify the Registrar of Companies of the payment of stamp duty for the initial issuance of shares. Dealing with Construction Permits: Sri Lanka made dealing with construction permits less time-consuming by streamlining the internal review process for building permit applications. DB2015 Paying Taxes: Sri Lanka made paying taxes more costly for companies by increasing the reduced corporate income tax rate for qualifying small and medium-size enterprises. DB2014 Dealing with Construction Permits: Sri Lanka made dealing with construction permits easier by eliminating the requirement to obtain a tax clearance and by reducing building permit fees. Getting Electricity: Sri Lanka made getting electricity easier by improving the utility’s internal workflow and by reducing the time required to process new applications for connections. Paying Taxes: Sri Lanka made paying taxes easier for companies by introducing an electronic filing system for social security contributions. Trading across Borders: Sri Lanka made trading across borders easier by introducing an electronic payment system for port services. DB2013 Starting a Business: Sri Lanka made starting a business easier by computerizing and expediting the process of obtaining a registration number for the Employees Provident Fund and Employees Trust Fund. Registering Property: Sri Lanka made registering property faster by introducing an electronic system at the Land Registry in Colombo. Getting Credit: Sri Lanka strengthened its secured transactions system by establishing an electronic, searchable collateral registry and issuing regulations for its operation. Trading across Borders: Sri Lanka reduced the time to export by implementing the ASYCUDA World electronic data interchange system. Page 57 Doing Business 2019 Sri Lanka DB2012 Protecting Minority Investors: Sri Lanka strengthened investor protections by requiring greater corporate disclosure in case of transactions between interested parties. Paying Taxes: Sri Lanka made paying taxes less costly for businesses by abolishing the turnover tax and social security contribution and by reducing corporate income tax, value added tax and national building tax rates. DB2011 Paying Taxes: DB2010 Dealing with Construction Permits: Sri Lanka made dealing with construction permits more difficult by increasing some fees and adding a procedure. Getting Credit: Sri Lanka improved access to credit information through a consolidation of systems at the private credit bureau allowing all shareholder lending institutions to submit credit data, with no minimum threshhold for the loans to be reported to the database. DB2009 Getting Credit: Sri Lanka improved access to credit by strengthening its secured transactions system through its new company act, under which secured creditors’ claims are no longer frozen when the company goes into liquidation and by setting up an online system for banks to share credit information at the private credit bureau, collecting data on all loans from financial institutions and distributing historical credit information covering a longer period. DB2008 Starting a Business: Sri Lanka made starting a business easier by eliminating burdensome requirements for approvals, introducing a flat registration fee and making company seals and the use of notaries optional. Getting Credit: In Sri Lanka the private credit bureau increased the minimum threshold for loans on which negative information is distributed from 100,000 Sri Lanka rupees to 500,000. Trading across Borders: Sri Lanka made trading across borders easier by introducing a new electronic data interchange system that enables electronic submission and processing of customs declarations and cargo manifests and by providing for legal recognition of electronic documents and contracts. Page 58 Doing Business 2019 Sri Lanka Page 59