Guide to buying property in Sri Lanka for foreigners and expats
What are the rules and regulations for expats and foreigners buying and renting property in Sri Lanka ?
Foreigners can no longer purchase property in Sri Lanka and can only lease it for up to 99 years (previously a foreigner could purchase property by paying a 100% tax).
Foreigners will be exempted from the law under the following circumstances:
- A company with less than 50% foreign ownership is eligible to purchase land
- If the entire value is paid upfront on the transfer of condominium units of residential or non-residential accommodation on or above the 4th floor of a registered condominium apartment constructed with the approval of the UDA. The lease should be for more than 35 years.
- Diplomatic missions; International, Multilateral, Bilateral organisations
- Any land the title of which is transferred by intestacy, gift or testamentary disposition to a next of kin (who is a foreigner) of the owner of such land, in accordance with the applicable law of succession of Sri Lanka;
- Sri Lankan dual citizens
- Investment in a project is over US$10 million
- A joint venture company incorporated in Sri Lanka (with foreign participation) is not liable to pay the tax
- Land for the development of large housing schemes, hospitals and hotels with a minimum investment of $10 million
- Exporting companies with a minimum investment of $1 million
- Large infrastructure projects with a minimum investment of $50 million
- The transfer of land to a bank/finance leasing institution purchasing property at an auction pertaining to a security in relation to a defaulted loan
Read full details in the Land Act No. 38
Sale of land to foreigners has been prohibited from the 2013 budget. Instead the land can only be leased out for a max of 99 years. Foreigners or companies (with more than 50% foreign ownership) no longer need to pay the 15% land tax from 1st Jan 2016 (LAND (RESTRICTIONS ON ALIENATION) (AMENDMENT) - issued 2nd Sept 2016)
Taxes for landlords
Anyone leasing out a property to a foreigner or local will need to pay a 1% stamp duty when the rent is collected.
VAT is payable at 15% if the lease is to a VAT Registered person, other than on residential premises. Further, the sale of land & buildings other than residential premises will also be liable to VAT at 15% on the value.
Capital Gains tax
The government is considering bringing in Capital Gains tax, however there is no confirmation on when this will be brought in or the details of how it'll be implemented. A Capital Gains tax is the taxable percentage of the profits earned through the sale of any investments, which could be through the sale of stocks or property.
Update 02/09/2016 - The 15% tax on land lease for foreigners was removed from 1st Jan 2016 via the LAND (RESTRICTIONS ON ALIENATION) (AMENDMENT) gazette
Update 31/10/2014 - Land (Restrictions and Alienation) Act published. Read it from here
Update 03/08/2014 - New legislation is being drafted to strictly enforce rules pertaining to the 2013 ban on foreigners owning land. There will be a tax of 15 per cent on the value of the lease. With new laws you are also not allowed to circumvent this ban by purchasing the land through a majority Sri Lankan nominee owned company. It's assumed that this law will not apply to foreign-owned companies of more than 10 years (TBC). More>>
Update 03/11/13 - the Investment Promotion Ministry is to submit a cabinet paper to reduce the land transfer tax to below 10 per cent to facilitate foreigners seeking to lease land.
Update 17/02/13 - Sri Lankan expats holding foreign citizenship can now buy land in Sri Lanka. More>
Last update: July 2015
- LAND (RESTRICTIONS ON ALIENATION) ACT, No. 38 OF 2014
- LAND (RESTRICTIONS ON ALIENATION) (AMENDMENT) issued 02/09/2016 removing the 15% land tax for foreigners
- 100% land sale tax for foreigners to be scrapped
- Tax for foreigners when buying land in Sri Lanka
- Rules pertaining to sale or lease of land to foreigners
- Sri Lanka Investment Climate Statment 2011
- Chambers Colombo
- Gazette No 1386/18 dated March 30, 2005
- Stamp Duty - Gazette No 1439/3 dated April 3, 2006
- Stamp Duty guide from Inland Revenue
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