15% VAT on Apartment sales to come in to affect from 1st April 2019 (Updated Aug 2019)
15% VAT on Apartment sales will come in to affect from 1st of April 2019, according to the government Gazette issued 16th of August 2018, with the title ‘VALUE ADDED TAX (AMENDMENT) ACT, No. 25 OF 2018’.
According to the Finance Ministry sources, as it stands, if the Sales & Purchase Agreement (SPA) is signed before the 1st of April 2019, the buyer is not liable to pay VAT, even for payments made after this date. They however also said that this is still under discussion and might change in future.
The VAT exemption only applies if all units in the apartment project is under LKR 15 million; which would eliminate most of the apartments for sale in and around Colombo from this exemption.
On the 6th of Aug 2019, the Cabinet decided to amend the budget proposals, to increase the VAT exemption for apartments, from under 15 million to under LKR 25 million and also exempt housing units which received compliance certificates from a local authority or have a completed Sales and Purchase Agreement under the Notary Ordinance before the implementation of the VAT act. These changes are not implemented yet and is expected to be presented to parliament in September 2019.
VAT is also exempted if you’re buying the property from a private seller (owner) in the secondary market (re-sale), unless the property is owned by a VAT registered company.
If implemented, the increase in VAT is expected to significantly affect the sales of condominium units unless the developers absorb it’s costs in the selling prices.
The full Gazette can be read from here (Section 8 (ii))
The VAT implementation can only be cancelled or delayed by the government issuing a new Gazette notification, cancelling the previous amendments.
A list of new apartment projects in the country can be found from here