VAT on Apartment sales reintroduced from 1st Jan 2023

Update 01/01/2024

VAT rate increased from 15% to 18% effective from 1st January 2024

Updated: 21/09/2022

The VAT exclusion from condominium sales has been removed effective from 1st of October 2022, which was later revised to 1st January 2023. Which means any apartment bought from a VAT registered company or individual will be liable for VAT, from 1st January 2023.

For the latest update on the re-introduction of VAT on apartments  please read our latest article on VAT on apartments 2022.

Updated: 30/11/2019

The Government has abolished the VAT taxes on Condominiums, effective 01st Dec 2019. The Govt issued a Gazette notification 2151/52 on 29/11/2019 informing that the previous Gazette 2147/59 issued on 31/10/2019 will be rescinded. The previous Gazette on 31/10/2019 (2147/59) by then Finance minister Mangala Samaraweera reduced the VAT rate from 15% to 6%, effective 1st Nov 2019.

The following information has been made obsolete by the Gazette notification on 29/11/2019. The information below is for historical purposes only. 

Previous update: 30/10/2019

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.

The VAT exemption only applies if all units in the apartment project is under LKR 25 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 (COC) from a local authority or have a completed Sales and Purchase Agreement under the Notary Ordinance before the implementation of the VAT act (i.e. before 1st April 2019). These changes have now been passed in Parliament on 23rd October 2019.

VAT should be 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

Posted Date: 1st February 2019

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  • kumudu

    This tax system is not suitable for middle class people. if they have only a residential property,if any incident, if they had to sale the living property at the market value have to pay huge amount for various taxes. finally owner of the house nothing in hand. then they have to face for more difficulties to solve their problems.after that they fell in to more and more difficulties.who is going to solve their difficulties. will the govt. take responsiblilities to solve their difficulties. therefore this tax system will be okay for business people who doing business frequently as a huge investment not for every one. this tax system must be change immediately.

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