Buying property in Sri Lanka
A General Guide for Non-Citizen
This guide is intended as an outline of the possible options under existing legislation. It does not constitute legal advice and is not comprehensive. The legislation is complicated and far from being clear.
The Land (Restrictions on Alienation) Act 2018 prohibits the transfer of title of any land situated in Sri Lanka with effect from 1st January 2013, where the transferee is - 1. A non-citizen or 2. A company incorporated in Sri Lanka with a foreign shareholding of 50% or more or 3. A foreign company.
However, public companies with over 50% foreign ownership are now permitted to buy immovable property with effect from 1st April 2018.
Potential purchase structures
Under current legislation, a foreigner can use the following options to enter the property market.
- Taking a lease of the property.
- Share Structure option.
- Via inheritance or by a Parental Gift, both under Sri Lankan inheritance laws.
- A Private Limited Company with a 49% percent or less foreign shareholding.
- A locally listed Public Company.
- Buy a condominium/apartment.
- By having dual citizenship.
Purchase of property by companies with foreign shareholding of 49% or less
A company incorporated in Sri Lanka with a foreign shareholding of 49% or less can purchase property provided that it maintains its foreign shareholding of 49% or less for a minimum period of twenty years. There are reporting obligations to enforce this requirement. The land can be rented out for up to 99 years. 1% stamp duty is payable.
Purchase of property under an Investment structure
We will Guide you to purchase the property Under the best Investment structure.
Asset Pool Structure
Bonds are issued to foreign parties by a local company, which owns the property. Approval from the Department of Foreign Exchange is required.
Fees & Taxes
Stamp Duty & Legal Fees
There is a 1% stamp duty on a 99 year lease of land. On the acquisition, the first LKR 100,000 will attract a 3% stamp duty and 4% on the balance.
Legal fees are typically in the range of 1-3% of the property’s value.
Tax on Capital Gains (CGT)
A Capital Gains Tax would be charged on a gain arising from realization of an investment asset at the rate of 10%. We can refer you to specialist tax consultants for professional advice. (the cost of the asset would be the market value of such asset as at 30th September 2017)
Valuation & Surveying
A Valuer’s fee is based on the transaction value and calculated according to an approved fee structure of the Institute of Valuers.
Standard brokerage fees are 3% of the property’s value and the management rental fee is 15% of the total tenancy value.