How to Buy as a Sri Lankan National
If you have Sri Lankan citizenship or dual citizenship then buying in Sri Lanka is a fairly straightforward process.
You may buy in your own name or set up a local company through which to buy the property, though this is not really necessary if you are simply intending the property to be your residence and not a business. There is a 4% stamp duty to be paid on the purchase of any property, however there is no capital gains tax payable on selling your property. We do advise that, when buying, you get the deeds checked by two independent lawyers if you can. The most common problem that arises here with property is unclear title and lawyers are prone to overlook things and make mistakes that are costly and time consuming in the long run.
How to Buy as a Foreigner
As in most developing countries there are restrictions on foreign ownership of immovable assets such as land and property. In the recent past there was a 100% tax imposed on foreigners, or local companies with over 25% foreign ownership, buying freehold property, however under the new Rajapakse government, this tax has been removed.
As of 15th August 2014 a new bill is being presented to parliament under a Gazette Notification issued on 8th August.
View the full transcript of the Gazette Notification Here: http://documents.gov.lk/Bills/2014/land/landE.pdf
Summary of Gazette Notification pertaining to foreign ownership:
Any foreign national wishing to buy a freehold title can purchase shares up to a maximum of 49% in a local company that subsequently buys a property. Thereafter further transfer of shares within said company to a foreigner above 49% in total can only be made after a period of 20 years. In this instance a foreigner may use a local friend or nominee for the purpose of holding the balance shares in the company.
A stamp duty of 4% is due on any purchase of property, however if the property is already the sole asset of a locally owned company and the company is transferred to the foreign buyer and his local partner then only a share transfer tax of 0.5% is payable.
A foreigner, or a local company where any foreign shareholding is 50% or more, may purchase a lease of up to 99 years. However this is subject to a 15% Land Lease Tax in addition to the 1% stamp duty.
An exception to this rule is if the purchaser is a local company with 50% or more foreign shareholding and has been in operation for 10 consecutive years or more. In such instance the Lease Land Tax is reduced to 7.5%.
A foreigner, or a local company where any foreign shareholding is 50% or more, may purchase a condominium apartment on the 4th floor or above without any restrictions, as specified in the Apartment Ownership Law.
Please note that the above is still being debated in Parliament so please contact us for any updates. The most important thing is to shop around for the best lawyers who not only understand the latest amendments to any land laws pertaining to foreign buyers, but most importantly are thorough in their title search.