Varners
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
Foreigners and foreign companies are prohibited from directly or indirectly owning immovable property from 1 January 2013. However, this prohibition does not apply to the purchase of condominium units, acquisition of land by listed companies that are majority foreign owned, acquisition of land for Strategic Development Projects, and other exempt categories. They may also invest in property-owning companies, provided foreign shareholding does not exceed 50%, and they may lease land for up to 99 years. All such transactions are subject to taxes, including stamp duty and capital gains tax, depending on the investment structure.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
As a general rule, funds for real estate investments by foreign companies must be raised offshore and remitted to Sri Lanka through official banking channels in designated foreign currencies. Local financing is not available for foreign entities purchasing condominiums or investing in land-owning companies. Additionally, any land owned or leased by foreigners or foreign companies cannot be mortgaged or pledged to a bank for five years from the date of the transfer or lease. Offshore borrowing is permitted but must comply with Sri Lanka’s foreign exchange regulations, including approval by the Central Bank where applicable.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
Stamp duty is payable by the buyer, to the relevant Provincial Council, at 3% on the first LKR 100,000 of the market value of the property and 4% on the balance value. Legal fees for conveyancing, typically 1% to 3% of the transaction value, are paid to the notary public attesting the deed and generally cover registration, notarial charges, title search, and due diligence costs. Condominium purchases from VAT-registered developers may attract 18% VAT on the sale amount. Sellers are also liable for a 10% Capital Gains Tax on any gain from the sale.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
Properties in Sri Lanka are subject to local government taxes, such as assessment rates, calculated on the property’s annual value and payable to the relevant local government authority. These taxes are legally the owner’s responsibility. However, unlike in some jurisdictions, it is uncommon for owners to pass these tax burdens onto tenants or occupiers through lease agreements. While such cost-shifting can be contractually agreed upon, it is not a widespread practice due to their perceived risk. There is no national annual property tax.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
No such tax breaks or other incentives are available.
How is the ownership of Real Estate evidenced in your jurisdiction?
Ownership of real estate is evidenced primarily through a title deed, which is a legal document executed before a notary public and registered with the relevant Land Registry. The title deed evidences the transfer of ownership rights from the seller to the buyer. Registration of the deed with the Land Registry is essential to perfect and protect ownership rights against third parties. For land under the Registration of Titles Act, ownership is evidenced by a title certificate issued by the Title Registry, reflecting the registered owner’s details. For leasehold properties, a lease deed registered with the Land Registry serves to protect the lessee’s rights over the lease term.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
Real estate ownership details are recorded in the relevant Land Registry or Title Registry, which are public records accessible to anyone upon request. Consequently, the identity of property owners is not confidential. While nominee ownership arrangements are sometimes used, these do not guarantee true confidentiality and may raise legal and regulatory risks, especially under anti-money laundering laws.