Investing in Sri Lankan real estate offers compelling advantages for foreigners. The Sri Lankan economy’s openness to the private sector, facilitated by low barriers and favorable policies, creates a conducive environment for foreign investments. Foreigners can freely buy properties, with the only requirement being the payment of the Land Tax at 100% of the property value. Expanding business operations is simplified for foreigners, who can invest in real estate through various avenues, such as direct property acquisition or investing in property firms. Additionally, Sri Lanka’s popularity as a tourist destination enhances the potential for lucrative returns on real estate investments, attracting elite individuals and investors globally. Despite challenges like residency issues, the prospect of better incentives and a favorable economic climate make Sri Lankan real estate an attractive option for foreign investors
Investing in Sri Lankan real estate as a foreigner involves understanding the legalities and regulations surrounding property ownership. Here’s a comprehensive guide:
What are the rules and regulations for expats and foreigners buying and renting property in Sri Lanka?
Foreigners can buy apartments / condominiums from ground level up, however lands cannot be purchased on freehold and can only be leased up to 99 years. A condominium is defined as a group of residences with shared facilities. The condominiums can be purchased provided that, the entire value shall be paid upfront through an inward foreign remittance prior to the execution of the relevant deed of transfer.
Any private company with minority (Upto 49%) foreign ownership can buy or lease property in Sri Lanka.
Under the current legislations, a foreigner can get in to the property market using the following options:
a) By leasing the property
b) By inheriting
c) By a gift from parents
d) Part of a private company with a local shareholding of 50% or above
e) As a part of a locally listed public company
f) Buy an apartment / condominium (any floor)
g) By obtaining Dual Citizenship
VAT on apartment sales
The VAT tax on apartment sales has been abolished, effective 1st Dec 2019. A 15% VAT tax was affective from 1st April 2019 to 31st Oct 2019 and a 6% rate from 1st Nov 2019 to 30th Nov 2019. Buyers no longer need to pay VAT tax on the purchase of an apartment / condominium.
Taxes for Property
There is a 1% Stamp Duty for leasing land up to 99 years.
If buying a property, there will be a 3% Stamp Duty on first LKR 100,000 and 4% thereafter. A lawyer will typically charge 2-3% for preparing the documents.
Residency Visas
A residency visa cannot be obtained by simply buying a property. However, Foreigners who invest over USD 250,000 will be allowed residence visa in Sri Lanka under the Resident Guest Scheme Visa programme. A 5-years visa can be obtained by investing USD 300,000 or above and a 10-year visa for any investments over USD 500,000. Anyone over 55 years old can obtain a 2-year renewable visa under the My Dream Home Visa Programme by depositing only USD 15,000.
The Golden Paradise Visa Program is a long-term residency programme intended for investors who want to enjoy Sri Lanka while contributing to its booming economy. This programme provides investors and their families with long-term benefits.
The following are the eligibility requirements for the Golden Paradise Visa Program.
1)Establish a Golden Paradise Foreign Currency Account (GPFCA) and deposit at least USD 200,000 in a local bank regulated by the Central Bank of Sri Lanka (Investor may withdraw up to 50% of the minimum investment amount after one year from the date of visa issue).
2)Documents proving the deposit confirm the payment transfer
3)Police clearance report obtained within 6 months by the country of residence
4)A medical report from a licenced local hospital stating that all candidates are free of Malaria, Filariasis, Tuberculosis, and HIV/AIDS.
5)A copy of the passport’s Bio Info Page
6)Marriage Certificate, Police Clearance reports, and birth certificates of dependents obtained from the spouse’s place of domicile.
7)A completed application for a residence visa
8)A completed Personal Particular Form
Under the Golden Paradise Visa Scheme, visa holders can invest in a government-approved investment, obtain lands and buildings under lease, purchase condominium projects in the country as well as purchase Sri Lanka Development bonds.
The validity period of this visa is 10 years and a visa fee of USD 2000 is payable for 10 years. The visa can be renewed after 10 years and our Buyer and Seller Assistance program can help you with the process.
Moving money in and out of the country
If a foreign resident wants to purchase a property, then the money will need to be channeled in to the country via a special SIA (Securities Investment Account) – which are now called Inward Investment Accounts (IIAs), held at a local bank. Once the property has been sold, the money can be taken out (plus any gains) via the same account in the currency that the money was deposited in. If you currently own a property where the money hasn’t been brought via a SIA account (eg. inherited, bought while a citizen of Sri Lanka), then there’s an annual limit of $20,000 when taking the money out of the country. You could still take the money out at once, if the source of the money can be proven to the bank and Central Bank (this whole process will take a few months to complete).
The government will allow $45,000 to be brought in to the country without declaring the source (Budget 2017)
The budgets of 2017 & 2018 have proposed that foreigners be allowed to borrow money from local banks for the purchase of condominiums (up to 40%).
Can You Buy Land in Sri Lanka as a Foreigner?
The Sri Lanka Land Reclamation and Development Corporation Act, No. 15 of 1968 and Land (Restrictions on Alienation) Act No. 38 of 2014 make provisions to stipulate restrictions on the transfer of title of any land situated in Sri Lanka.
The Land (Restrictions on Alienation) Act 2018 has made it illegal to transfer the ownership of any land located in Sri Lanka, starting from 1st January 2013, if the person or entity receiving the ownership is:
1) a non-citizen,
2) a company registered in Sri Lanka that has 50% or more of its shares owned by foreign entities, or
3) a foreign company.
Starting from 1st April 2018, it is now allowed for public companies that have more than 50% of their shares owned by foreign entities to purchase immovable real estate properties.