A common question we get from clients is whether foreigners can buy property in Sri Lanka. If you’re a Sri Lankan citizen living abroad, purchasing property is straightforward. However, if you’ve acquired citizenship in another country, things can get more complicated, as gaining foreign citizenship might revoke your Sri Lankan citizenship. It’s crucial to consult with a lawyer to understand your specific situation before making any property purchases.
If you’re a foreigner interested in buying property in Sri Lanka, understanding the legalities and options available is crucial. This simple guide will help you navigate the process and make informed decisions about property ownership in Sri Lanka.
Can Foreigners Directly Buy Freehold Land in Sri Lanka?
No, foreigners cannot directly purchase freehold land in Sri Lanka. This restriction is outlined in the Land (Restrictions on Alienation) Act No. 38 of 2014. The law prohibits foreigners and foreign companies from acquiring freehold land in their own name or through direct ownership structures.
Can Foreigners Own Condominiums in Sri Lanka?
Yes, foreigners can own condominium units located on or above the fourth floor. This exception is provided under Act 21, which allows ownership of such properties if they are registered under the Apartment Ownership Law. Ensure the property is officially registered as a condominium to qualify for this exception.
What Are the Alternatives to Freehold Ownership for Foreigners?
- Leasehold: Foreigners can lease land for up to 99 years. This long-term lease provides a viable alternative to freehold ownership.
- Company Structures: Foreigners can establish a Sri Lankan company to acquire freehold property. A local trustee must hold at least 51% of the company’s shares, allowing the foreign investor to control the property through the company.
What Taxes Are Involved in Leasing or Purchasing Property?
- Stamp Duty on Leases: A 1% stamp duty is applicable for leasing land up to 99 years.
- Stamp Duty on Purchases: For property purchases, the stamp duty is 3% on the first LKR 100,000 and 4% on the amount exceeding this threshold.
- VAT on Apartment Sales: VAT on apartment sales was abolished as of December 1, 2019, simplifying the purchasing process.
Are There Additional Taxes for Foreign Buyers?
No, there are no additional taxes specific to foreign buyers when acquiring freehold or leasehold property. However, the previous 15% land tax on leasehold arrangements was removed under Act 3 of 2017.
Can Foreigners Obtain Residency Through Property Investment?
Purchasing property alone does not grant residency. However, foreign investors can obtain residency through specific visa programs:
- Resident Guest Scheme Visa: Investment of USD 250,000 qualifies for a 5-year visa, USD 300,000 for a 10-year visa, and USD 15,000 for a 2-year renewable visa for individuals over 55 years old.
- Golden Paradise Visa Program: This program offers a 10-year residency visa with a minimum deposit of USD 200,000 in a local bank. The visa allows investment in government-approved projects, leasing land, and purchasing condominiums.
Can Foreigners Obtain a Mortgage for Property in Sri Lanka?
Foreigners cannot obtain mortgages from local banks in Sri Lanka. Dual citizens and non-resident Sri Lankans are eligible for mortgages. For assistance with mortgage applications, please contact us.
How Should Foreigners Transfer Money for Property Transactions?
Use Inward Investment Accounts (IIAs): Funds must be channelled through an IIA at a local bank. This account type ensures compliance with regulations. Upon selling the property, funds can be repatriated via the same account, including any gains.
What Are the Limits for Transferring Money Out of Sri Lanka?
- Annual Limit: USD 20,000 can be transferred out of the country annually if not using an Inward Investment Account (IIA).
- Budget 2017: Allows for USD 45,000 to be brought into Sri Lanka without declaring the source.
What Are Some Common Misconceptions About Foreign Property Ownership?
- 100% Tax on Freehold Land: No such tax exists. Foreigners cannot acquire freehold land directly.
- 7% Tax on Leasing: The tax on leasing was removed in 2017, and outdated information may still circulate.
- Two-Company Structures: Complex structures involving multiple companies should be approached with caution due to legal restrictions on foreign shareholding.
Sri Lanka offers diverse opportunities for property investment, including leasing land and owning condominiums. By understanding the legal framework and exploring available options, foreigners can make informed decisions about property ownership in Sri Lanka. If you are a foreigner looking to buy a property in Sri Lanka, for personalized assistance please reach out to or visit The New Sri Lankan House for further information on completed homes, prime bare lands, boutique hotels, and villas for sale and lease within Sri Lanka.
