What are the rules and regulations for expats and foreigners buying and renting property in Sri Lanka ?
Foreigners can purchase land and property (from ground up), as proposed by the 2017 budget. Previously land could only be leased up to 99 years and apartments purchased from 4th floor and above only.
Private companies with majority foreign holdings will be allowed to lease land on a long-term basis. However, such companies should have invested at least 250 million rupees excluding the value of land providing employment to at least 150 people, and have maintained this for at least three years.
Sale of land to foreigners has been prohibited from the 2013 budget, however this is likely to be removed from the 2017 budget allowing foreigners to purchase land. Previously the land could only be leased out for a max of 99 years. Foreigners or companies (with more than 50% foreign ownership) no longer need to pay the 15% land tax from 1st Jan 2016 (LAND (RESTRICTIONS ON ALIENATION) (AMENDMENT) - issued 2nd Sept 2016)
Taxes for landlords
Anyone leasing out a property to a foreigner or local will need to pay a 1% stamp duty when the rent is collected.
VAT is payable at 15% if the lease is to a VAT Registered person, other than on residential premises. Further, the sale of land & buildings other than residential premises will also be liable to VAT at 15% on the value.
Capital Gains tax
The 2017 budget proposes a Capital Gains Tax of 10% on the gains, effective from 1st April 2017. No further details are available at the moment, however there is suggestion that 'property bought and sold before the expiry of 10 years would be subjected to the tax'.
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), 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 budget of 2017 has proposed that foreigners be allowed to borrow money from local banks for the purchase of condominiums (up to 40%).