Guide To Buying Property
Foreigners and expats can invest in real estate in Sri Lanka under specific regulations. This guide clearly explains the permitted ownership structures, legal requirements, taxes and duties, lease options, visa considerations, and key investment rules involved in buying or leasing property in Sri Lanka.
1. Can Foreigners Buy Property In Sri Lanka?
Yes, foreigners can invest in Sri Lankan real estate, subject to specific legal restrictions.
Foreigners can legally purchase:
•Apartments / Condominiums located above the ground floor of a registered condominium project
•Property through a Sri Lankan private limited company with 51% or more local shareholding
•Property as Dual Citizens of Sri Lanka (no foreign ownership restrictions apply)
•Shares in Sri Lankan public-listed real estate companies
Foreigners cannot purchase freehold land in their personal name.
However, foreigners may lease land for a period of up to 99 years, subject to government approval and applicable taxes.
Important Payment Requirement for Apartments
When purchasing a condominium, the full purchase price must be paid upfront via inward foreign remittance through a Sri Lankan bank before the transfer deed is executed. Proof of remittance is mandatory.
2. Legal Entry Options For Foreign Buyers
Foreigners may access the Sri Lankan property market through the following legal pathways:
a) Leasing property (long-term lease up to 99 years)
b) Inheriting property (subject to inheritance laws and possible transfer restrictions)
c) Receiving property as a gift from parents (special exemptions may apply)
d) Purchasing through a private limited company with more than 50% Sri Lankan ownership
e) Investing via a locally listed public company engaged in real estate
f) Buying apartments or condominiums above ground level
g) Obtaining Sri Lankan Dual Citizenship, which allows unrestricted property ownership
Each option carries different tax implications, approval requirements, and compliance obligations.
3. Establishing A Private Limited Company To Purchase Real Estate
Foreign investors may legally acquire land or property in Sri Lanka by forming a Sri Lankan Private Limited Company, provided foreign shareholding does not exceed 49%.
Key Steps Involved:
Obtain required government approvals, sector-specific permits, and a business visa (if applicable)
Choose an appropriate business structure (Private Limited Company is recommended)
Register the company with the Department of Registrar of Companies
Open a Sri Lankan bank account in the company’s name
Verify land eligibility and obtain any required regulatory approvals
Complete the property purchase once all approvals are granted
This process involves corporate law, foreign exchange regulations, and land ownership rules.
Professional legal, tax, and corporate advisory support is strongly recommended to ensure full compliance.
4. Buying Land In Sri Lanka
Freehold land ownership by foreigners is prohibited under the Land (Restrictions on Alienation) Act (effective from 2013 onwards).
Foreigners cannot own land in their personal name.
Land may only be acquired through:
Long-term leasehold arrangements of up to 99 years
Approved corporate structures (Sri Lankan companies with >51% local ownership)
Dual citizenship status
Leasehold Tax
The former 15% lease tax on foreign land leases was abolished from 1 January 2016 under the Land (Restrictions on Alienation) Act Amendment.
However, standard stamp duty and registration fees still apply to lease agreements.
5. VAT & Taxation On Property Purchases
Apartment / Condominium Purchases (Primary Market)
VAT: 18% (applicable from 2024 onwards)
Applies to developer sales / first sale transactions
SSCL (Social Security Contribution Levy): 2.5%
Applies only to primary market sales, not resale (secondary market), unless sold by a VAT-registered entity.
Stamp Duty
Transaction Type | Applicable Duty |
|---|---|
Land lease (up to 99 years) | 1% |
Property purchase | 3% on first LKR 100,000 + 4% on balance |
Typical legal fees | 2% – 3% of transaction value |
Registration fees
Notary fees
Survey fees
Valuation reports (if required)
6. Taxes For Property Owners & Landlords
Stamp Duty on Rent:
1% stamp duty applies when rental income is collected
VAT on Leasing:
VAT applies if leasing to VAT-registered entities
Residential leasing is VAT-exempt
Commercial leasing is VAT-applicable
VAT on Sale:
Applies to non-residential/commercial property sales by VAT-registered entities
Does not apply to private individual residential resales (non-VAT entities)
7. Capital Gains Tax (CGT)
10% flat Capital Gains Tax applies from 1 April 2018
Exemptions:
- Gains below LKR 50,000
- Property used as principal residence for 2 out of the last 3 years
- Properties acquired before April 2018 are valued as of 30 September 2017 for CGT calculation
Tax Residency Rule
If a foreigner becomes a tax resident in Sri Lanka, CGT may also apply to global capital gains, including overseas investments, subject to double taxation treaties.
8. Residency Visas Through Real Estate Investment
| Investment | Visa Duration |
|---|---|
| USD 200,000+ | 10-year renewable visa |
| USD 100,000+ | 5-year renewable visa |
Conditions:
Funds must be remitted through an IIA (Inward Investment Account)
Property investment must be legally compliant
Proof of inward remittance is mandatory
Subject to immigration and BOI regulations
9. Mortgage & Financing
Foreigners cannot obtain mortgages from Sri Lankan banks
Eligible for financing:
- Dual citizens
- Non-resident Sri Lankans (NRSL)
- Financing is subject to:
Local income verification
- Foreign income assessment (case-by-case)
- Central Bank regulations
10. Moving Money In & Out Of Sri Lanka
Property purchases must be made through an IIA – Inward Investment Account
(formerly known as SIA – Securities Investment Account)
Repatriation Rights
- Sale proceeds + capital gains can be fully repatriated through the same IIA account
- If the original purchase was not made via IIA:
- Annual outward remittance limit: USD 20,000 per year
Inward Transfers
Up to USD 45,000 may enter Sri Lanka without formal source declaration (Budget 2017 provision)
Financing Proposal (Policy Reference)
Budget 2017–18 proposed allowing foreigners to borrow up to 40% for condominium purchases
(Note: Implementation depends on Central Bank regulatory approval and bank policies)