In the recent budget, there are proposals to relax the laws restricting foreign ownership of immovable property as imposed by the Land Alienation Act. Additionally, the Government proposes to introduce capital gains tax (CGT) on the sale of immovable property in Sri Lanka at the rate of 10 % on the realized gain.
FOREIGN OWNERSHIP RESTRICTIONS
It is proposed that foreigners will now be permitted to purchase apartments below the 4th floor. Previously, the law only permitted foreigners to purchase apartments above the 4th floor. It is also proposed that foreigners will permitted to raise up to 40% of the purchase price of an apartment through the local banking system. Previously, the total purchase price had to be remitted into Sri Lanka by a foreign purchaser. The Government is proposing that companies listed on the Colombo Stock Exchange with foreign ownership above the prescribed limit of 50% will be permitted to purchase immovable property. Therefore, the restriction imposed by the Land Alienation Act on foreign owned Sri Lankan companies purchasing immovable property may be removed if such foreign owned companies are listed on Colombo Stock Exchange.
In terms of the Government proposal, a capital gains tax (CGT) at the rate of 10% will be charged on the profits realized on the sale of immovable property. It is proposed that the CGT will only apply where the property is sold within a period of ten years from the date of acquisition. Therefore, any sale after a period of 10yrs from the date of its acquisition will not attract CGT. CGT will not apply to property that is inherited and subsequently sold by the person who inherited it.