From January 1st 2013 the Government of Sri Lanka took measures to prevent foreign investors from buying freehold title and in October 2014 they introduced a new system whereby foreign investors acquire land for up 99 years on lease. As of January 1st 2016 stamp duty on leases is just 1%. This seems very attractive but many lawyers are advising foreign buyers to buy land in corporate structure as leasehold law is not clearly understood.
If a foreign investor feels uncomfortable with a lease and wants to exercise control over the freehold title they can purchase it in the name of a company provided the company is held 51% by a local Sri Lankan national. We can recommend lawyers who can help make this safe for the foreign investors, using nominees who are well controlled by legal structures and agreements and making it easy for the foreign owner to sell the property on when they so desire.
There also other legal exceptions in favour of foreign investors which we can advise buyers in person.
It is anticipated that in 2016 there may be some more small changes in the law that are favourable to foreign investors.
Bringing money into and out of Sri Lanka.
Whichever method is used to buy a property the foreigner should open a special kind of bank account to remit funds in an out Sri Lanka. All reputable banks will be gald to help set up an SIA account. SIA stands for ‘Share Investment External Account’. All the money brought into Sri Lanka should go through the S.I.A. account (Share Security Investment Account) and must be used for investment in shares or leases. As and when the shares are sold the foreign investor is entitled to repatriate all the initial investment and of course any profits. Foreign investors are not liable to tax on any profits made on the sale of shares. Capital Gains Tax is not applicable in Sri Lanka. We are awaiting advice if there will be any tax on the transfer of a lease.
It is anticipated that in early 2016 the Government might remove exchange control restrictions making the S.I.A. account redundant.
Sale of Property.
When the time comes to sell property, if selling to a local, there is no issue. If a foreign buyer is found and the property is held in a company, the foreign seller can simply sell the shares of the company to the foreign buyer, place the funds into their S.I.A. account, and repatriate their funds..
Mortgages, borrowing and gearing up.
49% Foreign owned companies can borrow from Sri Lankan banks but interest rates are high and the process is slow. It is now quite legal to borrow money from outside the country provided income generated to service the loan from earnings in foreign currency .
That said, the economy in Lanka is rapidly growing and improving, interest rates are coming down. The Sri Lankan Inter-bank rate is at about 7% as of January 2016) and getting bank loans has become easier. We will be happy to assist if needed. However, loans are still expensive compared to many countries.
Our Fees and purchasing costs.
Typically the costs likely to be incurred by foreign investors buying property in Srilanka are as follows; Legal fees at between one and two per cent, agents’ commissions at up to five per cent, stamp duty of between four and 100 per cent depending on the method of purchase, stamp duty on leases of 0.5%, issuing and transfer of shares at 0.5% , survey fees depending on the size and nature of the property and valuation fees..
Most agencies such as ourselves charge buyers of property in Sri Lanka up to five per cent of the agreed purchase price but do not let this be a reason for contacting us as we are ble to consider waiving this for some properties.
Our services include.
you find property that suits your requirements.
Generally advising on buying in Sri Lanka and on the property market in Sri Lanka.
Where necessary recommending the best lawyers, accountants, surveyors and valuers.
Working with your lawyers to ensure that the property you want has good title.
Working with surveyors to ensure the extent of the land and the boundaries are correct.
Working with accountants to ensure your investment is tax efficient.
Where necessary working with accountants, company secretaries, lawyers and banks to set up companies and company bank accounts and assist with the transfers.
Assistance with the opening of the SIA accounts.
Advising and assisting on the sending of funds in and out of Sri Lanka
Overseeing and attending the signing of contracts.
After sales service includes general advice on living in Sri Lanka, cultural issues, employment issues and of course visa issues. We are always at hand to make further introductions to the best professionals in any field such as architects, builders, contractors and project managers.