Our Sri Lankan office will help foreign buyers through the buying process and with the help of each project’s dedicated legal and accounting firms. In addition, our team can help you with the following administrative and logistical processes:
- Exchanging currency: we have a forex partner in London who does large trades every day and always gets a better rate than a regular bank
- Arranging finance
- Furnishing your apartment
- Recommending insurance
- Finding and facilitating storage of your possessions in between your stays on the island
- Advice on visas
- Transportation and tours
- Health/finding a local doctor
- Opening IIA & local bank account
- Any other professional services
Some of these services can take up considerable time to manage and complete and therefore in some circumstances, we offer a paid concierge service to ensure your requirements and tasks are completed efficiently.
What are the rules and regulations for foreigners buying and renting property in Sri Lanka?
Foreign nationals can buy freehold condominium properties as freehold properties in Sri Lanka and apply for a 5 or 10 year visa when they buy.
If a foreigner wants to buy a villa or house then this requires a different approach: our lawyers will create a company and the foreign buyer will have full authority and economic rights over the company.
Our team on ground will be your single point of contact in choosing a Legal Counsel, opening the required bank accounts as well as guiding you through the execution of the deed of transfer.
Step by Step Process:
- Identify Property of your choice for acquisition via Kristall Spaces website https://property-srilanka.com/
- Due Diligence – conducted by Kristall Spaces Lanka or buyer visiting Sri Lanka
- Reservation of Property and initial Booking paperwork to be completed
- Opening of Bank Accounts in Sri Lanka and wiring funds; retaining Lawyers for paperwork; consultation with Tax Professionals (if needed)
- Execution and Signing of Agreements & Transfer of funds
- Rental options – to be discussed with developers who would promote the rental of the property in the absence of the owner.
Rates and Taxes:
- Stamp Duty: A one-time tax calculated as 3% on the first LKR 100,000 of the property’s value and 4% on the remaining value.
- Value Added Tax (VAT): While not applicable on resale by an individual, all new apartment sales by a developer are subject to VAT at 18%.
- Social Security Contribution Levy (SSCL): A 2.5% tax on the developer’s “liable turnover”. Developers typically pass this cost to the buyer, and it is often paid with each stage payment. This depends on your Sales and Purchase Agreement (SPA).
Capital Gains Tax
- Capital Gains Tax (CGT): If you sell for a profit, the gain is subject to CGT. For an individual, the rate is 10% on the gain (calculated as Selling Price minus Acquisition Cost). An announced increase to 15% has no set implementation date.
For more detailed tax information on buying and selling an apartment as a foreigner please read this article What are the taxes and acquisition costs when buying property in Sri Lanka?
Other frequently asked questions:
Are these properties ownership freehold? Yes. Sri Lankan Nationals and Foreigners will obtain a freehold title.
What are the anticipated maintenance services charges per square foot? The charges may vary from $0.20 to $0.35 per Sqft but USD 115 per month for a one bedroom unit can be expected.
What is the projected capital growth? Beachfront real estate prices have risen 84% in Sri Lanka over the past 5 years. Past increases do not guarantee future performance, but all indicators suggest that this trend will continue.
Can foreigners purchase apartments? Foreigners can purchase apartments and require an Inward Investment Account (IIA) to be opened in any bank in Sri Lanka in order to bring-in funds. This is vital as all investment brought into Sri Lanka can be taken out via the same channel including capital gains in the event of a sale.
Can I transfer funds directly from my account to the seller? Only if it originates from Sri Lanka. Any transfers originating from overseas must be first transferred to the IIA account and thereafter transferred to the seller.
Can I pay for my apartment using cash? Cash transactions are not accepted. Only bank-to-bank transfers.
Do I require a lawyer? Yes. The legal team / lawyer must be based in Sri Lanka. If you do not have legal representation, we can recommend some. A lawyer is required to sign the Sales & Purchase Agreement and at the time the Deeds are being transferred. If you are buying offplan then the developer will normally have an appointed lawyer to manage the conveyance for all buyers during the different stage of the build. Market convention is typically 1% to 3% of the property’s declared value, but this is negotiable.
Who will manage the apartment rentals on my behalf? There are a number of established operators who can look after your apartment and manage the rental business for you including generating and managing rental guests and housekeeping. All-Suite Resorts is a renowned operator in Europe and will be starting to operate some exclusive apartment projects in the South.
What is the projected average occupancy when the building is completed? Occupancy varies but according to the Sri Lanka Tourism Development Authority (SLTDA), prior to 2019, the Southern Coast area maintained a steady hotel occupancy rate of over 70%.
What are the projected yields from rental? Projected yields vary for each project but typically 6% and upwards is achievable, however, this is not guaranteed and will depend on the type of rental agreement and tourist arrivals.
