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Sri Lankan Law Forum » Property Law Forum » Taxes on acquisition and transfer of real estate

Taxes on acquisition and transfer of real estate

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Stamp duty on a deed of transfer is as follows:
3 percent for the first USD 751 (LKR 100,000)
4 percent for every USD 751 (LKR 100,000) or part thereof

Stamp duty on a lease agreement is USD 0.1 (LKR 10) for every USD 7.5 (LKR 1,000) or part thereof. Additionally, 15 percent of the total rental is payable by way of Land Tax in the following cases:

A. To a foreign individual
B. A foreign company
C. A company incorporated in Sri Lanka where any foreign shareholding in such company either directly or indirectly is 50 percent or above
A lesser rate of 7.5 percent of the total rental is payable as Land Tax in the following cases:
A. Lease of land to a company incorporated in Sri Lanka (direct or indirect foreign shareholding exceeding 50 percent) which has been in active operation in Sri Lanka for a consecutive period of 10 years immediately prior to the lease
B. Land transferred to a subsidiary if the holding company
(incorporated in Sri Lanka and which in turn is held more than 50 percent by a foreign company) has been in active operation for a consecutive period of 10 years immediately prior to the lease and the holding in the subsidiary is more than 50 percent
C. Condominium parcels situated on or above the fourth floor where the period of lease is less than 35 years
D. Condominium parcels situated below the fourth floor where the period of lease is more than 99 years
E. Lease of land in a Special Licensed Zone. Tourist Development Area, Industrial Estate or any areas declared by the Minister
F. Lease of land by a company where the Cabinet of Ministers decides having taken into consideration that a substantial foreign investment has already been realised by such Company into the related sector that such reduced tax rate is justifiable in order to ensure level playing field among its competitions in the related sector

Exemptions from the lease tax

A. Lease of land to
• Diplomatic Missions of another State or International, Multilateral or Bilateral Organization recognised within the meaning of the Diplomatic Privileges Act
• Dual citizens of Sri Lanka
• A foreign investor in consequent to a decision of the Cabinet
taken prior to January 1, 2013 involving direct investment of foreign currency, as per the related agreement on such investment, and structured on the basis of any written law governing the tax regime prior to January 1, 2013 and has ensured compliance by making inward remittances to Sri Lanka

B. Long term lease (more than 35 years) of a condominium parcel situated on or above the fourth floor provided the lease rental for the full period is paid through foreign inward remittance
C. Lease of land in a Bonded Area or a Free Port
D. Lease of land with the Special Cabinet approval and order published in Gazette by
• Strategic Development Projects engaged in certain sectors • Foreign company engaged in international commercial operations where land is leased to locate or relocate its global or regional operations or to setup a branch office Stamp duty is usually payable in the event of a transfer by the
purchaser and in the event of a Lease Agreement by the lessee, unless the lessor and the lessee have an agreement to the contrary.

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