According to the Land (Restrictions on Alienation) Act, No. 38 of 2014, it was stated that foreigners are prohibited from purchasing property from ground level to the fourth level while land can be leased up to 99 years. In accordance with the amendment to this Act, foreigners or organizations with over 50% foreign ownership are exempted from paying the land tax of 15% as of 1st January 2016. The removal of this land lease tax was a huge benefit as investing in Sri Lanka’s real estate sector became more appealing to investors, causing a growth in demand for property in smaller towns and cities, such as Mirissa.
The regulations also stipulate that anyone leasing a condominium or another property to a local or foreigner will incur a stamp duty of 1% [GN1] when the rent is received. If the lease is to a VAT registered person, VAT is payable at 15%.
Foreigners who wish to buy a property should channel the money into the country with a Securities Investment Account from a locally based bank. After the property is purchased, the money transferred can be withdrawn (including any gains) in the same currency it was deposited in.