Financial issues and questions.
Pearl properties operate as an estate agency and we do not pretend to be accountants or lawyers but having said that it is definitely part of our mission to help you safely through the maze On this page we try to set out in layman’s terms our understanding of the financial and taxation issues pertaining to foreign investors in Srilanka. Before taking any action you must consult reputable lawyers and accountants for advice. We will be happy to recommend first class professionals to assist you in this process.
Taxes due on the foreign ownership.
In 2004 the government of Sri Lanka reintroduced a 100 per cent tax on property bought in the name of a foreigner. This tax was bought in as a political measure to appease the left wing who were blaming a property boom on an influx of foreign investment. And the result of this tax is that it is now prohibitively expensive for a foreigner to think about buying a property in Srilanka in their own name. However, there are legal exceptions to the tax. For instance, it does not apply if a foreigner purchases a property above the fourth floor of any building. Also, there is no reason why a foreigner cannot buy a company that owns a property. Part of our service is to assist foreign buyers to purchase the property of their dreams tax effectively. To do this we work hand in hand with reputable professionals on our buyers behalf.
Bringing money into and out of SRI Lanka.
Once you have decided to buy a property in Sri Lanka you would be well advised to do it through a company. In order to buy shares in a company in Srilanka it is necessary for a foreigner to open a SIERA account. (hyperlink to page on SIERA account) SIERA stands for ‘Share Investment External Rupee Account’. All monies bought into Sri Lanka should go thru the SIERA account and used for investment in shares. When of the shares are sold the foreign investor is entitled to repatriate all the initial investment and profits. Foreign investors are not liable to tax on any profits made on the sale of shares.
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 buyer can simply sell the shares of the company, place the funds are in the SIERA account, and repatriate the monies.
Mortgages, borrowing and gearing.
At present in Sri Lanka, to our knowledge, there are no facilities foreigners to borrow against their properties. If a property is held in a company, in theory, banks may be prepared to lend. However, in practice this is not simple. Up until recently interest rates have been so high that in any case borrowing against property would have been prohibitively expensive.
The economy into Lanka he is rapidly improving, interest rates are coming down and we anticipate that it won’t be long before banks begin to relax there are constraints against property lending. If we have any news of this we will announce it in our newsletter.
Meanwhile, for a foreign investors its cash only.
Our Fees and purchasing costs.
Typically the costs of foreign investor or inland or property in Srilanka can expect to need to meet 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 the transfer of shares where applicable and survey fees.
Most agencies such as ourselves charge buyers of property in Sri Lanka up to five per cent of the agreed purchase price.
Our services include;
Helping you find property that suits your requirements.
Generally advising on buying in Srilanka and on the property market in Sri Lanka.
Where necessary recommending their lawyers, accountants and surveyors.
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 and lawyers and banks to set up companies and company bank accounts.
Assistance with the opening of the SIERA accounts.
Advising on the sending of funds.
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 and contractors, project managers are
Our fees and sales costs.
Like all agents in Srilanka we charge a sales commission in the event that we successfully introduce you to a buyer. Our sales commission is up to 5 per cent depending on value and ease or difficulty of sale.
There are meet the summer legal and accounting fees involved in arranging the sale of a company’s shares but that these are not generally significant.
Our services include;
Advising on the state of the market.
Advising on the value of the property to be sold.
Advising on what actions can be taken to increase the marketability of the property.
Helping me resolve the issues with the deeds and boundaries.
Marketing your property on our website and over the internet.
Marketing your property to other agents.
Overseeing the signing of contracts.
Ensuring that funds reach your accounts and are dealt with in a manner that will enable sales funds to be repatriated.