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Land Act

Acquisition of Land in Sri Lanka by Foreigners

Law applicable for instruments executed after 1st of April 2018

The foreign investors are eligible to lease lands in Sri Lanka to establish their projects.  A new land law was promulgated in 2014 (as amended in 2017 and 2018) which permitted lease of land for foreign investments and outright transfers will only be permitted when the foreign shareholding is less than 50%. The land lease period is subject to a maximum tenure of 99 years. Foreign investors are not liable pay any lease tax when leasing a land. However condominium properties can be purchased outright with no restrictions on nationality.

Outright Transfers

Acquisition of land by foreigners, foreign companies or Sri Lankan companies with more than 50% foreign shareholding is prohibited subject to a few exemptions.

The following table provides the restrictions (Section 2), exemptions to the law (Section 3) and some conditions that needs to be fulfilled in this regard.

 

Restrictions  Exemptions Conditions/Remarks
Section 2 (1)

The transfer of Title of any land situated in Sri Lanka, shall be prohibited to;

  1. A foreigner
  2. Sri Lankan company with 50% or above foreign shareholding
  3. A foreign company
            Section 3 (1)

  1. To Diplomatic Mission of another State or to an international, Multilateral or Bilateral Organization (DP Act)
  1. A condominium parcel specified under the Apartment Ownership Law (entire value to be paid upfront through an inward remittances)
  1. Transferred to a foreign investor in consequent to a Cabinet Decision prior to January 1, 2013 as per an agreement structured under tax regime prior to 01-01-2013 and has ensured compliance through inward remittances
  1. Transferred by intestacy, gift or testamentary disposition to a next of kin (who is a foreigner) of the owner of such land
  1. To a dual citizen of Sri Lanka
  1. Transfer of a land to any bank with 50% foreign shareholding at an auction or execution of  a decree of court for recovery of loans
  1. Transfer of a land to any Finance Leasing Institution with 50% foreign shareholding
    1. Where such land has been mortgaged
    2. To execute a lease or
    3. A decree of court to enforce the recovery of a loan
  1. Any land, transferred to a company with   50% foreign ownership from 01.01.2013 t0 29.10.2014 (certification date), if such company has been in active operation in Sri Lanka for a period not less than 10 consecutive years
  2. Any land transferred on or after 1st April 2018 to a Sri Lankan company with 50% foreign shareholding, listed in the Colombo Stock Exchange.
To allow transfer of land:

Section 2 (a)

  • Less than 50% of foreign shareholding shall be maintained for a minimum period of consecutive 20 years from the date of such transfer.

Section  2 (b)

  • When foreign shareholding of a company

50%;

  • transfer of the land becomes null and void
  • shareholding to be reduced to < 50% within
    • 6 months

 

Leasing of Lands to Foreigners

Section 5 (1)

The Leasing of Land shall be effected to;

(a) a foreigner

(b) Sri Lankan company with 50% or above foreign shareholding

(c) a foreign company

subject to a maximum tenure of 99 years.

Section 5A: The above three transactions are not subject to land lease tax.  (The land lease tax which was introduced in the Land (Restriction on Alienation) Act 2014 was withdrawn with effect from 1st January 2016.)