·
Purchase
of land & buildings other than by non-citizens
All
such purchases should be registered with the Registrar of Lands by submitting
an instrument called the ‘Deed of Transfer’ attested by a Notary Public.
Such instruments should be properly stamped as provided in the ‘Stamp Duty Law’.
The stamp duty is payable by the purchaser on the market value of the property
@ the following rates :
First Rs. 100,000 – Every Rs.100 or part thereof – Rs.3.00
Balance - Every Rs. 100 or
part thereof – Rs.4.00
The stamp duty
is payable to the relevant Provincial Council which exercises the authority
over the area in which the relevant instrument is executed. Usually, the
relevant Notary Public may attend to these formalities as a part of his
professional service.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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·
Purchase
of land & buildings by non-citizens
Individuals
who are non – Citizens or Companies having more than twenty-five percentum of
issued capital owned by non-citizens.
Normal stamp duty – as mentioned above
Additional duty - @ 100% of market value.
(the lowest value of the property may be specified by the
Minister of Finance)
Exemptions on additional duty :
-
Any property transferred to a licensed bank at an
auction conducted by
such bank in
the discharge of a mortgage of such property.
-
Any property transferred to a Registered Finance
Leasing Institution upon a purchase made by such institution where the property
has been mortgage to such institution as a security for lease, or in order to
execute a lease and an agreement to sell or a loan and an agreement to sell .
-
Any property transferred to a licensed bank or a
Registered Finance Leasing Institution pursuant to an order of court in an
action for recovery of a debt.
-
Any property transferred to a licensed bank or a
Registered Finance Leasing Institution to carry on their business of banking or
finance leasing in such property.
-
Any land transferred to an enterprise authorized by
the Board of Investment of Sri Lanka (BOI) to setup on such land –
(a)
a project to construct not less than one hundred
residential housing
units on a
piece of land not exceeding ten perches for each such unit or a registered
condominium property not less than one hundred units of
residential or non-residential accommodation, if the value of such land
is met by inward remittance of foreign currency
(b)
A
project for a construction and operation of a hospital or a hotel where the
investment is not less than ten million US Dollars and the purchase
consideration of the land is met by inward remittance of foreign currency.
(c)
A project relating to infrastructure development or
any other development approved by the Minister of Finance and where the
investment is not less than fifty million US Dollars and the purchase
consideration of the land is met by inward remittance of foreign currency.
(d)
A project solely for the manufacture of
non-traditional goods for export, for the establishment of its manufacturing
plant, office, storage facilities, dormitories for workers where the investment
is not less than one million US Dollars and the purchase consideration of the
land is met by inward remittance of foreign currency.
-
Any Condominium unit situated on or above the
fourth floor of any approved condominium, if the value of such unit is met by
inward remittance of foreign currency.
-
Any property acquired prior to October 5, 2004 by a
company and transferred to another company on the dissolution of such
transferor company consequent to a merger of the transferee company with the
transferor company.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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·
Mortgages
of land & building
All
mortgages of land & buildings should also be registered with the Registrar
of Lands. The stamp duty on such mortgages was not payable during the
period May 01, 2002 to April 03, 2006. With effect from April 04, 2006 the stamp
duty has been re-introduced on mortgages @ the rate of
Rs.1.00 for each Rs.1000/- or part thereof
of the value of the mortgage.
This
stamp duty is payable to the Department of Inland Revenue.
However,
the mortgages executed for any housing loan not exceeding LKR Three million have
been exempted.
The stamp duty on mortgages will be the same irrespective of whether the
parties are citizens or non-citizens.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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·
Income
from rent / lease of land & buildings
Stamp
Duty - In these
transactions also it’s advisable to enter in to an agreement and register it
with the Registrar of Lands.
The stamp duty is payable on such agreements to the Department of Inland
Revenue @ Rs. 10.00 for each Rs. 1000/- or part thereof of the value of
such agreement including any premium (key-money) recovered, with effect from
April 04, 2006.
Income
Tax - Rent income on land
& buildings calculated as per the Inland Revenue Act is liable to
income tax and the rate may be between 5% to 35% depending on the total
taxable income.
- If this income has been accrued to a Company (Corporate body) then such
income will be treated as business income.
- If the rent / lease rent paid by a tenant for one premises is not less than
Rs. Fifty Thousand per month or Rs. Five Hundred Thousand per year and if the
premises is used for non-residential purposes a with holding tax @ 10%
is deductible by the tenant on each such payment when the rent is paid. This
tax can be claimed as tax credit by the land lord (the owner) of such premises.
Value
Added Tax (VAT) - The VAT
is payable @ 15% (currently) if the rent / lease rent is accrued to a
VAT Registered person other than on residential premises. Further, the sale of
land & buildings other than residential premises will also be liable to VAT
at 15% on the value of supply calculated as provided in the VAT Law.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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In certain
situations the land lord (owner) charges key money (non-refundable lump-sum) in
addition to the rent / lease rent. This key money is liable to income tax as a
premium income in the year of receipt. Further the key money will be liable to
VAT as well @ 15%, if received by a VAT registered person.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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·
Sale
of
Lands & Buildings
The profit on
sale of lands & buildings is not liable to income tax unless the activity
is a trade or business including adventure in the nature of trade.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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In many cases
land & buildings are subject to the payment of rates charged by the
respective local authorities on an estimated value (not the market value) of
the property. The percentage of rates may depend on the area. The maximum
currently is 30%, which is applicable to the properties situated in Colombo
Municipal area. These rates are annual charges normally paid in quarterly
installments.
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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-
Construction Industry
Guarantee Fund Levy
This is an
annual levy payable by any construction contractor who has enforced such
contract in
Sri Lanka
. This levy is administered by the Institute for
Construction Training and Development (ICTAD) on behalf of the
Government of Sri Lanka. However, from April, 2007 the Commissioner General of
Inland Revenue will administer this levy.
The levy is
payable on the total value of contract including all sub-contracts covered by
such contract at the following rates, at the time of receipt of payment for
such contract.
If the total
contract value is less than Rs. Fifteen million, no levy is payable
The value between Rs. 15M to Rs. 50M @ 0.25%
The value above Rs. 50M to Rs. 150M @ 0.5%
The value more than
Rs. 150M @ 1.0%
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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·
Service Charge
on Development Permits
The
following service charge will be imposed on certain “non-low cost” residential
development permits issued by the Urban Development Authority :–
Floor Area (s.m.)
% on estimated cost of construction
Over 500 but less than 2500
1%
From 2500 but less than 5000
2%
From 5000 but less than 7500
3%
From 7500 but less than 10000
4%
From 10000
5%
Note:
This document contains the general information based on the current legal
provisions. Professional advice may be obtained before acting on such
Information.
(Date:
15.10.2007)
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----------------------------------------------------------------------------------------------------------
For
consultations please contact:
P. Guruge
- B.A. (Hons), I.T.P.
(Harvard –
USA
) FTII (Sri Lanka)
Tax and Investment Consultant
Director – ComTax Law (Pvt) Ltd.
Former Fiscal Policy Advisor to the Ministry of
Finance, Sri Lanka.
|
Residence: |
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565/21, Mihindu Mw, |
|
Malabe, |
|
Sri Lanka |
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Tel: + 94 11 2744757
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: + 94 77 7478352 |
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E mail : mailtoguruge@gmail.com |
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