Investing in Colombo: Yields, Appreciation & Ownership
Who can buy, how ownership works, and the taxes and duties for buying property in Colombo.
Who can buy in Colombo
Under the Land (Restrictions on Alienation) Act No. 38 of 2014, foreigners cannot directly purchase freehold land. Alternatives include 99-year leases (15% lease tax abolished in 2016) or establishing a Sri Lankan company where a local trustee holds at least 51%.
| Buyer | Permitted | Tenure | Conditions |
|---|---|---|---|
| Sri Lankan Citizen | Yes | Freehold | UnrestrictedApproval: Land Registry |
| Foreign National (lease) | Yes | Leasehold | Up to 99 years lease; no lease tax since 2016Approval: Land Registry |
| Foreign National (via company) | Conditional | Freehold (via company) | Sri Lankan company with 51%+ local shareholdingApproval: Company registration + Land Registry |
Sri Lanka rule, applies in Colombo.
Stamp duty and registration in Sri Lanka
Stamp duty in Sri Lanka is primarily governed by Provincial Councils and is payable by the buyer for property sales.
| Property value | Stamp duty | Registration |
|---|---|---|
| First Rs100,000 | 3% | Included in legal fees (estimated 1-3%) |
| Balance value (above Rs100,000) | 4% | Included in legal fees (estimated 1-3%) |
Sri Lanka rule, applies in Colombo.
Capital gains on a sale
In Sri Lanka, a Capital Gains Tax (CGT) of 10% is applicable on gains from the sale of investment assets like land or buildings.
| Holding period | Classification | Tax rate | Indexation |
|---|---|---|---|
| Any | Investment Asset (Land/Building) | 10% | Not applicable for assets acquired/gifted after 01/04/2018; for those before, cost includes value as of 30/09/2017. |
Sri Lanka rule, applies in Colombo.
Always consult a licensed real estate attorney before purchase. Rules change; verify current law. Always confirm with a qualified tax professional. Rules change; verify with a professional before you transact.
Frequently asked questions about Colombo
Yes. Up to 99 years lease; no lease tax since 2016
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