Legislation is being introduced to remove existing legal impediments in the sale of land to foreigners and foreign companies to develop state land in major towns occupied by people illegally.
These people are now being evicted, government officials said. The current system of levying a 100% tax on land transfers to foreigners will be removed by introducing a special land tax in order to prevent the sale of land at inflated prices to foreign buyers, making huge profits completely tax free and thereby cheating the government of revenue while also breaking immigration laws. Whenever there’s a prohibitive tax in place, foreign investors find a way around it and Sri Lanka is no exception, a senior official of the Finance Ministry, said.
Several incidents of evading 100% tax in the sale of land to foreigners have been reported in the recent past. Under the present system, a foreigner or a foreign company can buy tax-free land if their investment for the whole project is over US$10 million. The aim of introducing new legislation is to tackle all these issues closing loopholes in the law, Land Ministry officials said.
According to the proposed legislation which is still in the drafting stage, the state will move away from the practice of issuing long term leases as it does not serve any useful purpose and as it becomes an unnecessary burden on the government.
The Chief Valuer’s valuation will be treated as the value enabling the Tender Board to make its selection of purchasers of land on the basis of the highest price offered.
The Urban Development Authority (UDA) and Sri Lanka land Reclamation and Development Corporation (SLLR&DC) will identify lands they could utilize for development projects over the next 10 year period and offer the balance lands to investors on outright sale by public tender, Lands Ministry officials said. If lands belonging to the UDA and SLLR&DC continue to remain idle for years due to lack of funds for development, basic infrastructure facilities like roads to be provided and these lands will be sold by calling public tenders.
Foreigners are now allowed to own land in Sri Lanka with some restrictions. The purpose of this 100% tax is to discourage foreigners acquiring properties in Sri Lanka. However a joint venture company incorporated in Sri Lanka (with foreign participation) is not liable to pay that tax. Furthermore the condominium units of residential or non-residential accommodation on or above the 6th floor of a registered condominium apartment constructed with the approval of the UDA are exempt from such 100% tax, the Finance Ministry official said.
According to current Exchange Control regulations, the (local) buyer of a property in Sri Lanka should obtain permission from the Controller of exchange to make payment to a non resident (living abroad). The sale proceeds should be credited into an account designated as a non resident blocked account. According to the regulations an emigrant is entitled to an outward remittance of US$150,000 and can claim a further remittance of US$ 20,000 annually, if the emigrant has sold his or her property in the island and remits the sales proceeds aboard.
This was the earlier practice but under proposed new rules if a foreigner who owns a residential property in Sri Lanka has sold the property, he will be able to take out the amount which he has brought to Sri Lanka to purchase the said property (i.e. amount of the inward remittance).
Foreigners have acquired over 10,000 acres of land in the past two decades in Sri Lanka. This includes private land close to the historic Dutch Fort in Galle, one Lands Ministry official explained. They bought the land in violation of laws of Sri Lanka and didn’t even pay the due taxes to the state, he added.
Out of the 6.5 million hectares of total land in Sri Lanka, 5.2 million hectares belong to the state, he said adding that foreign national can buy private land, according to existing laws, but not those owned by the state. Under the new legislation foreign investors and foreigners are allowed to purchase state land. Sri Lankans resident abroad who purchase special bonds would be allowed to buy land in the country without the 100 % transfer tax, a Finance Ministry official said. |
E-mail
