Reverse sweep for ban on land deals
The government is bringing in sweeping changes to recent restrictions imposed on foreign ownership of businesses and property to promote foreign investments, government officials said.
The Finance Ministry will issue a circular indicating these changes following the Treasury Secretary Dr. P.B. Jayasundera’s endorsement of these decisions, reversing a budget decision.
In a 180-degree turn from the recent decision and subsequent action to prohibit foreign ownership of business and property in Sri Lanka under the 2013 budget proposal, the government will revert to the earlier practice of allowing foreigners to take up full ownership of businesses and property, if their investments in the project is over US $10 million, they revealed.
Earlier – before the budget proposal – a foreigner or a foreign company was entitled to buy land without paying 100 per cent land tax if their investment for the whole project was over US$10 million
Sri Lanka’s new regulation on foreign ownership of property is similar to the previous practice which was in existence before the year 2004.
However it will have additional, new provisions where foreigners can lease land but would be subject to a land tax of 5 to 10 per cent, Minister for Investment Promotion Lakshman Yapa Abeywardana told the Business Times
This is a new provision since there was no tax on lands leased by foreigners, earlier.
Mr. Abeywardena revealed that the government will grant permission for foreign investors of large investment projects to purchase land by special cabinet approval under the new changes.
Under another new provision, a company with a foreign stakeholder which is in operation for 10 years with a good track record would be allowed to buy land in the future for the purpose of expansion, he said.
Changes are also being brought to the lease period which ranged from 33 years to 99 years, a senior official of the finance ministry said adding that the period of leasing was determined with the agreement of buyer and seller.
Foreign investors, under the new rules, would also be allowed to lease land for up to 99 years.
The Government in 2004 reintroduced the 100 per cent tax on property bought by foreigners, a political measure to appease leftwing parties who were blaming the property boom on an influx of foreign investment.
At present, foreign investors can own up to 40 per cent of a Sri Lankan business with the remainder held by local partners, a finance ministry official said, adding that this is being changed to 100 per cent ownership for those who invest over US$ 10 million.
Soon after the November 2012 budget announcement on foreigners owing land, the Government amended several land-related laws for this purpose.
Among the existing legislation that was amended to enforce the ban on land sale for foreigners are the Registration of Documents Ordinance, the Notaries Ordinance and the Title Registration Act, as well as the State Land Ordinance.
Now these amended laws would either be revoked or changed in line with the latest steps being taken by the Government to attract a targeted $2 billion in foreign investment this year. In the first January-March quarter 2013, Sri Lanka has attracted $218 million in investments.
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