Prohibited Transfers:
Transfer of land is prohibited to:
•Foreign individuals
•Foreign companies
•Companies incorporated in Sri Lanka with a foreign shareholding of 50% or more, either directly or indirectly.
Subsidiary Restrictions:
Companies with foreign shareholding exceeding 50% cannot establish a subsidiary in Sri Lanka for the purpose of purchasing immovable property.
Definition of Land:
Includes state or private land, submerged land, and buildings on the land.
Exemptions
Transfers to the following entities or individuals are exempted:
1. Diplomatic or International Organizations:
Diplomatic missions, multilateral, or bilateral organizations recognized under the Diplomatic Privileges Act.
2. Condominium Property:
A condominium parcel above the fourth floor (excluding ground and common floors) if:
The entire value is paid upfront via inward foreign remittance before the deed transfer.
3. Foreign Investors (Pre-2013 Agreements):
If aligned with Cabinet decisions prior to January 1, 2013, involving direct foreign currency investment under written laws applicable before that date.
4. Inheritance:
By intestacy, gift, or testamentary disposition to a foreign next of kin of the landowner.
5. Dual Citizens:
Individuals holding dual citizenship in Sri Lanka.
6. Banks with ≥50% Foreign Shareholding:
Through auctions or court decrees related to loan recovery.
7. Financial Institutions:
To enforce a lease, agreement to sell, or recover loans via court decree.
8. Active Companies (Pre-Land Act Certification):
Companies operating in Sri Lanka for 10+ consecutive years as of the Land Act certification date.
Increasing Foreign Shareholding in Local Companies
1. Restrictions for Companies Holding Land:
Companies with <50% foreign shareholding cannot increase foreign ownership to 50%+ for 20 years from the transfer date.
2. Consequences of Exceeding 50% Foreign Ownership:
The land transfer becomes void.
3. Rectification Period:
•Companies listed on the Colombo Stock Exchange (with minimum shareholder criteria): 12 months to reduce foreign shareholding.
•All other companies: 6 months.
•If reduced within the rectification period, the transfer remains valid.
Mortgage Restrictions
•Land transferred or leased to foreigners under exemptions cannot be mortgaged or pledged for five years from the date of transfer.
Secretaries’ Certificates
•For land transferred to companies with <50% foreign shareholding:
•A certificate from the company secretary confirming the foreign shareholding is required upon registration.
•Updates must be submitted every six months.
This legal framework ensures controlled foreign ownership while allowing limited exemptions under specific conditions.
