Removal of VAT exemption on condominiums a regressive policy

Monday, 13 November 2017 00:42 - - {{hitsCtrl.values.hits}}

Move exposes policy inconsistency and lack of long-term certainty of tax regime

The removal of 15% VAT exemption on the sale of condominium housing units has been flagged off as a “regressive policy,” with the move likely to have an impact on future developments as well as on the idea of promoting vertical living, according to a financial services industry expert.

“This is a regressive policy; having given the exemption just 12 months ago, it highlights the Government’s policy inconsistency and lack of long-term certainty of the tax regime applicable to private sector investments in Sri Lanka,” noted Colombo Stock Brokers Association Chairman Ravi Abeysuriya.

“VAT, which is a service tax, is not charged on property transactions in almost all the countries, except a few,” he added.

Abeysuriya also pointed out that Sri Lanka required over 1.5 million housing units in the next 15 years according to the National Housing Policy and most of them were likely to be condominium housing units, with vertical living becoming popular.

“People who have already agreed the purchase price for condominium housing units and pay on an instalment basis will have a significant additional 15% VAT burden on the instalment with effect from 1 April 2018,” opined Abeysuriya, who is also Association of Alternate Financial Institutions President and CFA Sri Lanka Director.

“A more prudent method for the Government would have been the VAT to apply on sale of new condominium housing units with effect from 1 April 2018 where the developer could price the condominium housing units giving due consideration to the VAT that can be reclaimed on the inputs,” he added.