🚨A NEW TAX: Imputed Rental Income Tax

⭕ The government of Sri Lanka is set to introduce an imputed rental income tax by April 1, 2025.

⭕ Imputed rental income is the deemed income homeowners could earn if they rented out their homes.

⭕ The tax however will apply to both owner-occupied and vacant residential properties.

⭕ This tax is aimed at addressing the institutional impediments faced by the initially planned property tax for 2025.

⭕ Typically, property taxes are a key revenue source for local governments. However, the imputed rental income tax is different. It targets the income homeowners could potentially earn from renting their properties, rather than the properties themselves. As a result, the tax is imposed on individuals' income, allowing the central government to directly receive the tax revenue.

⭕ The government is implementing two major property data databases to create this new tax,

1. Property Valuation Database: This database will compile comprehensive data on residential properties, including assessed values, latest assessment dates, and property types. Expected completion by August 2024.

2. Sales Price and Rents Register (SPRR): The SPRR will capture real-time sales prices and rental information for properties nationwide, providing a dynamic basis for the tax. It's set to be fully operational by end-March 2025, with a provisional version available by August 2024.

The Notaries Act will also be amended by April 2025 to ensure notarized real property contract information is automatically fed into the SPRR. This improves data accuracy and access for relevant government entities.

⭕ Both systems will be accessible to the IRD, valuation department, land registry and to the public.

⭕ Not everyone with a property will be taxed, the tax will have an exemption threshold. The threshold will likely exempts primary residences up to a certain assessed value or imputed rental income level. For example, if the threshold is set at a certain amount, any imputed rental income below this amount would not be taxed.

This is based on second review report on Sri Lanka under EFF by IMF :
https://t.co/HX7SBjteEw