Wasantha Athukorala, a professor in the Department of Economics and Statistics at the University of Peradeniya, alleges that the government is working to introduce an imputed rental income tax, as the government failed to prepare plans for the implementation of a property tax by April 2025, as proposed by the International Monetary Fund (IMF).Furthermore, Prof.

Athukorala expressed that if a property tax is implemented in the country, all ill-gotten gains will be exposed.It was announced that Sri Lanka will likely introduce an imputed rental income tax, as part of the ongoing revenue mobilization efforts.

The new tax comes as a substitute for the property tax, as the introduction of the property tax and the gift and inheritance tax by 2025 encountered delays, due to constitutional restrictions on sharing revenues between the central and local authorities and the lack of adequate information on property values.Accordingly, Sri Lanka will promptly initiate preparatory work to introduce an imputed rental income tax, though the expected gains would only fully materialize in 2026.The imputed rental income tax on owner-occupied and vacant residential properties will be introduced before the beginning of the tax year on April 1st, 2025, as per the IMF Country Report No.

24/161.To ensure that the imputed rental income tax is fully operational by 2026, Sri Lanka will undertake the following measures;Establish the first database on estimated current market values by end-December 2024 with immediate efforts to                  (i) digitize the valuation records held by the government valuation department, starting with municipal councils, finalizing this effort by end-2025,                 (ii) collect information from a representative sample of 5,000 standard properties that includes key variables, including annual values, latest assessment date, and property type, of all                                       properties in all municipal councils by August 2024 (new Structural Benchmark).

This would help determine the capital values of these properties.Introduce a provisional nationwide digital Sales Price and Rents Register (SPRR) by August 2024.

Ensure that the SPRR is fully established and operational by end-March 2025 and that it is accessible by the IRD, the valuation department, the land registry and the general public (new structural benchmark).

A fully operational digital SPRR would be the key resource for the assessment of property values and hence the basis for several taxes, including imputed rental income taxation, capital gains taxation, stamp duties, and local recurrent property taxes.  Improve data-sharing among relevant government entities.

A gazette notification was introduced on March 21, 2024, under the IRA requiring the Registrar General’s Department to share all real estate sales information with the IRD.

The Notaries Act will be amended by April 2025 to ensure comprehensive information on each notarized real property contract (which will include the valuation roll, the cadastral number, and a unique tax ID) is automatically fed into the digital SPRR.