On what it costs to run a rental villa in Sri Lanka

There’s a requirement now for owners to register with the Sri Lankan Tourism Development Authority (SLTDA).

This is a process typically more arduous in the admin than the cost and has steps including requirement for a fire safety certificate, workers and public liability insurance, and submission of info on staff.

Most of those come with some cost of course but none are vast - likely from around USD 500 a year for a 2- or 3-bedroom villa.

The registration process itself has a fee of approx. $150 and an annual renewal cost of some $70.

The likelihood is that you’ll manage the operation of the rental through a Sri Lankan registered company. You may prefer - and it’s quite sensible - to have an operating company separate to the holding company for the property if you’ve structured the ownership that way. Keeping the holding company clear of any employee liabilities makes any future sale are much simpler process.

Company incorporation typically costs from around $250 and annual fees for company secretarial work can work out around the same level.

It does pay to find a good Company Secretary at the very start and have them handle this admin cleanly and efficiently. We can of course make suggestions if required.

Obviously it’s impossible to generalise but here are some ballpark ideas on salaries for staff:

House manager - from $200 a month
Cook - from $200 a month
Gardener - from $100 a month
Cleaner - from $100 a month

Most owners will incentivise with a service charge amount linked to income and of course staff are likely to be tipped well if guests are happy.

Inevitably some might find those numbers a little unpalatable but that’s the market we’re in. High-end villa owners may wish to hire the likes of a very experienced chef, rather than a cook, in which case the salary will can be multiples higher.

You might want to engage a property management company to oversee the maintenance, operation and even marketing of your villa rental.

There are now a good number of professional companies that do just that and most will offer a range of services. A standard model is to charge a base fee (generally linked to size of the property) and then a percentage - likely around 15% of the rental income.

Some management companies will suggest a % of revenue and a % of operating profit which can be a good structure to keep everyone mindful of costs.

The applicable corporate income tax rate for tourism-related businesses in Sri Lanka is 30%.

You will of course think on how to make the operation tax efficient; considering all the operating costs, depreciation on the asset etc.

Again very difficult to generalise but a three-bedroom villa with air-conditioned bedrooms might expect to spend in the region of USD 150 on electricity and water per month.