Everything You Need to Know About Stamp Duty Sri Lanka

Updated 2024

Stamp Duty in Sri Lanka is one of those government payments which you aren’t made explicitly aware of, but are required to pay on a regular basis. However, if you’re curious to learn more about Stamp Duty, and how it affects you, this is the blog for you.

We’ll help you understand this ‘duty’ and walk you through the different payment methods available to you.

What is Stamp Duty?

Sri Lanka first introduced a tax on official documents with the Stamp Duty Ordinance in 1909. This tax was later replaced by the Stamp Duty Act No. 43 of 1982, which also covered similar fees for other legal matters.

Sri Lanka used to have a stamp duty tax on property and some valuables, but it got put on hold in 2002. In 2006, the government brought it back, but only for a specific list of ten things. So, unless you’re dealing with one of those ten instruments, you don’t need to worry about stamp duty for now.

Those specified instruments are :

• an affidavit,
• a policy of insurance,
• a warrant to act as notary public,
• a periodic lic​ense to carry on trade, business, profession or vocation,
• a claim, demand or request made by a service provider from the holder of a credit card, for the payment of a stated sum of money, due in respect of a transaction entered into using such credit card;,
• a mortgage for a definite sum of money which affects a property,
• a promissory note,
• a lease or hire of any property,
• a receipt or discharge given for any money or other property

What is Stamp Duty charged for?

Stamp Duty is charged based on the Stamp Duty (Special Provisions) Act No. 12 of 2006, with updates from Acts No. 10 of 2008 and 13 of 2011 at specified rates, on every specified Instrument,

• executed,drawn or presented in Sri Lanka;
• executed outside Sri Lanka in relation to a property in Sri Lanka and presented in Sri Lanka, (liability arises at the time it is presented in Sri Lanka)

subject to the exemptions published in the Gazette.

Let’s take a look at how Stamp Duty might be relevant to you in your day-to-day life:

Meet Chamika 👋🏾

Chamika started a small Software Development company called Savvy two years ago. He now employs 35 people. All 35 people are paid over LKR 100,000 at Savvy.

Savvy’s payday is on the 25th of each month, and from what we’ve just mentioned – Savvy has to pay Stamp Duty every time it pays its employees.

You also might like to read our article on How to Register Your Company in Sri Lanka.

What are the Stamp Duty rates in Sri Lanka?

Different ‘instruments’ or in simpler terms, ‘documents’ have different Stamp Duty rates allocated to them. Let’s take a look:

Say hi to Chamika again 👋🏾

As we all know, Chamika’s company Savvy pays all 35 of its employees over LKR 100,000 monthly.

In order to pay its salaries on the 25th of each month, Savvy has to send out a salary slip to every employee. And, according to the 9th document (a receipt or discharge given for any money or other property) we’ve mentioned in the chart, LKR 25 needs to be paid as Stamp Duty for each one of these documents.

So, Savvy must pay LKR 875 to the Inland Revenue Department (IRD) as Stamp Duty every month.

What do you need to pay Stamp Duty for in Sri Lanka?

1. Salaries

If you’re an employer, you need to deduct Stamp Duty from your employees’ salaries at the point of payment and remit the deducted amount to the IRD.

For example: If an employee’s salary is over LKR 25,000, the employer needs to deduct LKR 25 and pay it to the IRD or paste a stamp worth 25.00 rupees.

However, if the company employs over 100 employees, the company is required to register with the IRD and pay the compounded amount.

2. Property

You need to first go to the provisional council and present your house or land’s valuation. Once you do, the council should give you the estimated payable amount.

For example: If you purchase a land and a house for LKR 12,000,000, you are required to obtain a Stamp Duty opinion from the revenue department.

3. Insurance

Stamp Duty will be included in your insurance payments. The insurance companies will then remit the amount to the IRD.

4. Other

For every other occasion, Stamp Duty documentation and direction will be instructed by lawyers.

Compounding Stamp Duty

To compound Stamp Duty, registration with the Department of Inland Revenue is required. The following persons must obtain this registration:

• Any person issuing an insurance policy
• Any authority issuing licenses
• Any service provider of credit cards
• Any employer with more than 100 employees
• Any other person issuing instruments deemed impractical or inexpedient for stamping at the prescribed time and manner

Registered compounding authorities are required to compound the relevant Stamp Duty and remit it to the Commissioner General of Inland Revenue quarterly, within 15 days after the end of each quarter. A separate schedule should be maintained for each instrument category, including:

Name of the Instrument: (Policies of Insurance, License, Liquor License, Notary License, Other License, Credit card transactions, Salary receipts, Receipts & Discharges, Bonds & Mortgages, Promissory Notes, and Lease, Rent & Hire).

How can you pay Stamp Duty in Sri Lanka?

You have the option of paying Stamp Duty in Sri Lanka in 3 different ways:

Method 1: Paste stamps on documents

You can pay the relevant Stamp Duty of a document or transaction amount by pasting a stamp that is worth the same amount.

Method 2: Pay single Stamp Duty Fees to the IRD

This is relevant to specified instruments or documents relating to a mortgage or lease of any immovable property.

Once you deposit the relevant amount in the bank, the IRD will issue a certificate for the payment.

These payments can be made to No. 7041555 of Commissioner General of Inland Revenue, Bank of Ceylon – Taprobane Branch.

 Method 3: Pay compound Stamp Duty fees to the IRD

This is for when you have to pay compounded Stamp Duty fees to the IRD.

Remember Savvy and the Stamp Duty payments it has to pay for its 35 employees? The compounded Stamp Duty rate is LKR 875.

Savvy can make this compound payment to No. 4153842 of Commissioner General of Inland Revenue at the Bank of Ceylon –Taprobane Branch.

A few things to remember:

You need to use ‘pay-in-slips’ that have been issued by the Inland Revenue Department for each quarter, to settle the Stamp Duty liability of that quarter. You can go to the IRD and request for ‘pay-in slips’.

In the absence of system printed pay-in-slips, you are instructed to enter payment period code correctly in the pay-in-slip manually obtai​ned.

What are the exemptions granted to Stamp Duty in Sri Lanka?

Stamp Duty in Sri Lanka has its fair share of exemptions. We’ve mentioned some of the more important ones in this blog. But, if you’d like to go through the whole list – take a look at the article here.

1. Any affidavit made on the request of any public officer or in compliance with any requirement imposed by any written law;
2. Any bond or mortgage given by any public officer or their sureties for due execution of his office;
3. Any instrument for the mortgage of food crops or jewellery;
4. Insurance policies:
   • Life or medical insurance;  or,
   • Plant, machinery or equipment used in the construction industry or agriculture; or,
   • Any motor vehicle other than any motor vehicle used for private travelling.

Process your Stamp Duty payments with Simplebooks

Stamp Duty, despite not being the most expensive payment to the Government, is quite hard to navigate thanks to its extended list of exemptions and payment terms.

Busy founders usually have to devote a lot of their precious time to track the relevant payments, sort through the exhaustive exemption list and figure out the correct payment method.

Here’s where Simplebooks can help. We can process all of your documents, and the Stamp Duty payments that come along with it – while you spend your time running your business.

FAQs