Everything You Need to Know About Stamp Duty Sri Lanka

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.

Let’s begin by taking a look at what Stamp Duty is charged for.

What is Stamp Duty charged for?

As we’ve mentioned before, Stamp Duty is a payment or ‘duty’ you pay to the Government. Like any duty, tax, or fine – Stamp Duty in Sri Lanka is just another way the Government collects money from its citizens.

You’re charged Stamp Duty in two main situations:

1. When you purchase singular assets (a house, car, etc); or, 
2. When formal/legal documents are finalised and implemented.

But, this is only a high-level explanation of why and when people have to pay Stamp Duty in Sri Lanka. Let’s take a look at the specific scenarios:

A person or a company needs to pay Stamp Duty for:

• Every document that is used to help transfer real estate in the Western Province;
• Every document you present at court (for court cases) in the Western Province; 
• Every document used to transfer the ownership of motor vehicles in the Western province; 
• Every bill of exchange, cheque or promissory note drawn outside Sri Lanka and accepted or paid or presented for acceptance or payment or endorsed, transferred or otherwise negotiated in Sri Lanka;
• Any document that is not a bill of exchange, cheque or promissory note executed outside Sri Lanka and received in Sri Lanka, being an instrument which relates to any property situated, or any matter or thing done, or to be done, in Sri Lanka;
• Every document used to withdraw and transfer money in Sri Lanka.

You might also like to read our article on How to Check the Title of Your Land in Sri Lanka.

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:

	Instrument/Document	Rate (LKR)
1.	Affidavit	50/-
2.	Policy of Insurance	Rs.1/- for every Rs. 1,000 or part thereof
3.	Warrant to act as Notary Public	2,000/-
4.	Any foreign liquor licence issued in respect of any calendar year or less than calendar year	20,000/-
	Any liquor licence out of the liquor licences AFL1, AFL2, AFL3 and AFL 4 or which are issued together with any foreign Liquor licence	2,000/- per licence or 10% of licence fee whichever is higher
	Any licence issued for the sale of bottled toddy	2,000/- per licence or 10% of licence fee whichever is higher
	Any liquor licence out of the liquor licences AFL1, AFL2, AFL3 and AFL 4 or which are issued together with any foreign Liquor licence	2,000/- per licence or 10% of licence fee whichever is lower
5.	Credit card transactions in foreign countries	25/- for every Rs.1,000 or part thereof
6.	A Bond or Mortgage for any definite and certain sum of money and affecting any property	Rs. 1/- per every Rs.1,000 or part thereof
7.	A Promissory note	1/- per every Rs.1,000 or part thereof
8.	Any instrument relating to a lease or hire of any property	10/- per every Rs. 1,000 or part thereof of the aggregated rent or hire (not exceeding the sum for the first 20 years period of lease term, where it exceeds 20 years)
9.	A receipt or discharge given for any money or other property	25/-( Amount exceeding Rs 25,000/-)

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.

100,000	3%	3,000
11,900,000	4%	476,000
Total SD payable		479,000

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.

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’.

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.

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