Stamp Duty in Sri Lanka: Updated Guide for 2025
When certain transactions take place, such as transferring property, promissory notes, or mortgages, a tax must be paid to the government. This tax is called stamp duty. The name comes from the traditional practice of affixing a stamp to documents to show that the fee has been paid.
Stamp duty in Sri Lanka is governed by the Stamp Duty (Special Provisions) Act No. 12 of 2006, which outlines the types of documents and transactions that require stamp duty. These include affidavits, insurance policies, appointments of notaries public, promissory notes, and more. Stamp duties related to land transactions are mainly handled by the Provincial Councils.
How Is Stamp Duty Calculated?
Stamp duty can either be a fixed amount or a percentage of the transaction value. The calculation method depends on the type of document involved. Below are some examples.
1. For Deeds of transfer (Land Sales)
3% on the first 100,000 rupees
4% on the remaining amount
Example: Land worth 1,000,000 rupees
Step 1: 100,000 x 3% = 3,000
Step 2: 900,000 x 4% = 36,000
Total stamp duty = 3,000 + 36,000 = 39,000 rupees
You can verify this using the Lexelon Stamp Duty Calculator.
2. For Deeds of Gifts (Gifting Land)
3% on the first 50,000 rupees
2% on the remaining amount
Example: Land valued at 1,000,000 rupees
Step 1: 50,000 x 3% = 1,500
Step 2: 950,000 x 2% = 19,000
Total stamp duty = 1,500 + 19,000 = 20,500 rupees
You can verify this using the Lexelon Stamp Duty Calculator.
Stamp duty for a gift deed is lower than for a sale deed, even if the land value is the same.
How Is Land Value Determined for a Deed of Gift?
Gift deeds do not involve a monetary transaction, but a value must still be stated in the deed. Some people try to declare a low value to reduce stamp duty. This reduces government revenue. To prevent underpayment, a valuation of the Provincial Council Revenue Department should be obtained. If a low value is used without proper valuation, penalties may be imposed.
3. For Mortgage Deeds
Stamp duty is 0.1% (1 rupee per 1,000 rupees)
Example: Mortgage amount of 1,000,000 rupees
Stamp duty = 1,000,000 x 0.1% = 1,000 rupees
4. For Rent or Lease Agreements (Deeds)
Stamp duty is 2 % (20 rupees per 1,000 rupees)
The value is based on the total rent over the full rental period. No stamp duty is charged if the monthly rent is below 5,000 rupees.
Example: Rent is 10,000 rupees per month for 2 years
Total rent = 10,000 x 24 = 240,000
Stamp duty = 240,000 x 2%= 4,800 rupees
5. For Promissory Notes
The stamp duty for a promissory note is one rupee for every one thousand rupees or part thereof. This equals 0.1%.
Example: Promissory note value is 1,000,000 rupees.
Stamp duty = 1,000,000 x 0.1% = 1,000 rupees
Promissory notes that are not properly stamped may be difficult to enforce in legal proceedings. It is important to ensure that the correct amount of stamp duty is paid.
How to Pay Stamp Duty
Stamp duty is usually paid by affixing a special stamp to the relevant document. These stamps are then cancelled, usually by punching a hole, to prevent them from being reused.
For larger payments, stamp duty can be paid by crediting the appropriate amount to the account of the Commissioner General of Inland Revenue at the Bank of Ceylon.
For mortgage deeds or deeds related to taxes on immovable property: Payment should be credited to account number 7041555 at the Bank of Ceylon, Taprobane Branch. A payment certificate must be obtained from the bank and attached to the deed.
For bulk payments (multiple people at once): Payment should be made to account number 4153842 at the Bank of Ceylon, Taprobane Branch.
Each province may issue different types of receipts for this purpose. Always follow the instructions prescribed for your area.
Who Should Pay Stamp Duty?
There can sometimes be disputes about who is responsible for paying stamp duty. As a general rule:
- In the case of a land sale, the buyer is responsible for paying the stamp duty.
- For mortgages, the landowner pays.
- For rental agreements, the tenant or person renting the property is required to pay.
Failing to pay stamp duty or underpaying it is considered tax evasion. The Inland Revenue Department has the authority to investigate and take legal action against offenders.
