Sri Lanka Inheritance & Gift Tax Guide 2026

Overview — Inheritance and Gift Taxation in Sri Lanka

Sri Lanka does not impose an inheritance tax or estate duty. The Estate Duty Ordinance was abolished many years ago, and there is no current proposal to reintroduce it. This makes Sri Lanka one of the more favourable jurisdictions for inheritance planning in South Asia. However, the transfer of assets (particularly immovable property) by inheritance or gift may be subject to other taxes and costs, including Capital Gains Tax, deed registration fees, and stamp duty. There is no specific gift tax regime, but gifts may trigger CGT in certain circumstances.

No Inheritance Tax

Sri Lanka abolished estate duty (inheritance tax) several decades ago, and no inheritance tax has been reintroduced. This means:

• No tax is payable on assets inherited from a deceased person
• There is no estate tax return or filing requirement for heirs
• Inherited assets pass to legal heirs (under the law of succession) without a tax charge
• There is no equivalent of an inheritance tax or estate duty in any form

The absence of inheritance tax applies to all asset classes — immovable property, shares, cash, and other personal property.

Gift Tax — 0% for Spouse, Parent, and Child Transfers

Sri Lanka does not have a specific gift tax regime. Transfers of assets by way of gift between spouses, parents, and children are generally not subject to any gift tax. Key points:

• No tax is levied on the donor (giver) for making a gift
• No tax is levied on the donee (recipient) for receiving a gift
• Gifts to other parties (e.g., friends, distant relatives) may also be free from a specific gift tax
• However, CGT may apply if the gift is deemed a disposal of a capital asset (see below)

Capital Gains Tax (CGT) on Gifts

Under the Inland Revenue Act, a gift of a capital asset is treated as a disposal for CGT purposes. The donor is deemed to have disposed of the asset at its market value, and any gain (market value minus cost) may be subject to CGT at 10% (14% for non-residents). However:

• Gifts between spouses may be exempt from CGT (treated as a no-gain/no-loss transfer)
• Gifts to parents and children may also be excluded from CGT in certain circumstances
• The CGT liability (if any) falls on the donor, not the recipient
• If the gift is not a capital asset (e.g., cash), CGT does not apply

Deed Transfer Costs on Property

When immovable property is transferred by inheritance or gift, the following costs apply:

• Deed registration fee: Approximately 4% of the property value payable to the Provincial Revenue Authority
• Stamp duty: 1-3% of the property value depending on the province
• Legal fees: Lawyer's fees for preparing the deed of transfer
• Valuation fee: If a valuation is required for the deed

These costs are payable by the recipient of the property (the heir or donee). The total cost for registering a property transfer by inheritance or gift can range from approximately 5% to 7% of the property value.

Step-Up Basis for CGT on Inherited Assets

When a person inherits an asset (such as property or shares), the cost base for future CGT purposes is the market value of the asset at the date of the deceased's death (step-up in basis). This means:

• The heir's acquisition cost is the market value at the date of inheritance
• Any capital gain that accrued during the deceased's lifetime is effectively exempt from CGT
• Only the gain from the date of inheritance onwards is taxable when the heir disposes of the asset
• This step-up basis is a significant tax advantage for inherited assets

FAQs

Do I need to file a tax return for inherited assets?

There is no inheritance tax return required. However, if the inherited asset generates income (e.g., rental property), the income must be declared in the heir's tax return.

Can I gift property to my child without paying tax?

Yes, gifts to children are generally free from gift tax and CGT. Only deed registration and stamp duty costs apply to the property transfer itself.

What happens if there is no will?

If a person dies intestate (without a will), assets are distributed according to the Law of Succession (Muslim or Roman-Dutch law, depending on the community). The absence of a will does not trigger any tax liability.

Disclaimer

This guide provides general information about Sri Lankan inheritance and gift taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Sri Lankan legal or tax professional for advice specific to your situation. InvestmentKit does not provide tax advice.