• MoF to craft proposal for NPT, integrating findings from IMF study 
• Anticipates implementation by Jan. 2025

Govt. clarifies intent to introduce property tax only; dispels rumours of inheritance tax inclusion

The Ministry of Finance (MoF) has commenced drafting the proposal for the introduction of a new National Property Tax (NPT) in Sri Lanka incorporating the findings of a study conducted by the International Monetary Fund (IMF) mission that visited the country earlier this year. 

Speaking to The Sunday Morning Business, MoF Department of Fiscal Policy Director General M.K.C. Senanayake said an IMF mission had visited the country earlier this year to carry out a study on the implementation of property taxes in Sri Lanka and submitted its report to the Government.

However, he refused to comment on the particular observations made by the IMF team with regard to the suitability and specific modalities for introducing property taxes in Sri Lanka.

Accordingly, he revealed that the Department of Fiscal Policy had already commenced drafting its proposal for the introduction of an NPT, incorporating the observations made by the IMF, which would be presented to Parliament.

“We have started developing it. The implementation of this property tax should take place in January next year. We have another six months to go,” he stated.

Senanayake further clarified that, contrary to speculation, the Government would only be introducing a property tax and not an inheritance tax.

He stated that the plan was to introduce an NPT, but revealed that the exact modalities for its implementation were yet to be finalised.

The introduction of a property tax by 2025 was part of the revenue generation plan the Government had agreed to with the IMF in 2023. 

According to programme documents, the following assurances were given by Sri Lanka: “To reach a primary fiscal surplus of 2.3% of the GDP by 2025, we will revamp the property tax system and introduce a wealth transfer tax. In particular, we will introduce a nationwide real property tax and adjust the system of transfers between the Central and Provincial Governments. We will also introduce a gift and inheritance tax with a tax-free allowance and minimal exemptions. Preparatory work for these tax reforms will commence by mid-2023, supported by IMF technical assistance.”