An Overview of Stamp Duty in Nigeria

What is Stamp Duty in Nigeria?

Stamp Duty is essentially the tax levied by the government of a country on written legal, commercial or financial documents used to legally record or validate certain transactions that took place within the country. The written documents are known as (or called) instruments.

In Nigeria, stamp duties are paid to the Federal Government of Nigeria (FGN) or State Government on documents, including bills of exchange, conveyances on sale, promissory notes and agreements. Others are contracts or documents, like instruments of apprenticeship, letters and certificates of admission, insurance policies, and others. Apart from these, you’re also required to pay stamp duty when sending out documents via the post office.

It’s administered by the Federal Inland Revenue Service (FIRS), the Federal Capital Territory (FCT), and respective States Internal Revenue Services (SIRS).

Stamp duty payment derives backing from legislation, with the law referred to as the Stamp Duties Act 1939. That’s as amended by various Acts and different resolutions that are obsolete amid present realities.

A newer bill, Stamp Duties (Amendment) Bill 2018, got passed into law in May 2018 to amend the Stamp Duties Act, LFN 2004.

The stamp duty used to be ₦50 charge over all bank transactions over ₦1,000. It was recently reviewed in FG’s latest finance bill that was put into effect earlier in the year.

With that revision, customers are now required to pay the ₦50 stamp duty only if their fund transfers or deposits are above ₦10,000. This charge is mandated by the Finance Act of 2019, with the revenue remitted to FG.

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Let’s discuss stamp duties in Nigeria.

Stamp Duties Act

As earlier stated above, the payment of stamp duties has legal backing, which is the Stamp Duties Act 1939 (as amended by many Acts and resolutions). Due to the current realities, this has now become outdated.

In the Act, a list of documents has been specified in its Schedule, in addition to the duty to be paid on each document.

There is a newer bill, which is called Stamp Duties (Amendment) Bill 2018, passed into law in May 2018 by the eighth National Assembly. It seeks to completely amend the Stamp Duties Act LFN 2004 (that has got outmoded judging by current realities).

This bill comprises (twenty-three) 23 amendments to the extant provisions of the Stamp Duties Act (“SDA”), Cap S8, Laws of the Federation of Nigeria 2004.

When stamp duty was reviewed, the new stamp duty charge is mandated by the Finance Act of 2019.

Importance of Stamp Duties

When the FG announced the collection of stamp duty of ₦50 charge over bank transactions that exceed ₦10,000, a lot of Nigerians wondered why the government took that decision. The move was made to handle the inadequacies occasioned by the falling prices of petroleum globally.

Considering the fact that petroleum is the mainstay of the Nigerian economy, it’s understandable that the government plans to use stamp duty revenue to raise substantial income to continue its myriads of programs.

The finance bill, which backs the new stamp duty, is a plan by FG to revamp tax administration in Nigeria through the introduction of different tax increments.

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Revenue from stamp duty is collected by the FGN through the CBN.

How Stamp Duties are Calculated

Every receipt, regardless of whether it’s cash or electronic transfers of ₦1000 and above into a current account, qualifies to be charged and will be charged a stamp duty of ₦50.

Also, the ₦50 Stamp Duty gets charged for each transaction more than ₦1000 and above. It isn’t charged per volume of your banking transaction.

Furthermore, the Stamp Duty is also deducted from POS receipts, ATM print-outs, fiscalised device receipts.

Stamp Duty Charge Exemptions

The new bill exempts bank transfers that are between 2 accounts owned by the same individual, company, or organization from stamp duty charges.

You can see your bank’s customer service (CS) for a charge reversal. If your bank fails to do this reversal, you can send an email via cpd@cbn.gov.ng to the consumer protection department of the CBN to resolve this issue.

Forms of Stamp Duties

The forms or types of stamp duties are

  1. Fixed Duties: These don’t change based on consideration. Examples of fixed duties include duties on payment receipts, guarantor forms, proxy forms, and others.
  2. Ad valorem: These are duties varying with consideration, such as duties on Deed of Assignment, Share Capital, Bills of Exchange, Debenture, and others.

Stamp Duties on House Rent and C of O Transactions

In a bid to mitigate against disagreements in real estate-related deals and generate more revenue for the government, the FIRS has announced stamp duty payment will be made on house rent as well as the Certificate of Occupancy (also called C of O). This is in accordance with its new adhesive duty.

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The disclosure was made by Mr. Abdullahi Ahmad in a press statement earlier this month in Abuja. (Ahmad is the FIRS Director for Communication and Liaison Department.)

This new policy — he said — was formulated to provide the tools the legal backing needed and ensure that they’re legally binding on every individual taking part in such deals.

As a result of this, Ahmad told Nigerians to make sure documents relating to rent and lease agreements for their homes or offices, C of O, and other typical tools for business-related transactions were verified using the new FIRS Adhesive Stamp Duty.

The following are the chargeable transactions in the Fixed Duty Instruments category, Power of Attorney (PoA), Certificate of Occupancy (C of O), Proxy form; Appointment of Receiver, Memorandum of Understanding (MoU), Joint Venture Agreements (JVA), Guarantor’s Form, and Ordinary Agreements Receipts.

While ad-Valorem Instruments chargeable under the Stamp Duties Act are Deed of Assignment, Sales Agreement, Legal Mortgage or Debentures, Tenancy or Lease Agreement, Insurance Policies, Contract Agreements, Vending Agreement, Promissory Notes, Charter-Party and Contract Notes,Ahmed explained

Summary

Stamp Duties, which are also referred to as instruments for the Stamp Duties Act, are taxes levied on financial transactions and documents. They’re paid to the government (either at the federal or state level) on documents, such as bills of exchange, agreements, conveyances on sale, instruments of apprenticeship, letters and certificates of admission, insurance policies, etc. Also, a stamp duty of ₦50 is charged over all bank transactions exceeding ₦10,000 via the CBN, unlike the previous policy where the duty applied to transactions over ₦1,000.