Stamp Duty is a tax the Government imposes on documents that are required to legally record certain types of transaction. It is a tax payable in respect of dutiable instrument as provided under the Stamp Duties Act, CAP 58 LFN 2004(as amended).
Stamp Duty is chargeable on both physical and electronic instruments in two (2) ways.
- AD-VALOREM: This is where the duty payable is based on percentage of consideration on an instrument.
- FLAT RATE: This is where a fixed sum is chargeable irrespective of the consideration on dutiable instrument or document.
FINANCE ACTS 2019 AMENDMENTS
The following amendments were made to Stamp Duties Act, CAP 58 LFN 2004:
- Section 52 amended S2 (interpretation) of the Principal Act: It replaced and expanded the interpretation of the words Stamps, Stamped and Instrument to include “an electronic stamp or an electronic acknowledgement by denoting any duty or fee” also went ahead to include electronic stamps in referencing “stamped” and expanding instrument to include electronic documents.
- Section 53 amended s4 of the Principal act: It replaced: S4(1) Federal Government with Federal Inland Revenue Service and S4(2) State Government with the relevant Tax Authority in a State.
- Section 54 of Finance Acts 2019 amended S89 of the Principal Act by repealing the existing S89 and substituting with new subsections that further defines “receipt” for the purpose of stamp duty. Specifically:
- Expanding the definition of receipts to include both the use of an adhesive stamp or digital tag for electronic payments of stamp duty.
- Providing for the stamp duty to apply to transfers in excess of N10,000 to attract a SINGULAR and one-off duty of N50 (though transfers between self accounts (same BVN) do not attract a charge. Effectively addressing the lacuna with respect to the CBN announcements of 2016.
- Provides that any pay tax duty paid in relation to the above provisions is to be applied as a credit against any duty applicable.
- Section 55 of Finance Act repealed s90 of the Principal Act: Section 90 of the principal act provided that certain forms of receipts were not dutiable especially in relation to business conducted in the ordinary course of the business of the banker.
- Section 56 of Finance Act 2019 amended the principal Act by exempting share transfers and payments made pursuant to a Regulated Securities Lending transaction with respect to the Securities and Exchange Commission (SEC regulations).
- Added to the category of exempt receipts in relation to transactions with the Securities and Exchange Commission
- Made additions to the category of exemption from stamp duty where:
- Shares transferred to an approved borrower
- Shares returned to an approved agent by a borrower
- All documents are related to a regulated securities lending transaction pursuant to regulations issued by the Securities and Exchange Commission
Payment and remittance of stamp duties on receipts
A fixed-rate of N50 FIRS adhesive stamp is applicable in respects of all receipts. A N50 Stamp Duty is also due from customers in respect of electronic transfers done by them through the Money Deposit Banks (MDBs) in Nigeria where the transfer is N10,000 and above. The MDBs have the obligation to deduct and remit the stamp duties due on such transactions.
Remittance of Stamp duties
- Money Deposit Banks shall remit stamp duties collected on behalf of the FIRS into the FIRS Stamp Duties Account with the Central Bank of Nigeria.
- In the case of ad-valorem, the stamp duty is chargeable at the prescribed rates and shall be remitted to the Stamp Duties Account of either the Federal or the State Government.
Burden of Payment
- The burden of payment of stamp duties whether fixed or Ad-valorem is that of the beneficiaries of a contract, or Money Deposits Banks customers who transfer an amount of N10,000 and above from his account to another customer’s account. In any case, the party making payment shall have the obligation to account for the applicable stamp duties.
- The MDBs, MDAs, Landlords, and other executors of chargeable transactions are only agent of collection whose duties are to ensure that the stamp duties due on each transaction is remitted to the Federal or State Governments stamp duties Account as and when due.
It is the responsibility of MDAs, MDBs, Companies, Landlords, Executors etc. to ensure that the service providers, contractors, tenants etc. pay stamp duties due on agreements, receipts and other dutiable instruments.
