Clarifying Issues: What you need to know about recent developments on Stamp Duties!

August 2020

www.pwc.com.ng

Since the inauguration of the Inter-Ministerial dutiable instruments and the duty payable In many cases, the SDA is silent on the party Committee for the Audit and Recovery of on such instruments. responsible for stamping. In practice many Back-Years Stamp Duties on 30 June 2020 people stamped documents only if and when (link to prev ious alert), there has been Instruments subject to ad valorem rates they had to be presented in court. several public pronouncements by the include contract notes at 0.08%; Deeds of Federal Inland Revenue Service (FIRS) on assignment at 1.5%; Gifts (Land) at 1.5%; However, in some cases, the SDA identifies the the administration of stamp duties (“SD”) in Insurance Policy at 0.075%; Tenancy or party that would be liable to the penalty if a Nigeria. Lease agreement at 0.78% to 6%; Bonds document is not stamped (e.g. Section 23 of the (Mortgage) at 0.375%; Contract agreement SDA). In this regard, the party that would be Background at 1%, Loan Agreement at 0.125% etc. penalized should ordinarily have the burden of compliance in the first place. In other cases, Stamp Duty is a tax chargeable either at fixed The FIRS also lists instruments subject to e.g. for loan capital, the SDA imposes rates (flat amounts) or ad valorem (as a fixed rate such as Appointment of trustee or procedural obligations on a party that also percentage of the value of a transaction), an Attorney, Guarantors form (for loan includes a process for stamping. depending on the class of instrument as application), Bank cheque at NGN1 flat rate; provided in the Stamp Duties Act (SDA). Bank deposits or transfers at a rate of Compliance process for SD Such instruments include notarial acts, NGN50; Certificate of occupancy, agreements, conveyance on sale of property, partnership at NGN1000, Joint Venture Stamp duties collected should be remitted to powers of attorney, contract notes, Agreements at a fixed rate of NGN 500; the Stamp Duties Account of either the Federal valuations, bank notes, promissory notes, Power of Attorney (Revocable/not Land or State Government. The SDA, as amended mortgage notes, share certificates, Related) at NGN500 etc. by the FA 2019, now covers 'electronic debentures, share warrants, insurance policy, instruments’ as liable to stamp duties. customs bills of laden, bills of sale and In addition to the above charges, a fixed rate receipts. of NGN 50 is applicable on all receipts and Stamp duties are required to be paid within 30 for extra copies made of the instruments. to 40 days after they have been executed or One of the changes introduced by the within 30 days after they have been received in Finance Act 2019 was the designation of the Nigeria (if executed outside Nigeria). The SDA FIRS as the only competent authority to Administration of Stamp Duties does not define the meaning of ‘electronic impose, charge and collect stamp duties in all documents’ or ‘received in’. This may pose cases except on instruments executed Based on the amendment of Section 4(1) of some issues for the FIRS as taxpayers may between individuals for which the competent the SDA by the Finance Act 2019, FIRS is challenge the FIRS’ description of the above authority is the relevant state tax authority. designated as the competent authority to terms in its circular. It will be useful to amend collect SD on behalf of the federal the SDA to define the term ‘electronic The FIRS has subsequently issued various government. In this regard, the FIRS notice documents’ or ‘received in Nigeria’, provide the public notices on stamp duties administration. seeks to clarify that the newly unveiled FIRS necessary legal backing and simplify These public notices seek to: Adhesive Stamp should be used for compliance process. denoting duties requiring adhesive stamps. • highlight the amendments to the SDA as With respect to instruments executed The FIRS in its information circular also provided by the Finance Act (FA) 2019; between individuals, the competent authority suggests that SD can be remitted through the • clarify the administration of SD in Nigeria is the relevant tax authority of the State. “FIRS Stamp Duty Partner Support Portal” for and; all dutiable instruments executed by Corporate • guide taxpayers to avoid fraudulent Burden of payment bodies including banks, MDAs etc. activities aimed at evading stamp duties. The FIRS mentioned that the person Another FIRS’ public notice seeks to inform Stamp Duties Rates obligated to stamp the document is the taxpayers to stamp all dutiable documents at beneficiary of the contract. The Banks, the relevant SD office for authentication of such Before 2020, both the Joint Tax Board and MDAs, landlords and other executors of documents. Failure to do so will be considered the FIRS have published rates applicable to chargeable transactions are only collecting as non-payment of the duty on such various instruments. In its recent public agents. In the case of rent and leases, the instruments. notices, the FIRS provided an updated list of obligation is that of the tenant/lessee.

© 2020 PricewaterhouseCoopers Nigeria. All rights reserved. In this document, "PwC" refers to the Nigeria member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. While the circular encourages the payment of Conclusions stamp duties via the FIRS’ e-platform, there For a deeper discussion, have been issues such as the platform not The current economic challenges have widened please contact any member facilitating bulk remittance of SD, as the the budget deficit of governments at all levels as of our Tax team below or platform only allows individual stamping of both revenue from oil and taxes have dwindled. documents. The FIRS also suggests that Ironically, it is also the time when government your usual contact within taxpayers can seek further confirmation, in needs to spend more to provide palliatives, tax PwC Nigeria: writing, from the relevant tax authority where concessions and support to vulnerable persons the documents were deemed stamped to and businesses. Given the unusual situation, Taiw o Oyedele confirm the authenticity of the stamps. government needs to be deliberate in [email protected] implementing tax measures and fiscal policies. Direct :+234 (1) 271 1700 Ext: 50002 Punitive measures will be imposed on any The overall objective should be to generate persons involved in fraudulent activities with revenue in a manner that does not hamper Seun Ajayi regards to the execution of the SD including economic recovery. On the other hand, taxpayers [email protected] imprisonment under section 480(1)(b) and need to pay attention to their tax affairs to ensure Direct :+234 (1) 271 1700 Ext: 50007 Section 467 of the Criminal Code Act. Failure compliance at the least possible costs while to deduct or remit the SD to the relevant SD managing their tax risks for long-term Onyeka Okafor Account attractsprosecution for offences sustainability. [email protected] under the SDA, payment of penalties, and Direct :+234 (1) 271 1700 Ext: 57444 inability to admit chargeable but unstamped Also, the tax authorities should do more to create documents in evidence in civil proceedings. awareness, educate the general public and simplify the compliance process. Ultimately, the SDA should be repealed and re-enacted to address existing ambiguities and limit the tax to a few, broad based transactions.

About PwC At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 276,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more by visiting us at www.pwc.com/ng