The Stamp duty Act, framework and prospects
February 14, 2021
Stamp duty undoubtedly has made the most of the Nigerian banking system in the last few years, this can be deduced as all deposit banks and financial institutions are required to charge stamp duties of N50 on every eligible transaction above N10k naira.
Stamp duties are however paid on dutiable written or electronic instruments issued or executed by companies and individuals.
What is stamp duty?
Stamp duty is a government levy imposed on written or electronic transaction documents, as directed by the Stamp Duties Act (SDA).
Usually charged at flat rate or a percentage of such transaction/instrument value with recourse to the nature of instrument involved.
The Federal Inland Revenue Service is saddle with the responsibility for administration of stamp duty, who as well met penalties and sanctions for non-compliance.
Methods of representing stamp duties
The methods involved include,
- Impressed stamp
- Adhesive stamps
- Direct electronic printing or impression on the instrument
- Electronic tagging
- Issuance of stamp duties certificate then
- Any other acknowledgement of stamp duty adopted by the service
Instruments where stamp duty could apply
This can be applied on all dutiable instruments such as;
- Memorandum of understanding
- Promissory notes
- Insurance policies and other instruments stipulated in the Stamp Duty Act, Cap s8, laws of the Federation of Nigeria 2004 as amended.
Albeit, the Finance Act, 2019 has expanded the scope of the SDA to include
- Cross-border transactions in line with global practice and current economic realities.
Stamp duty is chargeable on both physical and electronic dutiable instruments, either as a fixed sum or a percentage of the consideration on the instrument (ad-valorem)
Guidelines provided by FIRS on stamp duties administration and collection
FIRS is the relevant tax authority empowered to charge and collect stamp duties on all dutiable instruments executed between a company and an individual, while the State Internal Revenue Service (SIRS) are empowered to collect stamp duties on instruments executed between individuals.
Who is under obligation to pay stamp duty in Nigeria?
The SDA does not provide guidance on who is required to pay duty on all executed instrument.
However, largely it’s the party who seeks protection on reliance of the instrument that should pay the stamp duties as applied.
FIRS or SIRS is empowered to appoint anyone as an agent, provided the agent has funds belonging to the underlying responsible party.
How stamp duty is being calculated
Ad-Valorem – This refers to the duty collected in proportion to or percentage of the estimated value of the instrument or transaction concerned.
The ad-valorem duty is denoted by an impressed stamp, examples include;
- Conveyance on sale
- Deed of gifts etc
Flat/fixed rate – This rate is specified for the instruments that are to be charged with fixed rated. It is denoted by an adhesive stamp.
This gives rise to denoting stamp duty payable by postage stamp, examples include bank cheques and power of Attorney.
When should instruments be stamped?
- Instruments first executed in Nigeria: Section 12 of the SDA provides that every instrument first executed in Nigeria that are required to be stamped using adhesive stamp should be stamped on or before its first execution.
However, agreement stored on server or received by email in Nigeria are deemed brought into Nigeria.
- Unstamped instruments: Section 23 (1) of the SDA provides that every unstamped instrument may be stamped with an impressed stamp within 40 days from its first execution.
- Instrument executed for the first time outside Nigeria: Section 23 (4) of the SDA provides that any instrument executed for the first time outside Nigeria may be stamped at any time within thirty (30) days after it has been first received in Nigeria.
Penalty for not stamping in due time
There’s a penalty of the duty due, a penalty of N20 and interest of 10% per annum from the date of execution to the date the interest equals the amount of the unpaid duty.
Remittance of stamp duties
- Stamp duties due to the Federal Government and collectible by the FIRS are to be remitted into the FIRS Stamp Duties Account with the Central Bank of Nigeria.
- Stamp duties due to the State Governments are to be remitted to the accounts of the States.
Electronic Money Transfer Levy “replaced” Stamp duties on Bank deposits and transfers
Stamp duties on electronic transfers has been replaced with a new levy in the 2020 Finance Act referred to as “Electronic Money Transfer Levy (EMTL)” on electronic receipts or electronic transfer for money deposited in any deposit money bank or financial institution, on any type of account, to be accounted for and expressed to be received by the person to whom the transfer or deposit is made.
The levy shall be imposed as a singular and one off charge of N50 on electronic transfers of money in sum of N10,000 or more.
The minister of finance shall make regulations for imposition, administration, collection and remittance of the levy.
The burden of paying EMTL on bank deposits and electronic transfers falls on the beneficiary of the transfer.
The party making the payment has the obligation to account for the stamp duties applicable on the transaction.
Transactions liable to stamp duty include;
- Guarantor’s form for loan application
- Loan capital agreement
- Marketable securities
- Share capital and share capital increase
- Conveyance of sale
- Lease/rent agreement
- Contract agreement
- Contract notes
- Bill of exchange and promissory note
Frequently asked questions on stamp duty
Q1 What is stamp duty rate in Nigeria
Answer: Stamp duty rate varies in Nigeria according to transaction involved.
Kindly find the rates as apply to below transactions
|Legal mortgage on principal||0.35%|
|Collateral on stamped principal||0.075%|
|Transfer, disposition of mortgage||0.075%|
|Sales of mortgage||0.075%|
|Share capital and increase||0.75%|
|Conveyance of sale||1.50%|
|Lease rent agreement||6%|
Q2. How to download stamp duty receipt for CAC registration
Answer: Visit Google and type “verify stamp duty”
Kindly take a close look at the websites seen on the search term.
Select the official stamp duty website that comes up.
On the column shown for stamp duty certificate code, input your code and hit search.
Your receipt will be retrieved uniquely.
Q3. What is stamp?
Answer: This is an impressed pattern or mark by means of an engraved or inked dye, an adhesive stamp, electronic stamp or electronic acknowledgement for denoting any duty or fee, this includes adhesive stamp issued by the Nigerian Postal Service.
Q4. What is receipt?
Answer: This include any note, memorandum, writing or whereby any money or any bill of exchange or promissory note is acknowledged or expressed to have been received, deposited or paid, or whereby any debt or demand, is acknowledged to have been settled, satisfied or discharged, or which signifies or imports any such acknowledgement.
Q5. What is an instrument?
Answer: This refers to every written or electronic document.
In a view to fill the gap caused by dwindling oil revenue, the government has increased its tax revenue drive which has led to awakening of stamp duties.
Though the duty has been dormant in the last 80 years, stakeholders are advised to ensure strict compliance.
Banks maintain the role of collection agents at this time.
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