Overview
The Stamp Duty Act (the “Act”) is one of the oldest Acts in Nigeria and has since been in existence one might say on a “lowkey”. It has been unexploited for a while, until the sudden realisation or awakening by the Nigerian government on the importance of tapping into that revenue to increase its income stream. As we all might be aware that the sudden awakening of the Nigerian government simply rose from the plunge in oil prices as such, Nigeria’s budget could no longer be funded wholly with oil revenues.
The Stamp Duty is legally backed by the Stamp Duty Act Cap S8, LFN 2004 (the Act). Stamp duties are tax payable on dutiable instrument which includes agreements, contracts, receipts and others described in the document attached. The 2019 Finance Act extended the definition of liable instruments, which made both physical and electronic instruments chargeable to Stamp Duty.
The Stamp Duty on any instrument could either attract a flat rate (fixed duty sum regardless of the consideration) or Ad-valorem (duty payable is as a percentage of the instrument’s consideration) – The Federal Government vide the Federal Inland Revenue Service (FIRS) and State government vide the respective State Internal Revenue Service shall administer (charge and collect) stamp duty for Corporates and Individual, respectively.
The instruments covered under the Stamp Duties are Bonds, Promissory note, Receipt, Loan Capital, Bill of Exchange, Share Capital, Guarantees, Leases, Insurance policy, among others.
Implication for non-compliance
Inadmissibility of the instrument in the court of law
Inability to present the unstamped document in other registries
Reduced ranking of security or collateral
Penalty at 10%
Interest at 19%
Matters Arising
Some pertinent issues with the Act.
Amendment of the Stamp Duty Act
- The 70 years plus legislation requires a complete overhaul regardless of the little amendments put in place by the Finance Act. Sometimes, reading the Act can put readers to confusion.
- Transactions, Rates and Penalties should be amended to reflect current realities and compliance should be improved
Relevance of Stamp Duties
- Taxpayers natural instinct is to avoid litigation, it appears that taxpayers have not considered it necessary to ensure that dutiable documents/agreements are stamped.
- Multiplicity of Revenue Collection Agencies and unending tussle between the FIRS and the Nigerian Postal Service (NIPOST)
