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Tuesday, July 21, 2020 / 07:29 AM / by KPMG Nigeria / Header Image Credit: Twitter; @firsNigeria
Following the recent launching of its adhesive
stamp, the Federal Inland Revenue Service (FIRS) has issued a press release to
provide clarifications on the administration of stamp duties in Nigeria. We have summarized below, the guidelines provided by the FIRS in the
publication:
1. Stamp duty is
applicable on all dutiable instruments, such as agreements, contracts,
receipts, memorandum of understanding, promissory notes, insurance policies and
other instruments stipulated in the Schedule to the Stamp Duties Act, Cap S8,
Laws of the Federation of Nigeria 2004 (as amended) (SDA or "the Act").
2. The Finance Act, 2019
has expanded the scope of the SDA to include technology, e-commerce and
cross-border transactions, in line with global practice and current economic
realities.
3. 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)
as illustrated in the sample table of rates contained in the press release.
4. The FIRS affirms that
it is the competent authority to impose, charge and collect stamp duties on all
dutiable instruments executed between a company and an individual, while the
remit of the State tax authorities (STAs) is limited to collection of stamp
duties on instruments executed between individuals. However, the FIRS is the
relevant tax authority to collect stamp duties on all banking transactions,
even when the parties thereto are individuals, especially electronic fund
transfers.
5. A fixed-rate of ₦50 FIRS' adhesive stamp
is applicable on all receipts. Also, electronic transfers above ₦10,000 through the
Money Deposit Banks (MDBs) will attract a stamp duty of ₦50 which the
MDBs are obliged to remit to the FIRS.
6.
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, while the stamp duties
due to State Governments are to be remitted to the stamp duties accounts of the
States.
7. The burden of payment
of the stamp duties on contracts and bank transfers is that of the beneficiary
of the contract and the customer who initiated the transfer,
respectively. The party making the payment have the obligation to account
for the stamp duties applicable on the transaction. Therefore,
ministries, departments, agencies, landlords and other executors are agents of
collection for stamp duties purpose and are required to ensure that their
service providers, contractors, tenants, etc. pay the applicable duties on the
relevant instruments.
8. The postage stamp
administered by the Nigerian Postal Service (NIPOST) for delivery of goods does
not denote stamp duties and, therefore, is not a substitute for the FIRS' adhesive stamp.
9. Failure to deduct or
remit stamp duties into the appropriate stamp duties account would attract
penalty and interest as provided by the SDA.
In conclusion, the FIRS reiterated its commitment
to make stamp duties the next major source of revenue for funding the Federal
Government's budgetary requirements in the face of dwindling oil revenue.
Comments
We commend the FIRS for the timely issuance of the
guidelines and providing the much-needed clarity to taxpayers regarding the
application and administration of Stamp Duties. With FIRS' current focus
on stamp duties and enforcement drive, it is important that all the
stakeholders understand and comply with their obligations under the SDA
Further, with the launch of its adhesive stamp, the
FIRS has exercised its power under the Finance Act, 2019, as the only competent
authority with powers to impose, charge and collect stamp duties on all
dutiable transactions under the SDA. In effect, the NIPOST postage stamps
currently used by taxpayers on receipts is not a substitute for the FIRS' adhesive stamp.
However, whilst the FIRS affirmed that the SDA is
the legal basis for the imposition of stamp duties in Nigeria, we noted that
some of the rates stipulated in the press release contradicts the provisions of
the SDA. For example, while the FIRS in the press release assigned a
0.375% ad-valorem rate to a mortgage, the SDA provides for
rates ranging from 0.075% to 0.375% depending on certain conditions.
Similarly, the rates provided for receipts, bank cheque per leaflet and a
letter appointing an attorney are inconsistent with the rates provided in the
SDA. It is obvious that some of the rates adopted by the FIRS originated
from the Joint Tax Board Harmonization of Stamp Duty Rates and
Items which, lacking legislative force, cannot be considered an
amendment to the Schedule to the SDA. Section 116 of the SDA vests the
power to increase, diminish or repeal the duty chargeable on instruments solely
on the National Assembly or the House of Assembly of a State, as the case may
be. Therefore, the FIRS will be hard-pressed to sustain the validity of
the revised rates, which are inconsistent with the provisions of the SDA.
Further, the SDA did not provide specific rates for
instruments, such as certificate of occupancy, vending agreement and
appointment of a receiver. Therefore, such instruments should be liable
to stamp duties at a flat rate of 15 kobo as stipulated in the SDA for
contracts that are not specifically charged with any duty.
It is important for the FIRS to review the
foregoing issues and update its position to avoid unnecessary dispute with
taxpayers during tax review, audit or investigation exercises. On their part,
taxpayers should review their records and remediate as necessary, and put
measures in place for full compliance as and when they execute a dutiable
transaction to avoid interest and penalty on unremitted duties.
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