Stamp duties are taxes imposed on or raised from stamps charged on instruments, parchments and other Legal documents. It is payment made on several instruments that are specified in the Stamp Duties Act. (SDA).
The Finance Act is an amendment Act which mainly aims at prescribing the different rates so that the tax can be charged under the Income Tax Act. The Income Tax Act is a permanent Act whereas the Finance Act is passed every year and its main purpose is to fix the rates to be charged under the Income Tax Act for that year.
The Nigerian government has misused stamp duty as a source of income over the years. To create a formal foundation for levying taxes on executable dutiable instruments, the government passed the SDA in 1939;
nevertheless, the Act’s execution was less successful before the Finance Act 2019 was passed, and it was later changed by the Finance Act 2020 and Further Amendments were made under the Finance Act 2021, and I can say with the ongoing 2022 Bill, it has even gotten much attention. This of course goes to unveil the indispensable relevance of Stamp Duties as a sustainable source of Revenue.
We would in this work make a comprehensive analysis of Stamp Duties’ Administration, Collections and Legal Framework juxtaposing same with visible amendments prevalent in the contemporary Finance Acts of 2020 & 2021 (as amended).
Stamp duty is levied on written or electronic transaction documents. Documents are subject to the levy known as stamp duty. Legal records like checks, receipts, military commissions, employment contracts, marriage licenses, and land transactions are all impacted. A postal stamp, a revenue, or an imprinted dice are used to identify it.
The fact that stamp duty is assessed on instruments rather than transactions is the first fundamental Issue that must be taken cognisance of. Therefore, there cannot be duty without an instrument. It is important to remember that the Stamp Duties Act includes both written and electronic documents when defining an instrument.
An oral agreement or one that results from the actions of the parties will not be subject to taxation under the Stamp Duties Act since it is not covered by its provisions.
Stamp Duties can be charged at Flat rate or charged ad valorem. It is said to be charged at Flat rate when it does not look at the value of the consideration when being charged but rather has a fixed amount. Where it is charged ad valorem, then it is in proportion to the value of the consideration.
Instruments with fixed stamp duty include:
• Power of Attorney
• Certificate of Occupancy
• Proxy Form
• Appointment of receiver
• Memorandum of Understanding
• Joint venture Agreements
• Guarantors form
• Ordinary Agreements and receipts.
Instruments with ad valorem duties include:
• Deed of Assignments
• Sales Agreements
• Legal mortgages and debenture
• Tenancy and Lease Agreements
• Insurance Policies
• Contract Agreements
• Vending Agreements
• Promissory notes and Charter Party.
Stamp Duties are taxes on documents and not on transactions or persons. The Federal Government has the exclusive right to Legislate on Stamp Duties. It is governed by the provisions of the Stamp Duties Act Chapter S8, Laws of the Federation of Nigeria,2004 (as amended.)
As noted above, cognisance must be taken on the further amendment orchestrated by the Prevalence of the Finance Act through its adoption of Stamp Duties Act amongst other Acts for review and amendments.
The sole authorized authority to impose, assess, and collect Duties on documents listed in the Stamp Duties Act’s schedule if those documents pertain to agreements made between a company and an individual, group, or body of individuals is the Federal Inland Revenue Service (FIRS).
The competent tax authority of a state is responsible for collecting taxes on agreements made between people or entities at a rate that may be agreed upon with the federal government. Thus, in practice, the Federal Government has divided the collection of the Stamp duties between itself and the States.
The Federal Government collects Stamp duties on:
• Corporate instruments (i.e. instruments executed by Companies),
• Duties paid by individuals residing in the Federal Capital Territory.
The State Government on the other hand charge and collect stamp duties on:
• Instruments executed by individuals.
Section 163 of the Constitution of the Federal Republic of Nigeria 1999 as amended clearly outlines the method of sharing the Proceeds of Tax from capital income Tax (CGT) and Stamp Duties collected by both the Federal and the States.
Thus, The revenue gotten under Section 4 (1) of the Stamp Duties Act shall be shared following Section 163 (b) of the 1999 Constitution whilst that gotten under Section 4(2) of the Stamp Duties Act shall be shared by Section 163 (a) of the 1999 Constitution (as amended).
The Supreme Court in Attorney General Ogun State v Attorney General Federation & Others (2003 FWLR pt.143 206) further aligned itself with the position of the Constitution and in her own wisdom per Onu JSC at p. 243 simplified the above provision.
Federal Inland Revenue Service (Establishment Act) created the agency with three goals: managing and enforcing the various taxes and legislation listed in the First Schedule or other laws made or to be made, from time to time, by the National Assembly or other regulations made thereunder by the Government of the Federation and to account for all taxes collected.
The Stamp Duties Act is one of the laws specified in the said First Schedule. Section 25 of the FIRS Act vests the power to administer all the enactments listed in the First Schedule to FIRS.
ADMINISTRATION UNDER FINANCE ACT 2020
Due to the extensive changes it made to various tax regulations, notably the SDA, the Finance Act’s enactment in January 2020 was celebrated as a landmark occasion.
The introduction of electronic documents as charged instruments and the inclusion of provisions for electronic receipts and stamping are the primary changes made to the Stamp Duties Act. Deposit money banks and other financial institutions are therefore obligated to impose a one-time N50 fee on cash deposits of N10,000 and higher. The person to whom the transfer or deposit is made is responsible for accounting for the levy.
In the Stamp Duties Act, any document that is to be used as evidence in a civil case in Nigeria must be stamped before it may be signed in Nigeria (or, if it is, elsewhere, if it relates to property in Nigeria). The stamping deadline for documents created outside of Nigeria is 30 days after the document is first received there.
Previously, “any written document” was included in the definition of “instrument” in the Stamp Duties Act. The Stamp Duties Act, as revised by the Finance Act, refers to all written and electronic documents as “instruments,” but it doesn’t define the phrase “electronic document” or specify when one is received in Nigeria.
Section 52 of the Finance Act, amended Section 2 of the Stamp Duty Act to extend the meaning of “stamp” to include “an electronic stamp or electronic acknowledgment” for denoting any duty or fee.
On the question of when an electronic document is received into Nigeria, the FIRS acknowledged this via an information circular dated 29 April 2020, which explained the terms of the Amended Stamp Duties Act, in response to the query of when an electronic document is received into Nigeria.
An electronic document, receipt, or instrument that was executed outside of Nigeria is acknowledged in Nigeria, according to the FIRS circular, if:
• it is received in Nigeria or accessed there;
• it (or an electronic copy thereof) is stored on a device (such as a computer or magnetic storage) and carried into Nigeria; or
• it (or an electronic copy thereof) is kept on a device or computer in Nigeria.
When reading the circular and the Amended Stamp Duties Act together, it seems clear that chargeable instruments received in Nigeria electronically after the commencement date will be subject to stamp duty.
The circular seems to answer the question of when an electronic document is received in Nigeria. As a result, the practice of signing documents outside of Nigeria, leaving them elsewhere, and simply keeping electronic copies will no longer be adequate to avoid paying stamp duty.
Under Section 53 of the Finance Act 2020 which amended Section 4 of the Stamp Duty Act, 2004, the Federal Inland Revenue Service (FIRS) is the competent authority to charge duties on instruments between a company and an individual, group or body of individuals.
Moreso, a new formula for distribution of revenue from stamp duties allocates 15% to the Federal Government and Federal Capital Territory, Abuja., while 85% should be remitted to the State Governments.
Before now, dutiable instruments can be stamped by either employing a die impressed on an instrument; affixing printed adhesive stamps issued by the Nigerian Postal Service. But by the FA 2020, direct electronic printing or impression on the instrument and electronic tagging can be made as well as issuance of stamp duties certificate, or any other form of acknowledgement of payment for stamp duties adopted by the FIRS.
This Electronic stamping of document has been made easy by the FIRS through an electronic portal – www.stampduty.gov.ng – solely for the purpose of collection of stamp duties.
The portal is to be used by all chargeable persons including individuals, institutions, private organisations, and banks for payment of stamp duties on dutiable transactions.
ADMINISTRATION UNDER FINANCE ACT 2021
• Time for stamping of instruments
The schedule to the Stamp Duties Act lists the dutiable instruments for which stamp duties are due (hereinafter SDA or the Act).
So Aas a general rule from the Act, except as otherwise allowed by other laws, all instruments subject to stamp duty may be stamped within 40 days of their initial execution upon payment of the charged duty.
In addition to the unpaid duty, there is a penalty for failing to stamp the document within the allotted time frame. Where an instrument needs to be stamped and the ad valorem duty is applicable, the stamping must be done before the 30-day period following the first execution of the document, or after it has been received in Nigeria if the first execution took place somewhere else.
Where however, an instrument has been submitted to a Commissioner for his opinion prior to the expiration of the said 30 or 40 days, as the case may be, the limitation of 30 or 40 days will not apply. In this case, the instrument may be stamped within 21 days after receiving notification of the evaluation in conformity with the Commissioner’s assessment.
It is worthy of note that any document that is not complete does not require a stamp, and if the rate of duty changes before a document is finished, the new rate of duty will be applied to the document. The execution by the last party shall constitute the execution of the document.
• As to when Duty must be Paid.
All duties imposed under this Act must be paid within one month after the liability to pay the duty arises, delay will render the assessment invalid or even attract further penalty.
• Penalty for Late Stamping.
Failure to pay stamp duties to the appropriate authority within the time stipulated in the SDA is an offence and it could attract penalty and interest as contained in Section 23 (1) of the Stamp Duties Act.
• Acceptance as a military advocate
• Agreement or memorandum for the hiring of any labourer
• Affidavit or statement made for the purpose of being submitted with or presented to any court in Nigeria or before a judge or other official of such court
• An appraisal done in accordance with a court order in the exercise of admiralty jurisdiction
• Bill or Note issued by Central Bank of Nigeria.
• Transfer of Shares in Nigerian Government or Legislative Stocks or Funds.
• All instruments on which the duty would be payable by Government
• All documents relating to the transfer of shares and stock.
It must be mentioned here that these instruments are only exempted from the payment of stamp duties, they will however be stamped in order to be admissible in evidence.
Objections and the Appeal Process
If a person disagrees with the assessment of stamp duties, they may file an appeal at Tax Appeal.
The Federal Inland Revenue Service (Establishment) Act, mandates that appeals be filed with the Tax Appeal Tribunal, This is in accordance with section 68(2) of the FIRSEA, which mandates that the FIRSEA take precedence over other tax legislation in the event of a conflict.
CONCLUSION AND RECOMMENDATIONS
The SDA amendments made by the Finance Acts of 2020 are commendable. However, there are questions about how practicable it is to enforce compliance. It is anticipated that the tax administrators will address these questions, such as the inability to remit stamp duties in bulk through the portal.
Whereas, we will not fail to further give a laudable recognition of FA 2021, we must however stress that there is need for a review of fines/penalties for defaulters as regards the amount. On this ground, it is advised that an overhaul of the SDA is long overdue.
1) Administration of stamp Duties in Nigeria under the Finance Act. (Part 2) 2) New Legal regime on Stamp Duty Charges in Nigeria under the Finance Act 2020
3) Olatunji A. “Legal framework, collections and administration in Nigeria.”
4) Y. Y. Dadem, Property Law Practice in Nigeria. (Jos: Jos University Press, 2018)
ABOUT THE AUTHOR:
Chidiebere Mbah Esq. Is Corporate and Commercial Practice Consultant. A Legal Practitioner with a flare for Corporate Practice, Taxation, ADR and Human Rights Advocacy. He is a prolific Writer and Poet who believes in salvaging the hope of the common man. He has written various legal and artistic works to his credit.