NIGERIA TAX BILL AND THE POTENTIAL REPEAL OF THE STAMP DUTIES ACT – WHAT LIES AHEAD?

INTRODUCTION

To address the challenges posed by the multiplicity of taxes, and promote a more harmonized taxation framework, the Nigerian government has introduced a suite of legislative proposals aimed at reforming the country’s tax system.[1] Amongst these, is the Nigeria Tax Bill (the “Bill”), which seeks to consolidate various legal frameworks governing taxation. Whilst we have discussed the Bill’s implications for free zone enterprises in our previous briefing note,[2] this briefing note focuses on the Bill’s impact on the extant Stamp Duties Act (as amended), Cap. S8, LFN, 2004 (“SDA”), by highlighting the salient provisions of the Bill as it relates to the administration of stamp duties in Nigeria.

REPEAL OF THE STAMP DUTIES ACT

Section 197 of the Bill expressly repeals, amongst other statutes, the SDA. Further underscoring the advent of a new legal regime, Section 202 of the Bill designates it (the Bill) as the principal legislation governing taxation, rendering any conflicting provisions in other laws void to the extent of their inconsistency. Consequently, barring any iterations during the legislative process, following the passage of the Bill into law, the SDA would cease to be the extant law on the administration of stamp duties in Nigeria.

CHARGE OF DUTIES AND APPLICABLE RATES

In a structured and simplified manner, Section 123 of the Bill, subject to the exemptions outlined in Part III of Chapter 8 of the Bill and consistent with the rates specified in the Ninth Schedule to the Bill, categorizes the instruments liable to stamp duties as follows:

a.    Instruments which, not having been previously executed by any person, are executed in Nigeria;

b.    Instruments executed outside Nigeria, that relates to property situated, or to any matter or thing done or to be done, in Nigeria.

Enhancing the rates stipulated in the Schedule to the SDA, and reinforcing the powers conferred by Section 4 of the SDA (as amended by the Finance Act, 2019) on the Federal Inland Revenue Service (“FIRS”) to impose, charge, and assess stamp duties on relevant instruments, the Ninth Schedule to the Bill provides a more comprehensible and self-explanatory outline of the applicable rates for various instruments. Some significant amendments introduced by the Bill[3] in this regard are:

   1. Loan Instruments

Departing from the customary 0.125% ad valorem rate applied to all types of unsecured loans under the SDA, item 9 of the Ninth Schedule to the Bill exempts overdrafts at banks and short-term loans (loans raised for a period not exceeding 12 months) from this rate.

2. Loan Capital

Unlike Section 103 of the SDA which provides an incentive for companies in the form of reimbursement of duty paid on loan capital wholly or partially applied for the conversion or consolidation of existing loan capital, Item 10 of the Ninth Schedule to the Bill specifies a reduced ad valorem rate of 0.1% for such loan capital.

3. Mortgages

The Bill retains the stamp duty rate for mortgages at 0.375% as contained in the SDA, however, mortgages relating to property of less than N10 million are exempted from the payment of stamp duty. 

4. Leases:

Item 22 of the Ninth Schedule to the Bill adjusts the rates applicable to leases as follows:

                       i.         0.78% for leases with terms between 0–7 years; and

                      ii.         3% for leases exceeding 7 years.

Additionally, it excludes properties with an annual value less than ₦1million or 10 times the annual minimum wage (whichever is higher).^[4] This marks a shift from the previous “tripartite structure” of:

                       i.         0.78% for leases of 7 years or less;

                      ii.         3% for leases between 7–21 years; and

                     iii.         6% for leases exceeding 21 years. 

5. Conveyance or Transfer on Sale:

Whilst the rate remains at 1.5%, the Ninth Schedule to the Bill exempts transactions where:

i.               The property value is ₦10million or less; or

ii.             The transfer occurs between associated companies holding at least 90% shareholding in each other (directly or through a third party), provided that the instrument had been stamped upon initial purchase. 

6. Electronic Money Transfer Levy:

Retaining the provisions introduced and modified by the Finance Acts, the Ninth Schedule continues to impose a fixed duty rate of ₦50 on transfers of ₦10,000 and above, excluding:

i.               Payments into one’s own account; or

ii.             Transfers between accounts of the same account holder within the same bank. 

7. Liability for Stamp Duty

One of the most noteworthy reforms in the Bill is the clarification provided in Section 125(2)^[5] and the Ninth Schedule regarding the party liable to pay stamp duty. For instance:

i.               For loans, the lender is liable;

ii.             For leases, the lessee is liable;

iii.            For transfers of property, the transferee is liable; and

iv.            For guarantees, the guarantor is liable.

These provisions resolve longstanding uncertainties concerning liability for stamp duty, thereby fostering greater clarity and compliance for contracting parties.

MANNER OF DENOTING DUTY

Pursuant to Section 5 of the SDA and as reiterated in other provisions,^[6] documents may currently be stamped using methods such as adhesive stamps, impressed stamps, embossed stamps, postage stamps, or stamps made by die. However, in alignment with modern trends, Section 124(1) of the Bill introduces updated methods for stamping, which include: tax stamps; a die; electronic or digital tagging; electronic receipt; or issuance of certificate. The inclusion of multiple digital stamping methods underscores the nation’s commitment to advancing towards a digitized economy and enhancing the efficiency of service delivery.

CHANGE OF ADMINISTRATIVE BODY

Currently, Section 4 of the SDA,^[7] designates the FIRS as the competent authority for imposing, charging, and collecting stamp duties, on instruments executed between a company and an individual, group or body of individuals, whilst the relevant tax authority in a State is charged with the responsibility of collecting duties in respect of instruments executed between persons or individuals at such rates to be imposed or charged as may be agreed with the Federal Government. However, Section 124(2) of the Bill proposes a significant shift by identifying the Joint Revenue Board (the “Board”) as the relevant administrative body for the administration of stamp duties.[8] Consequently, the passage of the Bill into law will supersede the FIRS’ and State tax authorities’ role in stamp duty administration, effectively transferring such powers to the Board.[9]

PROPER TIME FOR STAMPING INSTRUMENTS

The SDA currently prescribes varied and somewhat intricate timeframes for stamping different instruments:

1. Instruments Executed in Nigeria:

Section 12 of the SDA mandates that instruments executed in Nigeria and required by law to be stamped with adhesive stamps must be stamped on or before their first execution.

2. Unstamped or Insufficiently Stamped Instruments:

Under Section 23(1) of the SDA, such instruments may be stamped with impressed stamps within 40 days from the date of first execution, unless an extension or reduction of time is provided. Section 23(3) requires instruments subject to ad valorem duty to be stamped within 30 days of first execution or, if executed outside Nigeria, within 30 days of first receipt in Nigeria.

3. Charter Parties:

Section 47[10] allows charter parties executed outside Nigeria without proper stamping to be stamped with adhesive stamps within 10 days of being received in Nigeria, and before they are executed in Nigeria. Section 48 stipulates that charter parties executed in Nigeria may be stamped with impressed stamps under the following conditions:

a.    Within seven days of first execution, upon payment of the duty and a penalty of 45 kobo;

b.    After seven days but within one month of first execution, upon payment of the duty and a penalty of twenty naira;

c.     and shall not in any other case be stamped with an impressed stamp.

This fragmented and ambiguous approach has been significantly streamlined by Section 125(1) of the Bill, which provides a uniform timeframe for stamping instruments. Under the new provision, instruments must be stamped no later than 30 days after their execution by the person liable to pay the appropriate duty. This simplification ensures clarity and eliminates the needless permutations that have characterized the computation of time for stamping of documents under the SDA.

IMPLICATION OF NOT STAMPING

Under Section 22(4) of the SDA, an unstamped document remains admissible in criminal proceedings. This position is retained in Section 126(2) of the Bill. However, the Bill introduces a significant change regarding the admissibility of unstamped documents in civil proceedings. Under Section 22(1) of the SDA, an unstamped document can be made admissible in civil proceedings, arbitration, or before a referee by the “on-the-spot” imposition of stamp duty and any applicable penalty. In contrast, Section 126(1) of the Bill takes a stricter approach, rendering unstamped documents absolutely inadmissible in any court, judicial, or arbitration proceedings, without any provision for the on-the-spot remediation. This marks a departure from the current practice under the SDA and underscores the need for strict compliance with stamping requirements.

Relatedly, whilst the Bill omits the stipulation of monetary penalty for the failure to stamp,[11] it is assumed that the administrative powers conferred upon the Joint Revenue Board to “…specify the processes and requirements for the application…”[12] of stamp duties, would include the imposition of appropriate monetary penalties.  

OTHER INSTRUCTIVE PROVISIONS

Section 140(2) of the Bill stipulates that where multiple instruments subject to ad valorem duties are executed for the purpose of effecting the same transaction, only one of the instruments, as determined by the relevant tax authority, shall be charged with the ad valorem duty. This provision differs from Section 95(1) of the SDA, which previously limited this benefit to situations where several instruments were executed for the settlement of the same property, and the ad valorem duty chargeable exceeded one naira. For lack of relevance and applicability, the monetary threshold imposed by the SDA has been obliterated in the Bill.

In addition, Section 141 of the Bill introduces a new provision, stipulating that where an instrument chargeable with ad valorem duty involves non-monetary consideration, the value of such consideration shall be deemed to be the market value of the consideration, or the relevant part thereof. This is a new approach under the Bill.

EXEMPTED ITEMS

Part III of Chapter 8 of the Bill provides a list of items that are exempted from the payment of stamp duties, and they are:

1. transfer of shares in Government or legislative stocks or funds of Nigeria;
2. any instrument for sale, transfer or other disposition, either absolutely or by way of mortgage, or otherwise, of any ship or vessel or any part, interest, share or property of or in any ship or vessel;
3. any instrument on which the duty would be payable by a Nigerian Government or any of its ministries, departments or agencies;
4. any instrument in which the duty would be payable by any consular officer arising out of his official functions provided the foreign government he represents grants similar exemption to Nigerian consular officers;
5. any instrument executed by or on behalf of a co-operative society registered under any Act or law;
6. shares, stocks or securities transferred by a lender to its approved agent or a borrower in furtherance of a Regulated Securities Lending Transaction[13];
7. shares, stocks or securities returned to a lender or its approved agent by a borrower in pursuant of a Regulated Securities Lending Transaction; or
8. electronic transfer or electronic receipts of money of a sum below N10,000.00 or its equivalent in other currencies, transfers for salary payment and intra-bank self transfers.

CONCLUSION:

The introduction of the Bill marks a significant transformation in the country’s taxation landscape, particularly with the proposed repeal of the SDA. By providing a more streamlined, modern, and coherent framework for stamp duty administration, the Bill addresses long-standing ambiguities and introduces critical reforms that aim to simplify compliance for both individuals and businesses. The Bill not only modernizes stamping procedures through digital methods but also enhances the clarity of tax liabilities, ensuring that taxpayers know who is responsible for paying the stamp duty on various transactions.

The most noteworthy changes, such as the simplification of stamp duty timelines, and the introduction of new provisions such as Section 141, underscore the government’s commitment to a more efficient tax system. Additionally, the clarification on the inadmissibility of unstamped documents in civil and judicial proceedings, coupled with the restructuring of exemptions and chargeable rates, will significantly influence how transactions are conducted under the new legal regime.

However, the full impact of these reforms will depend on the timely passage of the Bill into law and the subsequent operationalization of its provisions. Whilst the Bill offers a promising vision for a more digitized, efficient, and harmonized taxation framework, stakeholders must remain vigilant in adapting to the forthcoming changes. As the landscape evolves, businesses and individuals alike will need to familiarize themselves with the new procedures and provisions to ensure continued compliance and to avoid penalties. The repeal of the SDA and its replacement by the Bill ushers in a new era of taxation in Nigeria, with the potential to enhance revenue generation, improve tax administration, and support the nation’s broader economic goals.

Disclaimer: Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the key contacts