TAX SERIES BY ENIOLA – SEASON 7 (STAMP DUTIES)
EPISODE 1 – APPROVAL
At some point in our lives, we crave Approval, that pat on the back, Acceptance, that invitation to our dream school, job… or the Bar.
What if we could buy Approval, Love or Acceptance with money? A tall order, but the Law is petty like that.
The Love and Acceptance of the Law has to be bought for “Instruments” listed under the Stamp Duties Act to be legally acceptable/ recognized. This is what it means to pay Stamp Duty.
The token of this love is evidenced by a Stamp on the face of the Instrument.
EPISODE 2 – INSTRUMENTS
Stamp Duty is a tax on “Instruments” governed by the Stamp Duties Act, Cap S8 LFN 2004. It is administered by the (Federal Inland Revenue Service) FIRS.
The Federal Government through the FIRS has the power to impose, charge and collect Stamp Duties in respect of Instruments executed where a Company is a party.
The State Government through the State Internal Revenue Service (SIRS) has the authority to collect Stamp Duties in respect of Instruments executed between individuals or persons but the rates are dictated by the Federal Government.
Instruments are subject to Stamp Duty where they are executed in Nigeria or relate to a matter or thing to be done in Nigeria no matter where they are executed.
Not all Instruments/Documents are subject to Stamp Duty. The ones subject are expressly set out in the Stamp Duties Act (SDA) and referred to as “Instruments”. They include:
- Affidavits, affirmations and statutory declarations;
- Agreements or contracts;
- Bills of Exchange;
- Hire-purchase agreements;
- Conveyances on sale;
- Promissory notes;
- Powers of attorney;
- Insurance policies etc.
Some of the instruments listed enjoy certain exemptions. For example;
- Affidavits or affirmations made for the immediate purpose of being filed, read or used in any court;
- Bills of Exchange issued by the Central Bank of Nigeria; and
- Powers of Attorney for the sale, transfer or acceptance of any Government stocks or funds, etc.
need not be stamped.
Other general exemptions from payment of Stamp Duties include:
- All instruments on which stamp duty is payable by any government or its departments;
- All instruments relating to transfer of stocks and shares;
- Instruments for the sale of ship, etc.
Stamp Duties can either be at a Flat Rate or Ad valorem (according to value). The rate depends on the nature of the Instrument. It is determined by the Commissioner of Stamp Duties subject to express adherence to the SDA.
Instruments must be stamped within 30 days of execution for Ad valorem duty and 40 days of execution for flat rate duty.
There are penalties for late or non-payment of Stamp Duties. They include;
- Payment of the unpaid duty and sanction of twenty naira where an instrument is unstamped after 40 days or insufficiently stamped;
- Payment of the unpaid duty and a further sum of two naira where an unstamped instrument is produced in any court or proceeding;
- Liability on conviction to a fine of twenty naira where an officer registers an instrument without stamping;
- Liability on conviction to a fine of hundred naira where the adhesive stamp on an Instrument is removed and used more than once;
- Twenty naira fine for submitting an instrument to more than one commissioner for an assessment etc.
Unstamped Instruments also will not be admissible in evidence or be available for any purpose whatsoever in any Court or arbitral proceeding. But after payment of the unpaid duty and the penalty for producing an unstamped document in any proceeding, it may be received in evidence. Section 19 and 22(1) of the Stamp Duties Act.
Important to note is that an unstamped Instrument can be admitted in evidence for Criminal proceedings. Section 22 (4) of the Stamp Duties Act.
A limitation period of five (5) years applies for proceedings for the recovery of stamp duties and any fine, penalty or debt due to the Government.
EPISODE 3 – STAMP DUTIES AMENDMENT BILL
With the wide base of Stamp Duties (i.e. the wide range of Instruments it applies to) and the need for Instruments to be accepted and legalized, it’s a no-brainer that if it is efficiently administered in Nigeria, it would rise to the occasion as a major revenue generator for the Federal and State Governments.
It also goes without saying that the Stamp Duties Act needs a major overhaul for such efficient administration to ever see the light of day.
It is thus great news that there is currently a Stamp Duties Amendment Bill in the House of Representatives which seeks to amend the Act in several ways.
Under the Bill, Stamp is defined to include electronically and internet generated stamps, stamps embossed through a point of sale (POS) machine or adhesive postage stamps with specified value.
Nigerian Postal Service (NIPOST) postage stamps are required to be used on all agreements, hard copy or electronic.
Receipts issued on bank deposits will also be liable to imposition of Stamp Duties. This will nullify the Court of Appeal decision in Standard Chartered Bank v Kasmal International Services Limited and 22ors [CA/L/437A/2014] that receipts for deposits payed to the bank, electronic transfers and teller deposits are not subject to Stamp Duties according to the extant Stamp Duties Act.
The threshold for chargeable receipts with Stamp Duty is to be increased to ₦1,000 as opposed to the current minimum threshold of ₦4.
The meager penalties (e.g. Twenty naira, Hundred Naira) for contravention of the SDA will also be increased.
EPISODE 4 – STAMP DUTIES AND VAIDS
It is apparent that long overdue attention is now being paid to Stamp Duties in Nigeria. The passing of the Bill will only intensify this position and Stamp Duty audits are imminent.
In light of this, TSE had a recent discourse on Voluntary Assets and Income Declaration Scheme (VAIDS). VAIDS applies to Stamp Duties and as such, all persons in Nigeria – Artificial or Natural, with obligations to stamp whose obligation falls within the 5-year limitation period should seize the opportunity of the VAIDS amnesty period to regularize their tax defaults before June 30.