October 6, 2020
The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, recently disclosed that ₦66 billion was recovered from stamp duties between January and May 2020. This figure when compared to the ₦6 billion generated from Stamp Duties for the comparative period in 2019 represents an unprecedented 1000% increase.1
The renewed focus on stamp duties is therefore predicated on the expected increase in stamp duties collection especially given the expansion of the scope of dutiable instruments to include electronic documents via the introduction of the Finance Act, 2019.
In this Article, we have examined the relevant provisions of the Stamp Duties Act (SDA) as amended by the Finance Act, 2019 vis-à-vis the FIRS’ position and the possible implications on Nigerian businesses.
Overview of SDA and the Finance Act Amendments in Nigeria
The SDA was promulgated in 1939. The language of the Act is invariably dated and may be difficult to understand for the average taxpayer given the age of the Act. This difficulty in understanding the SDA has sometimes led to uncertainty regarding the applicability of stamp duties to various kinds of instruments and transactions in Nigeria.
Furthermore, the SDA only made provisions for the application of stamp duties on physical documents, which is understandable, since at the time of its passage, electronic or paperless transactions could not have been in contemplation. This was the status of the Act and its implementation prior to the passage of the Finance Act, 2019. This largely contributed to the poor enforcement of the SDA and little or no attention given to its implementation compared to other tax laws, more so as the applicable stamp duty rates, including penalties for default did not reflect prevailing economic realities. It is therefore no surprise that the FIRS has now put its focus on the collection of stamp duties given the recent amendments to the SDA, which imposed stamp duties on electronic transactions and the overall need to improve government revenue.
The Finance Act introduced a number of amendments to the SDA and we have summarised the notable changes as follows:
– the FIRS is now the only valid authority empowered to impose, charge, and collect stamp duties in respect of documents relating to matters between a company and an individual, group or body of individuals. Likewise, the State Internal Revenue Services have replaced the State Governments2 in respect of documents executed between individuals or persons at such rates charged that may be agreed with the Federal Government.
– the definition of “instruments” has been expanded to include electronic documents and the definition of “receipts” amended to include electronic inscription.
– the definition of stamp was also amended to include “electronic stamp or electronic acknowledgment”.3
– the Finance Act also imposes obligation on Banks to charge a duty of ₦50 on all intra and inter-bank deposits and transfers from ₦10,000 and above (per transfer) with the exception of transfer between two accounts maintained by the same person in the same bank.
– the Finance Act, 2019 deletes Section 90 of SDA which exempted receipts of monetary deposits by a bank from stamp duties but provided exemptions for the following documents: