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 interbank 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
- receipts given by any person in a regulated securities lending transaction carried out under regulation issued by the Securities and Exchange Commission;
- all documents relating to a regulated securities lending transaction carried out under regulations by the Securities and Exchange Commission;
- shares, stocks or securities transferred by a lender to its approved agent or a borrower in furtherance of a regulated securities lending transaction; and
- shares, stock or securities returned to a lender or its approved agent by a borrower in pursuant to a regulated securities lending transaction.
FIRS Information Circular and Our Comments
In a bid to clarify the amendments in the Finance Act, FIRS issued an Information Circular titled "Clarifications on the Provisions of the Stamp Duties Act" ("the Circular") dated 29th April, 2020. The Circular reiterates some of the amendments made by the Finance Act to the SDA and further provides for the following:
The Circular clarifies that the following documents are dutiable:
- all written or printed dutiable instruments or receipts;
- all electronic dutiable instruments or receipts in the form of electronic media content, electronic documents or files, emails, Short Message Services ("SMS"), Instant Messages ("IM"), any internet-based messaging service, website or cloud-based platform;
- all printed receipts (including Point-OfSale receipts, fiscalised device receipts, Automated Teller Machine (ATM) print-outs and other written or printed acknowledgments);
- and all electronically generated receipts and any form of electronic acknowledgement of money for dutiable transactions.
Although the Finance Act does not define 'electronic documents', the foregoing appears to be a wide and expansive interpretation of the phrase "electronic documents". Thus, the practicability of enforcing compliance will certainly be an issue.
"It is important to note that the power to increase or decrease the rates in the Schedule to the SDA or add to the list of dutiable instruments is within the sole preserve of the National Assembly and cannot be delegated to or exercised by any other authority."
- Payment of Stamp Duties for
The Circular addresses the qualifying transactions for the payment of stamp duties for previous years by banks, Ministries, Departments and Agencies (MDAs). The Circular directs taxpayers, banks and MDAs to immediately remit to the FIRS, stamp duties which were collected by them, if they are yet to do so (i.e. stamp duties on deposits and transfers for ₦1000 and above for the period between 15th January 2016 and 29th February 2020). The Circular further states that stamp duties will be charged and collected on all deposits and transfers from ₦10,000 and above beginning from 1st March 2020.
Consequently, the Federal Government on the 30th June 2020 inaugurated the inter-ministerial committee on audit and recovery of back years stamp duties with the aim of recovering duties collected by institutions such as Deposit Money Banks (DMBs), NIBSS, CAC, etc. from 2015- 2019.
The clarification in respect of duties collected between 15th January 2016 and 29th February 2020 seems to reflect the provisions of the Central Bank of Nigeria (CBN) Circular of 15th January 20164 which instructed banks to charge ₦50 on all eligible transactions including receipts issued by DMBs and other financial institutions in acknowledgment of services rendered in respect of electronic transfers and deposits above ₦1000. However, the legality of the collection of stamp duties based on a Circular by the CBN is questionable, in view of the Court of Appeal decision of 2016 in the case of Standard Chartered Bank of Nigeria (SCBN) v Kasmal International Services Limited5 , where the Court held that the SDA, as applicable then, exempted evidence of receipt of monetary deposits into Bank accounts from stamp duties, additionally, the Federal High Court declared the said CBN Circular null and void in the case of Retail Supermarkets Nigeria Limited v. Citibank Nigeria Limited & CBN6 .
In addition to the above, the recovery exercise by the government may not be extended to electronic documents executed prior to Finance Act regardless of the 5-year window provided by the SDA for the recovery of duties. This is because the imposition of duty on electronic documents only came into effect after the enactment of the Finance Act, 2019.
- Dutiable Instrument and
The Circular contains a list of dutiable instruments and the applicable rates. However, some instruments in the Circular are not provided for by the SDA while some of the rates adopted by the FIRS vary from those prescribed by the SDA. For example, the Circular mentions guarantor's form (for loan applications) as a dutiable instrument and imposes stamp duties at a flat rate of ₦500. A careful perusal of the SDA reveals that the Act does not mention guarantor's form rather it was the Joint Tax Board (JTB) in 2002 that reviewed the Schedule to the SDA and introduced guarantor's form as a dutiable instrument. It is important to note that the power to increase or decrease the rates in the Schedule to the SDA or add to the list of dutiable instruments is within the sole preserve of the National Assembly7 and cannot be delegated to or exercised by any other authority.
Given the increased focus on stamp duties and the provisions of the FIRS Circular, individuals and companies are advised to seek additional information or clarification from their tax advisers in order to be properly informed of the correct position of the law and their obligations under the SDA in order to ensure compliance within the scope of the law.
While the SDA (as amended by the Finance Act) clearly expands the scope of stamp duties in Nigeria to include electronic transactions, the FIRS Circulars and other public notices can only be applied to the extent that they conform with the provisions of the extant laws. This is because FIRS Circulars and notices cannot derogate from or replace the provisions of the law.
While we await further developments regarding stamp duties administration in Nigeria, it is important for corporate and individual taxpayers as well as other persons who may be engaged in transactions covered by the SDA to engage professionals in reviewing their transactions and business arrangements. This is to ensure that they are in compliance with the obligations under the law.
1. Agencies, 'FIRS generates N66 billion from Stamp Duties' (2020) [https://www.today.ng/business/economy/firs-generates-n66-billion-stamp-duties-304222] accessed on 9 August 2020
2. Even though they have always exercised the powers on behalf of the State Governments
3. Section 52 Finance Act, 2019
4. CBN Circular on Collection and Remittance of Statutory Charges on Receipts to Nigeria Postal Service under the Stamp Duties Act, CBN/GEN/DMB/02/006
5. Standard Chartered Bank of Nigeria (SCBN) v Kasmal International Services Limited CA/L/437A/2014
6. Retail Supermarkets Nigeria Limited v. Citibank Nigeria Limited & CBN FHC/L/CS/126/2016
7. Section 116 CAP S8, LFN 2004 (as amended).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.