FIRS Stamp Duty Hike for Tenancy Agreement: A Legal Analysis

By Opatola Victor (Esq)

Recently, the Federal Inland Revenue Service (FIRS) through its Chairman announced that the agency will commence the collection of 6% stamp duty on tenancy agreement.

While the payment of stamp duties on tenancy agreement is not a new provision, the imposition of the new 6% flat rate is not only foreign to both Law and administrative practice, it is also illegal.

The Stamp Duties Act was enacted into Law in 1939 and it has gone through certain amendments. Most recent of the amendments is that of the Finance Act 2018. Going through the gamut of the Stamp Duties Act and the amendments in the Finance Act, certain things become quickly clear.

1. Nothing empowers the FIRS agency to unilaterally increase, decrease or modify in any way the provisions and fines imposed in the Act.

2. The Stamp duty rates imposed in the Act remains unchanged.

Legal argument

Does the FIRS have the power to alter the provisions or stamp duties stipulated in the Stamp Duties Act or Finance Act?

One of the characteristics of Taxation is that it is an imposition, it is fixed, certain and backed by Law. Going through the provision of the Stamp Duties Act, section 116(1) and (2) gives us an understanding of the spirit and intent of the legislation in regards to who can increase, reduce or vary, in any way, the stamp duties under the Act.

Section 116 says: Schedule may be varied by resolution and order (1) The National Assembly may, by resolution, increase, diminish or repeal the duty chargeable under any of the heads specified in the Schedule to this Act in respect of the documents regarding which the Government of the Federation is competent to make laws, and in respect of any other matter within such competence may add new duties or otherwise add to, vary or revoke the Schedule. 

2) The House of Assembly of a State may, by resolution, increase, diminish or repeal the duty chargeable under any of the heads specified in the Schedule in respect of documents regarding which the Government of a State is exclusively competent to make laws, and in respect of any other matter within such exclusive competence may add new duties or otherwise add to, vary or revoke the Schedule.

Going through the Stamp duties Act, it becomes obvious that it is a very detailed legislation leaving little or no room for doubt as to Tax Liability and upon which individual it falls. 

EXPRESIO UNIUS EST EXCLUSIO ALTERIUS, express mention of one thing is the exclusion of the other. The Act itself has provided expressly for instance where any imposed stamp duty can be varied, and unfortunately, the FIRS as an entire body is not vested with the requisite Powers to vary upward or downward the stamp duties Act.

So the Position of the FIRS Chairman that the Stamp Duty to be paid on leases and tenancy agreement is 6% is against the Provisions in the schedule of the Act and is void. It is tantamount to arrogating to yourself powers you don’t have.

See also: FIRS Orders Landlords and Agents to Charge 6% Stamp Duty on Tenancy and Lease Agreements

Furthermore stamp duties can be either:

1. Advalorem: This is the general stamp duties charged. Section 4. Advalorem is a computation based on the value and price of the property. It is determined by the consideration and in accordance with the scale provided in the schedule to the act. 

2. Fixed- This computation disregards the value of the property and gives a flat rate.

It becomes obvious that the FIRS as a body cannot inturn make a rate declared as Ad Valorem and summarily turn it into a fixed rate, under any guise whatsoever. The rate for lease and tenancy agreement are Ad Valorem and not fixed, so the FIRS can not make it otherwise without altering the Act. 

Current stamp duty levy on tenancy agreement

The schedule to the Act provides three categories of definite  lease or tenancy

1. Lease below 7 years which is rated at 0.39k stamp duties to be paid on every N50

2. Lease between 7- 21 years which is rated at N1:30k stamp duties to be paid on every N50

3. Lease of 21 years above, which is rated at N3 stamp duties to be paid on every N50

The analysis is that 39 kobo on every N50 is the same as 78 kobo on every N100, which is the same as 0.78%. N1:50k on every N50 is the same as N3 on every N100, which is the same as 3%. N3 on every N50 is the same as N6 on every N100 which is the same as 6%.

Simply put:

For lease tenure Less than 7 years lease or tenancy, stamp duty payable is  0.78%. For Lease tenure between 7 years to 21 years, the lease or tenancy stamp duty payable is  3%. Lease tenure of above 21 years lease or tenancy attracts stamp duty of 6%.

Furthermore, the authority to stamp the document depends on the parties involved. If only individuals are involved, then the State Internal Revenue Board may stamp it. If it is a corporate body, then the FIRS may stamp. A document has to be stamped as soon as it is executed. Documents are to be stamped within 30 days of its execution.

For tenancy and lease agreement, the burden to remit the money to the tax board is on the Landlord.  The charge is on the instrument or agreement not on the receipt. 

Opatola Victor is a legal advisor at the Justice, Development and Peace Movement. He could be contacted via his email: [email protected] and his phone numbers: 09041815408 , 07069687425.