April 16, 2024

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Stamp Duty For Tenants Is 0.78%, Not 6% – FIRS

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The Federal Inland Revenue Service (FIRS) has clarified the categories of stamp duties and the fees to be paid by tenants as not 6% as recently widely circulated rather, “stamp duty on most rent agreements is at the rate of 0.78%.

This clarification came to the fore during a webinar conference where the FIRS Director, Tax Policy, Mr. Mathew Gbonjubola, cited the Stamp Duties Act to validate the position of the service on the various tenancies transactions and the fees they attract which are statutory,

Gbonjubola said that, “the 6% stamp duty is for tenancy above 21 years while 7 to 21 years lease or tenancy attracts 3% and less than 7-year tenancy is below 1%.”

He further explained that, “if a new agreement is drawn up at renewal, that document should be stamped, just like initial Agreement. If, however, the renewal terms are already in the initial Agreement such that no new document is prepared but just payment of the rent for renewal, then no stamping is required.”

Another contributor, Oyedele of Pricewaterhouse, a renown chartered accounting firm, he said that, “based on the Stamp Duties Act, stamp duty on lease or rent agreement is payable as follows:

  • Appraisement or Valuation of Property, 1.5%;
  • Certificate of Occupancy, Partnership N1,000 flat rate;
  • Gift of Land, 1.5%; Legal Mortgage, 0.375%; * Legal Mortgage (Up stamping), 0.375%; * Deed of Conveyance or Transfer on Sale of Property, 1.5%; * Memorandum of Understanding (Related to Land, Sales, Joint * Venture, Surrender, Subdivision Agreements, 1.5%;
  • Power of Attorney (Irrevocable/Land Related), 1.5%;
  • Sales Agreement, 1.5%

Please find below, few other Stamp Duty types and their rates,

If the lease term is less than 7 years, stamp duty rate is 0.78% (e.g. N780.00k on N100,000.00k rent). For a term of 7+ to 21 years, stamp duty rate is 3% which means, N3000.00k for N100,000.00k rent). For a term above 21 years, stamp duty rate is 6% (e.g. N6000.00k for N100,000.00k rent)

He however succinctly made it clear that, “given that most people enter into rent agreements for less than 7 years, the applicable stamp duty rate for most people will be 0.78%.”

Oyedele further explained thus, “if you are an individual renting from another individual, your stamp duty is payable to the state tax authority such as Lagos Internal Revenue Service, LIRS, if you are resident in Lagos. If either the tenant or the landlord is a company, then the duty is payable to FIRS.”

He emphasized that “the obligation to pay stamp duty on rent rests with the tenant but, FIRS is seeking to appoint the landlord as the agent to collect and remit the tax.”

During the virtual conference, the panelists averred that “Nigerians should accept the fact that the country can no longer rely solely on revenue accruing from its natural resources to fund the budget, hence the need to embrace taxation as the new normal of national fiscal policy.”

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