TAX 2.5 STAMP DUTIES
Is imposed on chargeable instruments executed in Nigeria OR which relate to a matter or thing done or to be done in Nigeria. Recognized in Item 58 of the Legislative List. In A.G V Camplough, the court noted that it can only be imposed on documents which come within those listed in the Statute.
First imposed in England in 1694 on parchment and papers and later included documents.
The chargeable instruments are listed in the schedule to the STA. They include:
- Affidavits and statutory declarations.
- Agreement with deposits.
- Agreement for lease of property.
- Documents for hire purchase.
- Annuities: An insurance where the insured is entitled to a fixed sum of money annually.
- Instrument of admission as a barrister or solicitor.
- Voting paper.
And so on.
Agreements for hire of labourer, relating to sale of goods, wares or merchandise and agreement that are not more than N10 are exempted. There are also other general exemptions in the schedule like:
- Instrument for sale of ship.
- Instruments where the government or its body is a party to.
- Agreements to which the NRC is a party to (Nigerian Railway Corporation).
- Instruments relating to the transfer of stocks and shares.
- Instruments that have to do with consular parties subject to the principle of reciprocity.
And so on…
Chargeable instruments can be stamped within 40 days from the date of execution (if brought into Nigeria, not more than 30 days from the date it is brought into Nigeria)-Section 23 after 40 days, it can only be stamped by payment of the unstamped duty coupled with twenty naira.
Failure to stamp does NOT invalidate the document or agreement-Dent V Moore.
- Unstamped documents are generally inadmissible for evidence except in criminal case-Section 22-Candido Da Rocha V Hussain
- The unpaid duty would be paid, in addition with the penalty for late stamping (N20 under Section 23) and a further sum of 2 naira. This shall be paid to the accountant general
Thus, the relevance of stamping would be felt when a chargeable instrument is sought to be presented in court/tribunal.
In practice, the defaulting party is usually asked to go and do the needed as in Commercial Bank Credit Lyonnais V Union Food (Nig) Ltd, the court held that failure is not a crime since the purpose of stamp duty is to raise revenue for the government. Thus not stamping is a mere irregularity which could be remedied by stamping. Same position was held in Union Trust Ltd V AG Federation.
The substance of the document rather than the form shall be the determinant. Thus the title of a document would not exculpate it from stamp duty where its substance evidences a chargeable transaction. Also, where one document contains (let’s say) three chargeable transactions, it shall be stamped as three notwithstanding that it is contained in one document. Conversely, where more than one document evidences a single transaction, it can be stamped as one.
Stamp duty may be charged based on the value of the transaction. E.g. Governor’s consent.
Section 20 prohibits double assessment/stamping else a fine of 20naira.
Section 13 prohibits the use of a stamp more than once… violation attracts a fine of 100 naira. This provision is apparent in postal issues. A fraudulent person may remove a stamp from one instrument to reaffix to another instrument “with the intent that the stamp be used again”.
The commissioner is granted the power to inspect records, papers and instruments to discover and determine whether any fraud or omission in relation to any duty has taken place.
An office that registers unstamped document shall pay a fine of 20naira-Section 25 STA.
Issuing unstamped bank note and stock certificate grounds liability of 200 naira and 100 naira respectively-see Section 35.
Problems and issues:
- The amount of penalty is trivial.
- Who has jurisdiction to administer? Section 4(1) STA vests state government with jurisdiction in respect of instrument executed between individuals and the FG has jurisdiction in respect of instruments executed where a company is a party to the transaction. Provided that such rates would be in agreement and consultation with the Federal Government.
- SDAct V SDLaw: Item 58 of the Exclusive Legislative list of the 1999 constitution reserves this power for the FG. Before 1979, it was within the power of the states. notwithstanding the constitutional provisions, states still retain their stamp duties laws and charge stamp duties under their laws under varying rates.
- Refusal of states to accept instruments stamped with the FG: in relation to land located within their territory.
In Savannah Bank V Director General of Ministry of Lands, Survey and Town Plannign and AG of Plateau, where the DG of ministry of lands Plateau refused to accept the deed of mortgage which was registered with the FG. The court granted an order of mandamus to compel him to register the deed.
In Union Trust Ltd V AG Federation and AG Ogun State where the Ogun State authorities refused to accept the mortgage trust deed that was stamped with the FG until another 20,000 stamp duty was paid to the state. The court held in favour of the FG.
- The FG has also encroached on the state’s jurisdiction in respect of instruments executed between individuals.
- Exorbitant Stamp Duty: the rates are high especially in Lagos and Rivers State. The Tax Study Group recommended that since stamp duty was not for revenue generation, 50k should be the maximum.
- Jurisdiction: Section 21 SDA provides that disputes be referred to the State High Court within 21 days and after paying the disputed amount. The FIRSEA provides that assessment issues should go to the TAT and appeal to FHC. The constitution provides that issues relating to the revenue of the FG should go to the FHC. This shows that Section 1 overides the supremacy clause of Section 68 FIRSEA-Stabilini Visioni V FBIR
With the introduction of electronic transfer and transactions, stamp duty is becoming a thing of the past. The FG and States should settle their issues and the rates of the Stamp Duties should be reviewed. There is also the need to curb corruption, the administration should be strengthened with the staff well equipped.