The Stamp Duties Act, Chapter S8, Laws of the Federation of Nigeria (LFN) 2004 (SDA) provides the legal basis for the imposition and collection of stamp duties in Nigeria. Stamp duties are chargeable on all instruments relating to matters executed between a company and individual, group or body of individuals and those executed between persons or individuals. The instruments upon which stamp duties are chargeable include bond, bill of exchange, promissory note, covenant, conveyance on sale, lease, mortgage, etc. The duty rates vary depending on the types of instruments or nature of transactions and these may be flat charge or ad valorem charge (i.e. percentage of the value of the transaction).
The Federal Government is the only competent authority empowered to impose, charge and collect duties on eligible instruments if such instruments relate to matters executed between a company and an individual, group or body of individuals. State Governments are however permitted to collect duties in respect of eligible instruments executed between persons or individuals.
In a bid to increase enforcement of the provisions of the SDA, especially with respect to transactions consummated in the informal sector, the Federal Government, through the Central Bank of Nigeria (CBN), issued a circular on 15 January 2016 mandating all Deposit Money Banks (DMBs) and other financial institutions to enforce collection of ₦50 stamp duty on eligible transactions.
CBN issued this circular in the wake of Federal High Court (FHC)’s decision in Kasmal International Services Limited v. CBN (Suit No: FHC/L/CS/1710/2013). The court held that CBN was duty bound to ensure that all financial institutions, under its regulation, deduct stamp duty of ₦50 on all receipts given by any person in acknowledgement of goods purchased or services rendered (including electronic transfers or teller deposits) of monies from ₦1,000 and above.
The circular specifically listed, as eligible transactions, all receipts issued by banks and other financial institutions for services rendered in respect of electronic transfer and teller deposits from ₦1,000 and above for stamp duties purposes. This general rule is subject to some exceptions – such as receipts for transfer to self, transfers from savings accounts and receipts in respect of salaries and wages, further to a statement issued by CBN on 21 January 2016.
Most banks immediately commenced implementation of CBN’s directive by charging their customers a ₦50 stamp duty for each eligible transaction consummated through their accounts. CBN further mandated banks to periodically account for the stamp duties collected and subsequently debited same to the banks’ accounts with the CBN. This practice has continued since the issuance of the circular till date; albeit, it has been saddled with controversies due to challenges from some stakeholders.
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