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Tenants to pay 0.78 percent stamp duty, FIRS clarifies

The Federal Inland Revenue Service (FIRS) has clarified the categories of stamp duties to be paid by tenants.

The FIRS on Wednesday mandated landlords and property agents to charge 6 percent Stamp Duty on all tenancy and lease agreements.

This decision has generated a strong debate among Nigerians on social media.

However on Saturday, Director, Tax Policy of the FIRS, Mr. Mathew Gbonjubola during a webinar conference put clarity to the rates.

Mr. Gbonjubola explained 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%.”

Mr. Femi Oluwaniyi, Coordinating Director, Tax Operations Group of the FIRS told The Nation that stamp duty on rent or lease only applies to new agreements and not to renewals.

According to him, “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.”

During the virtual conference, the panellists said 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.”

Taiwo Oyedele of PriceWaterhouseCoopers in his twitter account stated that “stamp duty on most rent agreements is at the rate of 0.78%, not 6% as being widely circulated.”

Stamp duty on lease or rent agreement is payable as follows: If the lease term is less than 7 years, stamp duty rate is 0.78% (e.g. N780 on N100k rent). For a term of 7+ to 21 years, stamp duty rate is 3% (means N3k for N100k rent). For a term above 21 years, stamp duty rate is 6% (e.g. N6k for N100k rent)

He noted that “given that most people enter into rent agreements for less than 7 years, the applicable stamp duty rate to most people will be 0.78%.”

Oyedele further explained that “if you are an individual renting from another individual, your stamp duty is payable to the state tax authority such as 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 reiterated that “the obligation to pay stamp duty on rent rests with the tenant. However, FIRS is seeking to appoint the landlord as the agent to collect and remit the tax.”

Some other Stamp Duty types and their rates are 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 (Upstamping), 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%; and Sales Agreement, 1.5%.

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