The Federal Inland Revenue Service on Wednesday announced that property owners and agents have been ordered to charge 6% Stamp Duty and remit back to the FIRS.
FIRS Director of Communications and Liason Department, Mr Abdullahi Ahmad told the News Agency of Nigeria that the levy applies to all tenancy and lease agreements entered into by landlords and agents regarding a property.
Ahmad said the directive is in line with the Stamp Duty Act. He explained that property-related transactions like tenancy or lease agreement fall under the Ad Valorem category of the stamp duty which attracts 6% duty. This percentage is payable of the total value or sum of the tenancy or lease.
The duty is 6% of whatever the amount of tenancy or lease is. This additional cost, however, will be borne by the tenant or individual obtaining the lease while the responsibility of remitting to the FIRS falls on the property owner or agent.
The rising cost of tenancy agreement in Nigeria
The costs associated with obtaining apartments or land in Nigeria keep rising by the day. Not only are the actual costs skyrocketing, the primary fees to be paid are also becoming unbearable.
In Lagos for instance, the norm is to charge an agency fee as well as an agreement fee. Sometimes, these fees could cost as much as 50% of the actual cost of rent or lease. In many parts of Lagos for instance, agency and agreement fees range between N100,000 to N150,000. In Ogun State, it costs between N60,000 and N120,000.
In some parts of Lagos, landlords demand and accept more than one year’s rent from new tenants even though the state law clearly prohibits landlords from demanding such and tenants from offering the same.
This new stamp duty represents an additional burden for new tenants and prospective landowners to bear. It invariably increases the cost of obtaining a new apartment or landed property especially in expensive cities like Lagos and Abuja.
Why an additional 6% stamp duty?
According to Mr Ahmad, the amount payable is necessary because it gives the tenancy or lease agreement the legal backing required and makes it legally binding on all parties involved. It is also a means to generate more revenue for the government.
Concerning property, other types of duties are “Conveyance or Transfer on Sale of Property, 1.5 per cent: Gift of Land, 1.5 per cent Memorandum of Understanding (Related to Land, Sales, Joint Venture, Surrender, Subdivision Agreements, 1.5 per cent, Power of Attorney (Irrevocable/Land Related), 1.5 per cent and Sales Agreement, 1.5 per cent.”
“Some other Stamp Duty types and their rates are Appraisement or Valuation of Property, 1.5 per cent; Certificate of Occupancy, Partnership N1,000 flat rate; Gift of Land, 1.5 per cent Legal Mortgage, 0.375 per cent, Legal Mortgage (Upstamping) and 0.375 per cent.”Abdullahi Ahmad
The new FIRS adhesive Stamp Duties were recently introduced when the Inter-Ministerial Committee on Audit and Recovery of Back Years Stamp Duties was inaugurated.
The committee is made up of representatives from the FIRS, the CBN, the Federal Ministry of Justice and the Federal Ministry of Finance, Budget and National Planning.
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