MODULE 12 STAMP DUTIES

MODULE 12 STAMP DUTIES

OUTLINES Administration of Stamp Duty in Nigeria Responsibilities of the Commissioner of Stamp Duty Methods of stamping Time of Stamping and Penalty Improving Stamping and Relevant collecting authority Documents subjects to stamp duty Terminologies in stamping

Administration of Stamp Duty in Nigeria Section 4 of Stamp Duties Act Cap S8 L.F.N 2004 specifies provides that: The Federal government shall be the only competent authority to impose, charge and collect duties upon instruments specified in the Schedule to this Act if such instrument relates to matters executed between a company and an individual, group or body of individuals. The state governments shall collect duties in respect of instruments executed between persons or individuals at such rates to be imposed or charged as may be agreed with the federal government. In this section, company includes banks and other financial institutions.

Responsibilities of the Commissioner of Stamp Duty Section 6 of SDA provides that (1) The relevant Civil Service Commission may appoint one or more officers who shall be commissioners of stamp duties and shall have the care and management of the duties to be taken under the Act. (2) When there are two or more commissioners, any decision, act and thing required to be made or done by a Commissioner may be made or done by any one of the said Commissioner. (3) When appointing a commissioner, the President or Governor, as the case may be, may signify that the duty of such commissioner shall be confined to adjudication. FUNCTIONS OF THE COMMISSIONER The Commissioner of Stamp Duties performs both administrative and technical functions. He is the administrative head of stamp duties office. He performs the following technical functions: a) He assesses the instruments submitted for stamping and imposes penalties if necessary. b) He stamps or embosses an instrument with the appropriate stamp denomination. c) He takes custody of the dies and adhesive stamps used in stamping documents. d) He adjudicates.

Adjudication is the process of determining the appropriate amount of duty chargeable on an instrument by the Commissioner of Stamp Duties. The Commissioner may required by any person to express his opinion as to the amount of stamp duty (if any) payable on any executed instrument. In such case, a certificate shall be endorsed on the instrument under the hand of the commissioner stating that, in the opinion, such instrument is not chargeable with any duty, or the particular amount with which it is chargeable or, if in his opinion such is the case, that it is duly stamped.

Methods of stamping a. Fixed Duties These are duties which remain the same irrespective of the consideration for the document being stamped. Examples of instruments subject to fixed duties are: - Admission as a barrister or solicitor, - Admission as a notary public, - Affidavit, affirmation and statutory declaration, - Instrument of apprenticeship, - Letter or power of attorney, - Policy of insurance against accident, - Receipts, and - Bill of exchange payable on demand or at sight or on presentation or within three days after date or sight.

b) Ad Valorem Duties These are duties which vary with the amount or value of the consideration for the document being stamped. Examples of instruments subject to ad valorem duties are: - valuation of any property, - bills of exchange of any other kind and promissory note, - share capital, - loan capital, - contract notes for or relating to the sales or purchase of any stock or marketable security, - conveyance or transfer on sale of any property, - debenture, - mortgage, and - policy of life insurance.

Time of Stamping and Penalty Time of Execution Governs The SDA stipulates the time frame for stamping. In general, the time frame for stamping is governed by the time of execution. Where a document which may be or is required to be stamped with an adhesive stamp is first executed in Nigeria, it shall be stamped on or before its first execution and such stamp shall be cancelled by the person by whom the instrument is first executed and at the time such execution. Except in criminal proceedings, no instrument executed in Nigeria, or relating (wheresoever executed) to any property situated in or to any matter or thing done or to be done in Nigeria, unless it is duly stamped in accordance with the law in force in Nigeria at the time when it was first executed. Except where there are contrary provisions in the SDA, any unstamped or insufficiently stamped instrument may be stamped with an impressed stamp at any time within 40 days from the first execution thereon upon payment of the duty or unpaid duty only, but after that time the said instrument may only be stamped upon payment of the unpaid duty and a penalty of N20. Where the unpaid duty exceeds N20, interest shall be paid at the rate of 10% per annum on such duty from the date on which the instrument was first executed up to the time when the amount of interest is equal to the unpaid duty.

Stamp representing the amount of unpaid duty together with the penalty shall, in the case of impressed stamps, be impressed on the instrument and, in the case of adhesive stamps, be affixed to the instrument in the presence of a commissioner who shall cancel the stamps and, in addition, in the case of those stamps, whether impressed or adhesive, which do not clearly indicate that they represent penalty, write the penalty thereon. The SDA further provides that in the case of such instruments hereunder listed as are chargeable with ad valorem duty, unless the instrument is written upon duly stamped material, it shall be duly stamped with the proper ad valorem duty before the expiration of 30 days after it was first executed, or after it has been first received in Nigeria if it was first executed at any place outside Nigeria. The instruments are as follows: - Bond, covenant, or instrument of any kind whatsoever; - Conveyance on sale; - Conveyance or transfers operating as voluntary dispositions inter vivos; - Lease; - Mortgage bond, debenture, covenant, warrant of attorney to confess and enter up judgment; - Settlement

If any of the above-listed instruments executed after the coming into operation of the SDA, i.e. 1 st April, 1939, has not been or is not duly stamped as indicated above, the person in that behalf shall be guilty of an offence and shall be liable on conviction to a fine of N20. In addition, the person shall pay the penalty prescribe by the Act together with a further penalty equivalent to unpaid duty thereon, unless a reasonable excuse for the delay in stamping or the omission to stamp or the insufficiency of stamp is given to the Commissioner.

The instruments and persons to liable to penalty is provided in the table below: Title of Instrument Person liable to penalty Bond, covenant, or instrument of any kind whatsoever. Conveyance on sale The oblige, covenantee or other person taking the security. The vendee or transferee. Conveyance or transfers operating as voluntary dispositions inter vivos. Lease The grantor or transferor. The lessee Mortgage bond, debenture, covenant, and warrant of attorney to confess and enter up judgment. Settlement The mortgage or oblige, in the case of a transfer or reconveyance, the transferee, assignee or disponee or the person redeeming the security. The settler

Improving Stamping and Relevant collecting authority Stamp duties on instruments specified in the schedule to the Act are collected by the Federal Government if such instruments are executed by corporate bodies and residents of the Federal Capital Territory, Abuja. The state governments shall collect duties in respect of instruments executed between persons or individuals at such rates to be imposed or charged as may be agreed with the federal government.

Documents subjects to stamp duty Instruments liable to stamp duties include, inter alia: Agreements, Appraisement, Instruments of apprenticeship, Banks notes, bills of exchange and promissory notes, Bills of lading, Bills of sale, Charter parties, Contract notes, Conveyance on sale, Duplicates and counterparts, Exchange and partition or division, Leases, Letter of allotment or renunciation, script certificates and scrip,

Letters or powers of attorney and voting papers, Marketable securities, Mortgages, Policies of insurance, Receipts, Settlements, Share warrants, Warrant for goods, Share capital of limited liability companies, and Loan capital.

Terminologies in stamping Adjudication is the process of determining the appropriate amount of duty chargeable on an instrument by the Commissioner of Stamp Duties. Leading and Principal Object. Stamp duties are measured by the principal object. Thus the adequacy of the stamp duty paid on any instrument depends on what constitutes the leading and principal object of the instrument. If that leading and principal object does not give rise to duty, no duty is chargeable simply because there is a subsidiary clause with a different object and vice versa. It will not be necessary to stamp an instrument for matters which are merely accessory so far as it has been stamped in respect of the leading and principal object. Overlapping Head Charges. Where an instrument can be charged under more than one head, it will be charged on one head only. Note that this is not the same as when one instrument carries two or more separate transactions and, therefore, charged with duty as separate instruments.

Consideration of Uncertain Value. Where the consideration, or any part of the consideration for a conveyance on sale is made up with money payable periodically for a definite period exceeding 20 years or in perpetuity or for an indefinite period not terminable with life, the instrument shall be charged in respect of that consideration with ad valorem duty on the total amount which shall or may, according to the terms of sale, be payable during the period of twenty years next after the day of the date of the instrument. Loss or Destroyed Instruments. Where an instrument has been lost or destroyed, there is a rebuttable presumption that it was duly stamped. The anus of proving that the document was insufficiently stamped or unstamped lies on the party who objects to its admissibility on the ground that it was unstamped. But where there are facts or circumstances which raise a strong presumption that the document was never stamped, the burden of proving that the document was duly stamped lies on the party who wishes to adduce secondary evidence of the lost or destroyed instrument.

One Instrument Alteration. Any alteration in an instrument making it chargeable with duty makes it a new instrument and would required stamping. Generally, where there is an alteration in the terms of an instrument after it had been executed (other than an alteration made to correct an error or address an admission) a new stamp would be necessary in order to sustain an action founded on it or to render it admissible in evidence as a security. One Instrument - Two or More Matters. Except there are provisions to the contrary in any Act, an instrument containing or relating to several distinct matters shall be separately and distinctly charged, as if it were a separate instrument, with duty in respect of each of such matters. Where a document has two objects and is stamped with an unpappropriated stamp which is sufficient to cover either object, it would be admissible when tendered to prove either object. One Instrument Two or More Considerations. Except there are provisions to the contrary in any Act, where an instrument is made for any consideration or considerations in respect of which it is chargeable with ad valorem duty, and also for any further or valuable consideration, or considerations, it shall be separately and distinctly charged as if it were a separately instrument, with duty in respect of each consideration.

Two Instruments One Transaction Where an agreement refers to another document such that the two together form only one agreement, it is sufficient if one of the papers is stamped. It is however necessary that the parties must be the same for each document.

Review Questions 1. Discuss the Time Frame for Stamping and Penalties for Late Stamping. 2. What is adjudication? Describe the procedures for making an appeal against the Commissioner s assessment. 3. Define relevant tax authority in connection with stamp duties. List ten instruments which are subject to stamp duties. 4. Explain the various forms of stamp duties.

References Adejola, P. A (2015): Revision Pack on Taxation for Professional, Conversion and Undergraduate Students, Arogbodo Press, Abuja. CITN Nigeria Tax Guide & Statutes, 2 nd Edition, Volume 2, 2014. Bassey U. O (2013): : Companies Taxation in Nigeria, the CIBN Press Ltd, Lagos. Seyi Ojo (2006): Fundamental Principles of Nigerian Tax, Sagribra Tax Publications, Lagos 2003.