The Federal Inland Revenue Service (FIRS) has announced a stamp duty that will be paid on rent and Certificate of Occupancy (C of O).
This new development stemmed from a necessary need to reduce real estate disputes and make more revenue.
In the early weeks of July, the Director for Communication and Liaison Department, Mr Abdullahi Ahmad, disclosed some explanation to the implementation of the new policy saying:
“The following are the chargeable transactions in the Fixed Duty Instruments category, Power of Attorney (PoA), Certificate of Occupancy (C of O), Proxy form; Appointment of Receiver, Memorandum of Understanding (MoU), Joint Venture Agreements (JVA), Guarantor’s form, and Ordinary Agreements Receipts.
“While ad-Valorem Instruments chargeable under the Stamp Duties Act are Deed of Assignment, Sales Agreement, Legal Mortgage or Debentures, Tenancy or Lease Agreement, Insurance Policies, Contract Agreements, Vending Agreement, Promissory Notes, Charter-Party and Contract Notes.
“Stamp duty is basically charged in two forms, either ad valorem where duty payable is a percentage of the consideration on an instrument or a fixed sum irrespective of the consideration on a dutiable instrument or document.”
As instructed by the Director, Nigerians are advised to ensure that all documents relating to rent and lease agreements for homes, offices, and other business related matters are authenticated with the new FIRS Adhesive Stamp Duty.
You should also know that a new committee that oversees the enforcement of the stamp duty act has been inducted to help with the swift recovery of stamp duties. Fines and penalties span up to 5 years. Their targets are deposit money banks, Nigerian Interbank Settlement System (NIBSS), Central Securities Clearing System (CSCS), Corporate Affairs Commission (CAC) and so on, in respect of stamp duties already collected but not yet remitted.
What This Means for Landlords and Tenants
With a weakening effect of the pandemic on the real estate sector of the economy, rent rates have fallen excessively to a point that threatens even the slightest form of recovery. The new stamp duty could potentially worsen the situation.
Those who have lost their financial means of daily survival will be forced to relocate to areas that offer lower rents.
The former president of the International Real Estate Federation (FIABCI), African region, Mr. Chudi Ubosi expressed his concerns on the amount of transactions already being taxed in the real estate sector. He posits that the government should instead, offer palliatives especially in such difficult times.
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