Introduction:

There has been a lot of controversy and misconceptions from a lot of quarters in the last few days on the stamp duty payable on tenancy/lease agreements. This has largely been due to the lack of accurate information. As the common biblical saying goes "my people perish for lack of knowledge".

Some news headlines in the print media read "Property owners, agents to charge tenants 6% stamp duty and remit to FIRS", "TUC Rejects 6% Stamp Duty on Rent", "Labour rejects 6% stamp duty on tenancy, lease agreement", mostly suggesting that stamp duty on lease/tenancy agreements will be charged at a flat rate of 6%.

Forms of stamp duty assessments:

Basically, there are two forms of stamp duty assessments, namely -

• Fixed stamp duties - this stamp duty does not vary, irrespective of the value of the document or instrument, and
• Variable or Ad-Valorem stamp duties - the duty here increases or decreases in proportion to the value of the consideration in the document or instrument to be stamped.

Applicable stamp duty rates:

The question now, is what is the correct stamp duty to be paid on tenancy or lease agreements? The enabling law1 provides the mechanism/formula for calculating the applicable percentages. We have tried to simplify the same using a rental value of N1,000, 000.00 (for our friends that stay off mathematics) as follows:

Table 1: Lease/tenancy stamp duty rates

 S/N Nature document Tenor Rate (%) Type 1. Tenancy/Lease 0 - 7 years 0.78% Ad Valorem 2. Tenancy/Lease 7 -21 years 3.0% Ad Valorem 3. Tenancy/Lease Above 21 years 6.0% Ad Valorem

Table 2: Sample calculation

 Tenor Value of Lease Stamp duty payable Rate (%) 0-7 years 1,000,000 7,800 0.78 7 -21years 1,000,000 30,000 3.0 Above 21 1,000,000 60,000 6.0

Simply put, the stamp duty rates for leases/rents is not a flat rate of 6%. It is done in a graduated manner as provided by the Stamp Duty Act. Contrary to wide speculation you are not required to pay stamp duty at the rate of 6% if the tenor or your lease does not exceed 21 years.

Conclusion:

In tax, you are either liable or not liable. You can only be liable to pay stamp duty on tenancy and lease agreements at the rate prescribed by applicable law, which in this case is the Stamp Duties Act. It is instructive to also point out that the courts in Nigeria have held on several occasions that a subject is not to be taxed unless the language of the statute clearly imposes the obligation2.

Footnotes

1. Section 69, 70 & 71 and Schedule to the Stamp Duty Act (As amended)

2. Ahmadu & Anor V Governor of Kogi State (2011) 5TLRN 136/138.