On 29 June 2020, Access Bank Plc., a tier one financial institution in Nigeria, issued a statement to its customers, promising to refund the stamp duty charges it had deducted from their accounts over the weekend.
This came after the institution had notified its customers of a mistake in its operations records, wherein the bank omitted to pass the stamp duty tax on applicable transactions accrued between 1 February, 2020 and 30 April, 2020 to its customers, and instead, deducted the accumulated charge from their accounts. This was immediately followed by social media outrage on the purported illegality of such actions. While it is debatable whether the bank should have retroactively deducted such funds, the Bank’s actions were in line with the provisions of the Finance Act 2020 (Stamp Duty Act, CAP S8) (“FA”).
The FA amended Section 2 of the Stamp Duty Act (“SDA”), by expanding the scope of the SDA’s definition of instruments liable to stamp duties, to include “electronic documents”. The FA, however, failed to provide clarity on the definition of the term. In response to this omission, the Federal Inland Revenue Service (“FIRS”) published an Information Circular (“the Circular”) on 29 April 2020 to provide clarity on the amendments introduced by the FA. The Circular also provided implementation guidelines to aid taxpayers in the remittance of their stamp duty taxes. We will therefore examine key highlights of the Circular below.
Instruments liable to Stamp Duties
The Circular provides clarity on the scope of instruments liable to be stamped, by specifically stating that written or printed dutiable instruments or receipts, Point of Sale (POS) receipts, Automated Teller Machine (ATM) printouts, receipts in form of SMS, Instant Messaging platforms or internet-based messaging service such as WhatsApp Messenger, electronically generated documents or receipts, emails etc are subject to stamp duty tax.
Section 89(3) of the FA requires all banks and financial institutions to charge stamp duties of N50 on certain transactions and remit the same to the FIRS. The Circular specifies that this charge applies to transactions of N10,000 and above on deposits and transfers. Additionally, banks are to pay stamp duties on eligible transactions including loan agreements, legal mortgage, guarantors’ forms, tenancy or lease and bonds.
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Documents executed outside Nigeria
Another key highlight of the Circular is its clarification of the provision of the FA on the stamp duty charges for electronic documents executed outside Nigeria but received in Nigeria. In ascertaining the term “received”, the Circular posits that any document that has been executed outside Nigeria is received in Nigeria if it is i) retrieved or accessed in or from Nigeria, ii) stored on a device (including a computer, magnetic storage, etc.) and brought into Nigeria and iii) stored on a device in Nigeria.
Third Party Vendors
According to the Circular, corporate entities, ministries, departments, and agencies are required to charge and remit stamp duty tax on contracts with third party vendors. The charge, excluding Value Added Tax, is 1% of the contract value.
While the Circular is a forward thinking attempt to guide tax payers on the interpretation of the provisions of the FA, it raises serious questions on the feasibility of implementation, especially considering the fact that it imposes a duty on tax payers to voluntarily declare the stamp duty tax on electronic instruments. It also presupposes that the FIRS has the capacity to monitor all electronic instruments executed outside Nigeria and received in Nigeria.