Billions at risk as tax law voids unstamped contracts

Nigerian businesses can no longer treat stamp duty as a routine formality. Under the Nigeria Tax Act (NTA), failing to stamp a commercial contract could render it unusable in court or arbitration, putting billions of naira in deals at risk.

Olamide Sulaiman, a tax consultant, said the law marks a major shift in compliance.

“Non-compliance does more than create financial exposure,” he said. “It can invalidate critical documents in legal or dispute resolution processes.”

The NTA introduces stricter rules compared with the old Stamp Duties Act (SDA). Section 126 makes any unstamped instrument inadmissible in court or arbitration, except in criminal matters.

Section 110 of the Nigeria Tax Administration Act (NTAA) sets penalties for failure to stamp dutiable instruments. Non-compliance attracts a 10 percent penalty on unpaid duty, plus interest at the prevailing Central Bank of Nigeria Monetary Policy Rate (MPR).

The law also introduces a fixed N1,000 duty for certain documents not specifically listed under existing schedules.

“This isn’t just about paying a fine anymore,” said Muhammad Omotosho, an attorney and tax advisor.

According to him, many businesses still assume that some documents are exempt.

“There is a belief that Share Purchase Agreements (SPAs) are not subject to stamp duty, as was widely assumed under the old law,” he said.

“But that position is not accurate in practice,” Omotosho added, citing the Tax Appeal Tribunal decision in Oando v. FIRS. He explained that SPAs are contractual documents and do not effect the legal transfer of shares.

“Only instruments that actually transfer title may qualify for exemption,” he said.

This distinction is critical for high-value transactions. Item 33 of the NTA’s Ninth Schedule imposes a 1.5 percent duty on conveyances or transfers.

In practical terms, mergers and acquisitions, share sales, and other major contracts must now factor stamp duty into their cost and compliance processes.

The financial stakes are significant. Stamp duty has become a major source of government revenue, with collections exceeding N1 trillion annually in recent years.

The NTA further expands the scope of dutiable transactions. The Electronic Money Transfer Levy (EMTL) has now been reclassified as stamp duty.

Banks charge a N50 fee on transfers of N10,000 and above, paid by the sender, while salary payments and transfers within the same bank remain exempt. The change reflects the government’s push to capture more transactions and reduce the use of unstamped documents.

Beyond the financial cost, legal risk is a growing concern. Unstamped contracts are now inadmissible in court, leaving businesses exposed during disputes.

There are also changes to how long authorities can pursue unpaid duties. Under the previous regime, a five-year limit was commonly assumed. However, the Nigeria Tax Administration Act (NTAA) 2025 introduces a six-year statute of limitation for tax assessments.

Sulaiman noted that this extends the window for enforcement and increases compliance pressure on businesses. Where there is deliberate misstatement, however, tax authorities can act without any time limit.

“This shows why businesses need to be more careful when structuring transactions,” he added.

He stressed that stamping should no longer be treated as a minor step after signing agreements. “It is now central to risk management and compliance.”

For businesses, this means immediate changes in practice. Legal and finance teams must ensure that all contracts are properly stamped, including share purchase agreements, property transactions, and other high-value deals.

Investors and lenders may also need to tighten due diligence, as unstamped agreements may not hold up in disputes. The reforms also point to a broader shift toward digital tracking and automated compliance. While this could reduce manual errors, it may introduce new challenges.

Issues such as incorrect transfer charges could trigger disputes, especially where supporting documents are not properly stamped.

Overall, the NTA turns stamp duty compliance into a key part of corporate governance.

Companies that fail to comply risk penalties and the possibility that critical contracts could be set aside in legal proceedings.  As enforcement continues, the message to businesses is becoming clearer: stamping is no longer optional; it is essential.