The Nigeria Tax Act 2025: A breath of fresh air for Stamp Duty Tax

The implementation of the Nigeria Tax Act (NTA) is set to serve as a watershed in the Nigerian tax landscape, particularly for stamp duty. This is because of all the changes introduced by the Nigeria Tax Act to the previous tax regime in Nigeria; stamp duty appears to experience a paradigm shift, witnessed by a more holistic overhaul in language, explicit expression of dutiable instruments, harmonisation of the timeline for stamping instruments to 30 days, and rates in tandem with prevailing economic realities.

The repealed Stamp Duty Act (SDA) was enacted in 1939 with only a few amendments introduced through the Finance Act of 2019, 2020, 2021 and 2023. The lacuna created because of the archaic provisions of the SDA undermined the implicative effects from a compliance perspective on taxpayers, as it did not address several key issues, such as the parties with the obligation to pay stamp duty, coupled with inconsequential rates when compared to prevailing economic realities. This situation resulted in a much more discretionary compliance approach by taxpayers, with tax practitioners having to make recourse to periodic circulars issued by the former Federal Inland Revenue Service, now the Nigeria Revenue Service, to address questions on parties with the obligation to pay stamp duty as well as the applicable rates.

The passage of the NTA has brought about positive changes, ushering in a refreshing new perspective. Tax practitioners are optimistic about the provisions and changes introduced by the NTA. One of such significant changes introduced by the NTA includes the explicit provision of the parties being liable to pay stamp duty and realistic rates in line with prevailing economic realities contained in the ninth schedule of the NTA. This express provision has relieved the academic voyage tax practitioners often engaged in when ascertaining the party with the obligation, as Section 23 of the SDA only provided the parties with the obligation to pay a penalty for non-payment of stamp duty on certain instruments. Stemming from this, Section 23, taxpayers had to infer the parties with the obligation to pay stamp duty by leveraging the jurisprudential implication that penalties could only arise from an act of non-compliance or omission to comply with the law.

In driving revenue for the government, the NTA has also introduced certain dutiable instruments, such as instruments for the transfer of mineral assets at an ad valorem rate of 2% of the value of the transfer. This novel provision reflects the approach of the government to widen the tax base, as the transfer of mineral assets under the previous SDA regime would have been assessed as a conveyance on sale at an ad valorem rate of 1.5%. This inclusion also echoes the government’s disposition towards the solid minerals sector in light of diversification of the economy.

Previously, the repealed Stamp Duty Act maintained a silent approach to the dutiability of certain crucial instruments. For instance, loan agreements were not explicitly considered subject to stamp duty, as the closest dutiable nomenclature was loan capital, attributed for its debt nature under Section 102 of the repealed act. Loan capital under Section 102 of the SDA required a preliminary requirement of notification to the Corporate Affairs Commission (CAC) upon issuance. This requirement was a restrictive and disputable categorisation for loan agreements which, in practical terms, did not require notification to CAC. Thus, this lacuna created leeway for loan agreements to be subjected to stamp duty at a fixed rate of NGN 500 as against the ad valorem rate of 0.125% of the loan sum. While the erstwhile revenue agency made attempts through circulars to subject loan agreements to an ad valorem rate of 0.125%, it was argued from the stance of an avalanche of case laws, such as Ess-ay Holdings v Federal Inland Revenue Service, where it was held that circulars are only administrative instruments which do not have the force of law. Under the NTA, the requirement to notify the CAC has been expunged, as the exemptions applicable under the Ninth Schedule reveal clearly that loan agreements are dutiable at 0.125% as far as the tenor of the loan exceeds 12 months.

On Share Purchase Agreements (SPA), the NTA retains the exemption provision of the SDA which exempts all documents relating to the transfer of stocks and shares, while maintaining a silent disposition on the explicit treatment of SPAs for stamp duty purposes. Although the Tax Appeal Tribunal in Oando Oil Limited v Federal Inland Revenue Service held that SPAs should be assessed as a conveyance on sale for marketable security and as such were dutiable at an ad valorem rate of 1.5%. The TAT, in an attempt to create a dichotomy between share acquisition and share transfer, argued that SPAs could not enjoy the exemption provided under Paragraph 13 of the repealed Act. Notwithstanding the holding of the TAT, it can be argued that the TAT’s reliance on Section 58 of the repealed SDA is blurry under the NTA regime. This is because Section 201 of the NTA has now adopted a more restrictive approach to the definition of conveyance on sale to mean the transfer of interest in real property, being land and buildings, only. Through this definition, SPAs cannot be treated as a conveyance on sale, as was decided in Oando’s case.

Additionally, within the context of Section 175(1) of the Companies and Allied Matters Act, 2020, an executed instrument is required for a share transfer to be deemed complete. This indicates that SPAs, which are purely contractual and outline the terms and conditions of the share purchase, when executed, confer a valid title. The valid title when transferred via the SPA dispenses with the need for executing another instrument of transfer, which can be argued to fall under the exemption provision of Section 184(h) of the NTA since equity looks at the intent rather than form.

Although it may be argued that the NTA, to an extent, has introduced clarity in terms of parties with the responsibility of stamping instruments through the Ninth Schedule of the Act. It nonetheless creates evident ambiguity, particularly on transfers. Item 33 of the Ninth Schedule, which makes provision for instruments of transfer to be stamped at an ad valorem rate of 1.5%, references conveyance “see conveyance”. This reference has further amplified the vagueness because Section 201 of the NTA has interpreted ‘conveyance on sale’ to include real property such as lands and buildings only. Germane questions are further raised, particularly on how transfers outside the purview of real property should be treated for stamp duty purposes. Just as the transfer of mineral assets was explicitly stated under Item 33 of the Ninth Schedule of the NTA, it would have been expected that the same be replicated for transfers outside real property. Since the treatment of the transfer of assets other than real property is not provided for under the NTA, recourse would have to be made to the dubio contra fiscum rule of interpretation under the law of taxation, which states that where tax legislation is unclear, the interpretation should favour the taxpayer rather than the tax authority. Based on this principle, it can be argued that all transfers outside the purview of real property and mineral assets should at best be treated as an agreement for which a fixed duty of NGN1,000 would be paid as against a conveyance on sale of 1.5% ad valorem duty.

The enactment of the Nigeria Tax Act is a positive development, especially for stamp duty compliance within the Nigerian tax landscape. It signals a collective recognition for all taxes in Nigeria and the compliance drive on the part of the government to widen tax collection while minimising loopholes. Indeed, the NTA portends a breath of fresh air from a 1939 stamp duty journey to a complete overhaul in 2025.

Similoluwa Adewale, a lawyer, wrote from Lagos and can be reached at [email protected].